Wednesday, August 18, 2010

When "broke" isn't broke...or broken (the big Social Security lie).

This long excerpt from yesterday's edition of Bob Somerby's always interesting, sometimes infuriating Daily Howler dismisses the Big Lie simply and effectively and deserves wider attention, and so I've posted it here. I also wanted to have a copy accessible to forward or print out and hand to anybody who throws this old canard at me going forward...

Special report: The thirty-year itch! PART 2—ALAN SIMPSON’S CON (permalink): Will Social Security “still be there” when Mike Hatchell, age 52, retires? Plainly yes, barring national melt-down. (Unless enough people start thinking it won’t be, in which case radical “reform” to the program becomes much easier to sell.)
On last Thursday evening’s Countdown, Hatchell said he had to spend his existing retirement funds during 59 weeks of unemployment. (His wife has also been out of work. See THE DAILY HOWLER, 8/16/10.) He volunteered an intriguing thought when asked about his retirement prospects:
HATCHELL (8/12/10): Obviously, I mean, with the unemployment—after 59 weeks without a job, you know, I mean, the IRA accounts, you know, that got drained. We basically have no retirement other than, hopefully, the government will have Social Security. We all know how vague that might be in the future.
Hatchell seemed like a very bright person. As we watched him, we kept thinking that he would make an excellent national spokesman for a range of political/issue groups. But, like millions of other people, he has heard all kinds of stories about what a fraud Social Security is. As early as 1994, a large number of younger voters had been conned into believing that they would never get Social Security benefits (see THE DAILY HOWLER, 8/16/10). Like millions of other Americans, Hatchell seems to retain this fear.

People have heard a welter of claims about Social Security, as we noted in yesterday’s post. But for the most part, people who fear the demise of the program have been misled by two basic cons.

Ironically, the two major cons are semi-contradictory. The first con says that the program’s trust fund doesn’t exist. The second con explains what will happen after the trust fund is gone:

First con—the trust fund: On the one hand, people have heard that the Social Security trust fund is just “an accounting fiction”—“a pile of worthless IOUs,” “the left hand borrowing from the right hand.” (The money isn’t there—we’ve already spent it!) Since Social Security is supposed to start drawing on the trust fund in the next few years—since the trust fund is supposed to allow the system to maintain promised benefits through the year 2037—this suggests that Social Security might be on the verge of a near-term collapse.

Second con—after the trust fund is gone: On the other hand, people have heard that Social Security will “go broke” or “go bankrupt” once the trust fund expires in 2037 (according to current projections). For most people, these terms suggest some sort of cataclysmic collapse, after which the Social Security system would have to be shuttered. Presumably, this explains why so many people, for so many years, have seemed to assume that they will never draw any benefits.

Those are the two basic cons. People like Hatchell have heard these cons for at least the past thirty years.

It’s easy to address the second con—to explain what happens after 2037. Alan Simpson is the Republican co-chairman of Obama’s deficit commission. Back in June, he said Social Security “will go broke in the year 2037” in an interview with Alex Lawson. But as soon as Lawson challenged that language, Simpson described the actual facts—the facts these scare merchants have known all along. John Berry did the reporting, for the Fiscal Times:
BERRY (6/20/10): Lawson asked if the [deficit] commission was working on Social Security, and Simpson replied, "We’re really working on solvency… the key is solvency."
"What about adequacy? Are you focusing on adequacy as well?" asked Lawson.
Replied Simpson: "Sure. We have to take care of the lesser in society. I don't know where you get all the crap you come up with. ... We’re trying to take care of the lesser people in society, like we always have in this country, and do that in a way without getting into all the flash words that you love to dig up, like cutting Social Security, which is bullshit. We’re not cutting anything. We're not cutting anything, we’re trying to make it solvent. It will go broke in the year 2037."
Lawson continued the interview by asking, "What do you mean by ‘broke’? Do you mean the surplus [the trust fund] will go out and then it will only be able to pay 75 percent of its benefits?"
"Just listen, will you listen to me instead of babbling?" Simpson said. "In the year 2037, instead of getting 100 percent of your check, you are going to get about 75 percent of your check. That’s if we touch nothing. So if you'd like that, fine.”
Duh. After making the frightening claim that Social Security “will go broke in the year 2037,” Simpson explained what would actually happen. Since payroll taxes would keep rolling in, the system would never “go bankrupt” or “broke,” unless you’re reinventing the language. Instead, payroll taxes would keep rolling in, and benefits would keep going out, although the system would be able to pay only 75 percent of scheduled benefits. Those scheduled benefits are higher than the benefits which are currently being paid (even when adjusted for inflation), but this would not be a desirable circumstance. That said, Mike Hatchell would still be receiving benefits, even after the trust fund expires—though his benefits would have to be cut at that point, barring some new source of revenue.

This would not be a desirable outcome—but Social Security would still “be there.” It would not go belly-up. If we’re still speaking traditional English, it wouldn’t be bankrupt or broke.

When people like Simpson use words like “bankrupt” and “broke,” they deceive people like Hatchell. Unfortunately, they’ve been at this game for a very long time, over at least three decades. As a result, many people are very confused about the program’s long-term prospects. They’ve heard that the system is “going broke.” They think they will never get benefits.

That’s the bad news, but here’s the good news again: This long-term situation is extremely easy to explain. You can see how easily Simpson explained it—but only after he was challenged about his claim that the system “will go broke.” Can we talk? Barring some sort of national meltdown, Social Security will never go broke in the way Hatchell seems to fear. Barring some sort of national meltdown, Social Security will always be there—though we may need to find new revenue, if we want to keep future benefits at their promised levels.

The long-term situation is easy to explain. This raises an obvious question: Why has no one ever explained it to Hatchell? Quite plainly, Hatchell is a very bright person; watching him, we kept thinking how good a spokesman he would be for various groups. But he seems to think that Social Security may not be there when he retires. (“We all know” such things, he said.) Thirty years of “liberal” ineptitude, indifference and fecklessness explain this situation.

The long-term situation is easy to explain; you can see how easily Simpson explained it. But so what? Over the course of the past thirty years, your “liberal” “intellectual leaders” have been too stupid and lazy to do so. As early as 1994, people like Hatchell had been conned. In the sixteen years since then, your “liberal” “intellectual leaders” have continued to nap, snore and fail.

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