Dean Baker in Wa*shin*gton Po*st

Max Sawicky sawicky at epinet.org
Mon Dec 13 08:09:56 PST 1999


My hero Dean Baker breaks into the op-ed page:

mbs

Social Security Scaremongering

By Dean Baker and Mark Weisbrot

Monday, December 13, 1999; Page A25

For decades critics of Social Security have brought to the

public a symphony of misinformation and disinformation,

embellished with the occasional lie. This effort began to bear

fruit a few years ago when most of the public, as well as the

press, became convinced that the system needed an overhaul.

Most of the deception is carried out through manipulating the

official numbers -- that is, the projections published each year

by Social Security's trustees. It is easy to create the

impression of impending doom, for example, by pointing to

the retirement of the baby boomers (beginning in 2008), the

expected doubling of the elderly population by 2035, etc.

But these dire warnings shrink to irrelevance when the other

side of the equation is taken into account: namely, the growth

of the economy. The system is sound without any change for

the next 35 years. To cover the next 75 years, if one takes

such projections seriously, would require additional revenues

of less than one percent of our national income.

All this is just the voice of the official numbers. But these too

are not insulated from the influence of Social Security's

adversaries. To see how this influence plays out, look at the

fine print.

Earlier this month a panel of experts charged with advising the

trustees of Social Security on economic and demographic

projections presented its recommendations. The panel was

headed by a former Reagan administration official who has

made no secret of his desire to cut entitlements for the elderly.

The newspaper accounts, including a Dec. 7 Post editorial,

highlighted the panel's recommendation to raise projected life

expectancy, which would make the program's finances appear

much worse. Meanwhile, little attention was paid to a more

important and curious recommendation: The panel lowered its

estimate -- as compared with its forecast four years ago -- for

growth of wages and productivity.

This is startling, given that for the past four years the U.S.

economy has seen exceptionally strong economic growth.

Productivity and wage growth have shot up. One could ignore

these years as a fluke, but nothing in the record warrants

lowering economic projections.

In the four years since the last panel met, real wages have

increased at more than twice the rate that the panel projected.

If real wages continue to grow at the pace of the past four

years, the Social Security system will be solvent for 60 years

without any changes.

If the Social Security trustees just used the same wage

projections advocated by the 1995 panel, adjusted for some

measurement changes by statistical agencies, the system

would be solvent for 40 years, even assuming greater

longevity. Further, with higher wage growth, the modest

changes needed to support the system into the indefinite

future would be affordable. In short, using any remotely

realistic projection for the growth of wages and the economy,

the Social Security system will be solvent into the stratosphere

of America's science-fiction future.

The panel's report showed other anomalies too. For example,

the productivity growth it forecast is slow compared with the

rates of other industrialized nations. If we are to believe these

projections, 21st-century America is going to be a fairly poor

country compared with the nations of Western Europe.

Nonetheless, without serious public dissent, the panel's

recommendations probably will be accepted. Politicians and

lobbyists then will use the new numbers to tell people that we

have to raise the retirement age, cut Social Security benefits or

privatize the system.

There are some important lessons here. First, the process of

generating and presenting these numbers is far too vulnerable

to political manipulation. The 75-year planning period used by

the trustees also is absurdly long. Given the vast uncertainties

in the assumptions -- for example, the range of population

projections for 2075 varies by 160 million people -- it is all too

easy to come up with some kind of financing gap somewhere

down the road. This gap, however small relative to future

income, is then magnified by Social Security's opponents into

a "crisis" that undermines public confidence in the program.

Finally, any shortfall that Social Security may have in the

future can result only from a dismal economic performance.

So the next time you hear politicians or Wall Street executives

say that Social Security needs to be "fixed," ask them to fix

the economy instead.

The writers are co-directors of the Center for Economic and

Policy Research.

© Co*pyri*gh*t 1999 The Was*hingt*on P*os*t Company



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