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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