When conservative commentators decide to push an agenda, their lock-step chorus can be overpowering. In all the noise, it's easy to lose track of a few basic facts: that privatization does not address the projected Social Security shortfall; that Social Security is running a surplus, making it the most fiscally sound part of the debt-ridden government; and that privatization has big costs and will eliminate real security for retirement.

MYTH: Social Security will be in crisis in 2018

The point is not that the Treasury will refuse to pay off its bonds but that doing so will require lower spending, higher taxes or more borrowing (which ultimately will mean higher taxes). In other words, Social Security's fiscal crisis begins in about a dozen years, so the focus on 2042 is misleading. (Jacob Sullem, "Saving graves," Town Hall, 2/6/05)

In fact, Social Security trustees, the Congressional Budget Office and the General Accounting Office (Congress' auditing agency) all agree that the retirement fund is in deep trouble. It will begin running a deficit in 2018. By 2027, the annual deficit will be over $200 billion a year; by 2033, over $300 billion. Putting off any repairs will only make matters worse. The last Social Security trustees report estimated that the cost of just one year's inaction would be about $600 billion. (Donald Lambro, "Dems crunched by Social Security numbers," Town Hall, 2/7/05)

The system will not start drawing on general (as opposed to payroll) tax revenue until 2018. And democracies are notorious for not confronting problems until they are crises. ("Reform at home," Wall Street Journal, 2/4/05)

REALITY

As we have been forced to repeat far too many times, yes, there is a Trust Fund of money that Social Security has saved, and which it will probably draw upon in roughly 15 years. (Note to conservative commentators: 2018 is now 2020!)

Now those Privateers who wish to appear somewhat sane have begun to contort themselves to avoid actually saying there is no Trust Fund. The claim here is that when Social Security runs its projected deficit, it will begin "drawing on general tax revenue." This is not true. It will be drawing on the Trust Fund. Now, Bush (and previous administrations) borrowed all this money for the general budget, just as we borrow money all the time from private investors and foreign banks. Due to Bush’s exceptionally large and long-term deficits, we may in fact run into a "fiscal crisis" a few years down the road. But it will not be "Social Security’s fiscal crisis" – it will be Bush’s.

What Trust Fund agnostics always fail to mention is not just that Social Security is running a surplus (counter to the rest of the government) but that this surplus was planned for just this purpose. In 1983, a man by the name of Alan Greenspan looked into his crystal ball and cried a SS shortfall, and so he proposed we increase the SS payroll tax to save up some money to cover it. In the last twenty years, workers have been paying not only for their parents’ Social Security, but partially for theirs as well.

Now, the Trust Fund agnostics want to pretend that never happened, and that there is no difference between the payroll tax and the IRS income tax. Well, there is a difference – first, the payroll tax is more regressive, since nothing over $90,000 is taxed. Second, Social Security has a separate tax and a separate account because it is designed to survive budgetary expediency of irresponsible politicians like Bush.

MYTH: Social Security will go bankrupt unless we privatize it

Without some changes, Social Security is headed for peril as the number drawing benefits increases and the number paying into the system decreases. Because Americans are living longer and drawing ever-higher benefits, the system is simply not sustainable under current trends — in population and payouts. (Paul Greenberg, "Fear itself," Washington Times, 2/7/05)

Is a "Marshall Plan" for America really the best vision that Sen. Reid can come up with? Or to suggest, as the Nevada Democrat did, that somehow we have government investment to thank for the incredible Internet technology revolution of the last 10 years? Or that a few tweaks here and there will keep our massively unfunded Social Security system functioning? (Star Parker, "Democrats need to come up with some ideas," Town Hall, 2/8/05)

Democratic denial that Social Security needs massive restructuring is reminiscent of the Iraqi press officer who announced daily that they were winning the war as American troops were closing in on Baghdad. (Parker)

The program will eventually go bust as the pay-as-you-go, young-to-old income transfer that it currently is. [...] Younger Americans are not fools, and they know that Social Security will not be there for them. (Wall Street Journal)

Of course, Social Security is going bankrupt, contrary to the nonsense liberals like Paul Krugman are arguing. That means in the future Social Security will not even be able to pay the equivalent of $920 today. (Peter Ferrara, "Social Security dupery," Washington Times, 2/3/05)

REALITY

Conservatives love to trot out polls showing young Americans don’t believe that Social Security will be around when we retire. Even mainstream media likes to find that randomly-chosen savvy youth to spout out this belief. Who cares if it’s dead wrong?

The very same dire projections that conservatives use to support this claim tell a different story -- that even if we do nothing, the system will still pay 70-80% of promised benefits. If you think that’s "going bust," you should see what the rest of the government is going to look like!

Of course, we’re not proposing that we sit back and twiddle our thumbs. Oh no. We realize the value of responsible planning, so we propose a mixture of minor taxes and cuts. For example, merely raising the cap on the regressive payroll tax from $90,000 to $140,000 would restore the projected shortfall by 43%, as AARP proposes.

Little "tweaking" like this might not sound so exciting, but it’s the only thing that will do the job – as the administration has admitted, its plan will do nothing to improve Social Security’s "solvency" -- and in fact, due to massive borrowing, the plan will make things worse.

(And for the record Ms. Parker, we do have the government to thank for the Internet.)

MYTH: No need to worry about "transition costs"

The Democrats object that allowing workers to put some of their payroll taxes in personal accounts will worsen Social Security's financial condition, since the diverted money would not be available to pay benefits for current retirees. Although much depends on the final details of the plan and the number of people who participate, the administration estimates that making up the difference would cost $754 billion during the next decade. (Sullem)

But this cost will be offset over the long term by lower demands on payroll taxes, as future retirees draw more on their own accounts and less on standard benefits. Another way of looking at it is that establishing private accounts simply makes explicit some of the system's existing liabilities. It may not reduce them, but neither does it raise them. (Sullem)

A big stumbling blocks Republicans face on private accounts has been the so-called "transition costs." I happen to believe the "transition cost" issue is a red herring, because private investment accounts save taxpayer dollars over the long term as future retirees begin drawing more of their retirement income from the private accounts and less from traditional Social Security outlays. (Stephen Moore, "Hard sell," Washington Times, 2/7/05)

Cheney never explained that the "transition costs" are just a matter of paying for some of Social Security's obligations now rather than later. ("Early returns," National Review, 2/10/05)

REALITY

Here’s another number Privateers love to fudge. You see, if you take money out of the current system and put it in private accounts, that means the current system will have that much less money to pay traditional benefits. This is called a gap, or to put it kindly, "transition costs."

To say the transition costs are $754 billion over the next ten years is misleading, since the Bush plan isn’t scheduled to start for another five years. All told, the transition costs will in fact run $4.9 trillion over the first 20 years of the program, and more further on. That’s trillion with a T. Take this "transition" debt, add on interest our children will be paying, and the supposed "crisis" of Social Security shortfalls begins to look like peanuts.

Now, how do so-called "conservatives" justify this? A lot of hand-waving that amounts to a warning: that they plan on eliminating the rest of Social Security (which would cost trillions more in "transition"), so the government’s "liability" will be reduced.

This excuse is so idiotic only a rabid anti-government ideologue would believe it. Not only do they plan on eliminating the guaranteed security of SSI by moving the "liability" to individual risk (retirement is a "liability" that exists whether government alleviates it or not), but they would saddle future generations with an additional "liability" of trillions in debt.

Myth: The Bush plan will be pain-free for the individual (something for nothing)

For the President's fellow Republicans, the problem isn't philosophy but political risk. They like being called "Mr. Chairman," and addressing Social Security means explaining the matter to constituents who will hear from Democrats that their benefits will be cut. Never mind that this is false, many GOP incumbents would rather just pass one more highway bill. (Wall Street Journal)

Now, a clawback is typically a feature of a plan where the government guarantees a certain combined benefit from the traditional system and the personal account. Under such a plan, the better your account does, the less you get from the government. Therefore, the gains in the accounts are clawed back. And I heard, when I was driving into work yesterday, I heard Senator Corzine making this point and he put it a different way. He said that basically all these retirement accounts are is a loan from the primary system that you have to pay back. And it had some convoluted explanation I don't even remember now. But the reality is that neither assertion is true. The president's plan for personal retirement accounts does not have a clawback. Under the president's plan, you, and not the government, get all the gains in your personal retirement account. The amount you receive from the government is not reduced if your personal account does well. The better your account does, the better off you are. [...] And guess who my source for this is? My source for this is Jeff Gannon of Talon News . (Rush Limbaugh, "White House fights back and wins," 2/4/05)

The personal accounts would be carefully monitored, conservatively invested, and would come with prudent limits. Much like the current Thrift Savings Plan that has long been available for federal employees. ("We will make sure a personal account can't be emptied out all at once, but rather paid out over time, as an addition to traditional Social Security benefits.") (Greenberg)

REALITY

The Bush administration has admitted that its privatization plan does nothing to help the "solvency" of Social Security, and due to the "transition costs" (see above), the plan will actually make its finances worse. Listen to what Bush himself said in the State of the Union speech:

Fixing Social Security permanently will require an open, candid review of the options. Some have suggested limiting benefits for wealthy retirees. Former Congressman Tim Penny has raised the possibility of indexing benefits to prices rather than wages. During the 1990s, my predecessor, President Clinton, spoke of increasing the retirement age. Former Senator John Breaux suggested discouraging early collection of Social Security benefits. The late Senator Daniel Patrick Moynihan recommended changing the way benefits are calculated. All these ideas are on the table. (George W. Bush, State of the Union address, 2/2/05)

Everything he mentioned is a cut – there are no proposals from him for raising revenues, not surprisingly, so he needs to cut outlays. It is difficult to imagine how the Wall Street Journal could claim that Bush will not cut benefits when Bush himself said he must do so.

Furthermore, the Bush plan provides for a clawback to partially pay for the gap. Contrary to what Rush says, a clawback is when the government gives with one hand, but finds another way to take back with the other. In this case, the Bush plan "gives" one third of the payroll tax in the form of a private account, and takes back when you retire by swallowing a share (what you put in the private account, plus inflation, plus 3% interest) of your traditional benefits. It might seem strange to take a lump sum out of a monthly benefit, but that’s what they’re planning on doing.

According to the White House, this means that if your investment returns 3% (as with a government bond), you will come out even. That is not true. Social Security is not a 3% investment, but rather an insurance. Your benefit is calculated by a somewhat progressive formula, so that someone who is poorer or someone who started low but worked his way up will still receive a modicum of retirement support. Social Security also supports disabled workers and survivors who may not have paid in at all. The surplus in the Trust Fund (which is earning 3%) represents a fraction of the whole operation of the program. As this memo shows, this clawback on one-third of your payroll tax could take two-thirds of your benefit.

However, even if you make this faulty assumption that Social Security as it is "returns" 3%, the Bush plan is still a bad deal. It relies on the magic of the market. How magical is it? The Congressional Budget Office’s projected rate of return, averaged for risk, is 3%. There goes your entire "private account."

But that’s an average. In the Bush plan, you are locked into a few low-risk funds, so you will not be striking gold or anything. Your private account will be automatically converted into an annuity when you retire, meaning that if you happen to retire during a low point in the business cycle (say, 2000 or 1929), you lose! Better luck next time!

MYTH: "Ownership," or whatever, is morally better

Ironically, it's the traditional Democratic constituencies that are the huge beneficiaries of the ownership agenda. Despite tired Democratic rhetoric, personal retirement accounts will transform the lives of low-income people, not rich people. (Parker)

The advantages of private accounts include better returns than the current system promises and the ability to leave any remaining balance to one's heirs. "Best of all," the president said, "the money in the account is yours, and the government can never take it away." (Sullem)

Imagine: Every American an investor . It's a prospect that pleases many of us, but seems to scare the Democratic opposition. Maybe they think the vision of every citizen an investor comes frighteningly close to every citizen a Republican . (Greenberg)

Although sold to the public as a pension system, Social Security is based on the forced transfer of resources between generations. It steals from the poor to give to the rich, and it substitutes dependence on a beneficent state for self-reliance and voluntary mutual aid. It may not be financially bankrupt, but it is morally so. (Sullem)

REALITY

As I’ve explained above, Bush’s privatization plan does not meet all the empty promises we’ve been hearing about streets of gold. At best, there will be some who are slightly ahead, some dangerously behind, and everybody saddled with enormous additional debt. The guarantee of support for individuals – the security of insurance – will be dramatically cut, replaced with individual risk. Instead of something for nothing, it’s nothing for something. The numbers simply do not add up.

And still, the marketing marches on. If our collective memory has become so short that we can’t recall 1983, when we began to save up $6 trillion to keep Social Security going ("worthless IOUs" today), then I guess we are not going to remember back to 1935, and the point of the program in the first place.

Every individual needs to plan for his or her retirement, through IRAs, 401(k)s, employer pensions, and, if he or she can afford to, regular private investment. Social Security was never designed to substitute for this. But in the event that your plans don’t work out – if your investments fail, if your employer changes its pension program, if you retire during a slump, if you live too long, if you’re disabled, if your breadwinner passes away, or if you plan poorly or not at all – in this event, Social Security will keep you afloat. It won’t give you the "good life," but it will let you live with a modicum of dignity. It offers security against real hardship or poverty when you can no longer work.

It is called insurance because it is only collectively that we can provide security for everybody and avert individual catastrophes, which could strike any of us. Social Security provides for all workers, and it especially helps the poor and low-income earners, millions of whom depend solely on the modest Social Security check in retirement. Poverty among the elderly, once a national disgrace, is now lower than poverty under 65. And because Social Security benefits everybody, it has become a mainstay of the "mixed portfolio" of the American middle class.

Social Security is quite simply the most popular and successful government program in history. Its projected shortfalls are tiny compared to the future costs of Medicare, the national debt, and Bush’s tax cuts. Why on earth do conservatives want to eliminate it?