NYT Social Security article | by GlennM
There's a long (9 web pages) article in the last NYT Sunday Magazine about social security.
Summary: crisis, what crisis?
Notes:
Much of the current push is ideological: "from an entitlement society to an ownership society."
The agency's best guess, labeled its "intermediate" case, is that the system will exhaust its reserves in 2042 ... there is a strong case to be made that the agency is erring on the side of being overly pessimistic. If its more optimistic projection turns out to be correct, then there will be no need for any benefit cuts or payroll-tax increases over the full 75 years.
Cato, a libertarian policy center founded in the late 1970's, has been arguing for 25 years that Social Security is on the verge of crisis.
... there is a serious issue at the heart of what worries critics. It isn't that the trust fund is broken; it's that the existence of the fund is seducing the government to spend more than it otherwise would, thus brooking larger deficits in the future.
Reagan began speaking out against Social Security in the late 50's ... Warm and folksy even as he envisioned a bleak Orwellian future, Reagan said that Big Brother could start with health care, "and pretty soon your son won't decide when he's in school, where he will go or what he will do for a living. He will wait for the government to tell him.
Once Reagan was in the Oval Office, he allowed his budget director, David Stockman, to handle the crisis [Note: trust fund about to run out of $ in 1983 -- Glenn]. Stockman, who was waging a war on government spending, tried to exploit the moment to curtail Social Security sharply. ... By proposing cuts for people on the verge of retirement, he triggered vehement protests. Members of the Republican-controlled Senate showed their instinct for self-preservation by voting 96-0 for a resolution intended to distance themselves from Stockman. ... In the end, they compromised on a combination of benefit cuts and tax hikes.
According to an agency publication, "Income of the Population 55 or Older: 2000," 8 percent of elderly beneficiaries were poor, but a startling 48 percent would have been below the poverty line had they not been receiving Social Security. Charles Blahous, the White House point man on Social Security, publicly criticized this calculation as "mindless," and the Social Security agency no longer computes the figure. Conservative economists say the figure is irrelevant: if Social Security didn't exist, people would save more. This may be true of economists, but what about the rest of us?
Last year, Tanner of the Cato Institute wrote that "over the worst 20-year period of market performance in U.S. history . . . the stock market produced a positive real return of more than 3 percent." Actually, the market has done worse than 3 percent per annum in nine different 20-year periods.
... pooling the investment pools the risk, and thus reduces the danger of retiring at the wrong time. In a system of personal accounts, someone who retired after a market crash would be out of luck.
And though future generations of workers will have to support more retirees, they will also be having fewer children. In fact, according to the Social Security actuaries, the total "dependency" burden (that is, the number of nonworking seniors and kids that each working-age adult will have to support) will remain lower than at its baby-boom peak. "In a grand social sense, ... we can support more seniors where there are fewer people in day care."
Enter now Ball's little accommodation to uncertainty. It is that Congress simply resolve now to impose, 50 years hence, a payroll tax increase sufficient to close whatever gap exists over the ensuing quarter-century. This could not be enforced now, of course, but that is Ball's point. He wants to free the Congress, and the rest of us, from the annual game of insisting on an exact and illusory far-off balance; to diminish the perception that we must urgently adjust to economic and demographic developments too distant to be forecast.