MYTH: Bankruptcy

Perhaps this is a good time to mention, there exists no social security surplus. The social security trust fund is filled with old, yellowed scraps of paper that read, “IOU." (Armstrong Williams, "Social Security," 2/14/05)

So what we’re looking at is the impending bankruptcy of the entire social security system. Experts predict that on or about the year 2032, the social security system will collapse. (Williams)

Within 15 years, the system will be paying out more in benefits than it collects in taxes.  Its shortfalls will grow larger and larger.  Bankruptcy will loom. [...] workers younger than 50 know they will never get back in benefits what they are paying into the system now.  (Jeff Jacoby, "An eighth of every paycheck," Town Hall, 2/14/05)

No wonder Social Security is so unpopular among the young.  It provides no security for their retirement, while it impoverishes them in the present.  (Jacoby)

REALITY

Every week we find more clowns who come out and say the Social Security trust funds are null and void. That is not true -- the trust funds hold more than $1.5 trillion in Treasury bonds, backed by the government, and if we were to default on these -- like Argentina did -- our economy would collapse. As long as the U.S. continues to give "full faith and credit" to its debts, then Social Security is the most sound program in the entire government.

As for the 2032 number, that was the grim projection five years ago. Today, the Social Security Trustees predict that, if the economy grows slowly, there will be a shortfall in 2042. The Congressional Budget Office estimates it at 2052. Nobody has predicted a "collapse"; rather, if no changes are made, the system will pay out 70% to 80% of what it promises now -- still more in real terms than what retirees receive today.

Armstrong Williams, admitted PR flack and state propagandist, has no business publishing a column and calling it "commentary" rather than simply a business venture, and yet the Heritage Foundation and a few other outlets continue to run with this fraud. Whereas before the revelation of his payola we were obliged to treat his false statements as mere ignorance, now we can only assume he has personal, economic motivations for what he writes.

MYTH: Transition costs would be less than the benefit to the government in reduced obligations from private accounts.

But these workers also could invest up to 4 percent of their Social Security taxes in PRAs. (David C. John, "Fixing Social Security," FOX News, 2/15/05)

A transition cost is the price you have to pay to get from point A to point B. Establishing personal accounts will require about $2 trillion in government borrowing over the next 15 years. But once the accounts are in place, the government saves about $10 trillion in future obligations. Any private business with large pension obligations would sign on to such a refinancing plan in a heartbeat. The debt restructuring would substantially improve the firm’s balance sheet and its stock price would rise — reflecting improved long-term finances even though its current cash flow would be reduced. (Stephen Moore, "Simply Templeton," National Review Online, 2/16/05)

Starting in 2015, the returns from personal retirement accounts begin to cancel out benefit requirements for Social Security. By 2040 nearly 40 percent of future obligations would be wiped clean. By 2050 two-thirds of the government’s liabilities would be erased.(Moore)

REALITY

If the real numbers don't add up, just make up new numbers. This is a variation of the effective conservative rhetorical device of lying. Just to clarify, Mr. John, Bush's plan for privatization takes 4% of your taxable income and diverts it from security into the investment scheme. That's one third of the revenue for Social Security -- not merely 4%.

If you suck out one third of Social Security's funding and still promise full benefits for those in the current system, you've got to make up the money somehow. That's the Gap, or "transition cost" -- and it will cost a fortune. The plan doesn't go into effect for five years; after that we would have to borrow $4.9 trillion in the first 20 years of the program, and trillions more after that. The trouble is, as the White House has admitted, that does not aid any of the supposed shortfalls. You get nothing for  something.

This phony $10 trillion figure cited by Mr. Moore is the so-called "infinite horizon" shortfall, where you assume a horrendously slow economic growth and assume that we do nothing at all, and then you count forever. Not only is this number completely fatuous -- Bush's plan to make his tax cuts permanent would cost $18 trillion over the "infinite horizon" -- it is also wrong, since the privatization plan is supposed to have a "net neutral effect" on Social Security.

MYTH: The projected ratio of workers to beneficiaries spells doom

Soon, there will be too few workers supporting too many retirees. The current system promises to give increasingly generous benefits, for increasingly long periods of time, to an increasingly large number of people — and to pay for it by taxing a proportionately smaller number of people. It simply can’t be done. (John)

The problem is straightforward: The baby-boomer’s impending retirement will cause a shift in the workforce so pervasive that the social security system will become top heavy, like an inverted pyramid. [...] The problem of too few workers supporting too many retirees will continue to lurk as long as infant mortality rates continue to decrease and life expectancy continues to increase. (Williams)

But because the ratio of workers paying in to retirees taking out is steadily shrinking -- it has plummeted from 16 to 1 in 1940 to 3 to 1 today -- Social Security is headed for a crisis. (Jacoby)

In 1950, 16 workers supported each retiree. By 2040, there will only be two workers per retiree. Does it occur to you that that is very bad news for workers? (Rich Lowry, "AARP in the hot seat," National Review, 2/16/05)

REALITY

Another favorite number Privateers love to cite is the ratio of workers paying payroll tax to retirees receiving benefits. The way they see it, it is as if time itself is on their side. It is true, as they say, that it was 16-to-1 in 1940 and 3-to-1 today, but what they don't tell you is that this grim 3-to-1 ratio is actually producing a sizeable surplus.

So, when the Baby Boomers retire, we will shift from 3-to-1 to 2-to-1 -- not quite so dramatic. And when Boomers -- the "pig in the python" -- pass on, we can expect the demographics to become more manageable again. Boomer retirement was predicted back in 1983 by the Greenspan Commission; that's why we saved up the surplus in the first place.

MYTH: AARP is hypocritical

The organization for Americans over 50 dedicates a large chunk of its website to what it calls "AARP Investments." [...] This entrenched special-interest group wants it both ways: It encourages its members to "gamble" on such things as unproved technological innovations, unstable commodity prices, and unpredictable economies south of the Rio Grande. Meanwhile, AARP labors mightily to prevent Americans from investing so much as a sliver of their hard-earned payroll taxes, even in low-risk securities. (Deroy Murdock, "Mother of all political battles," National Review Online, 2/16/05)

Your group [AARP] has suggested that investing in the stock market is much too complicated and risky for anyone attempting to build assets for retirement. Do all your officials therefore eschew investing their own money in the market? If so, what is their preferred investment vehicle (and please don't say stuffing cash under a mattress)? (Lowry)

REALITY

Privateers prove again and again they lack basic understanding of what Social Security is and what role it plays in retirement planning.

Social Security was designed to be a bedrock guarantee of adequate support for all. Americans should develop their retirement plans through a diverse portfolio of 401(k)s, IRAs, and private investment in stocks, mutual funds, bonds, etc. so that they risk enough of their savings to maximize the likelihood of a comfortable old-age, while ensuring they plan for the case that their investments do not pan out. Social Security pools risk nationally, so that individuals are guaranteed basic support no matter how the stock market is doing at a particular time or how prudent they were in saving throughout their lives. It guarantees their coverage no matter how long they live, and offers support for widows, orphans, and those disabled who cannot work.

MYTH: SS bad for blacks

Bush should explain to Howard's student body how Social Security rips off black Americans. Due to diversity of longevity, blacks tend to die sooner than whites. According to the National Center of Health Statistics , a black male born in 2002 can expect to live to age 68.8, while a white male should reach 75.1 years, a black woman 75.6, and a white woman 80.3. (Murdock)

REALITY

Mr. Murdock cites life expectancy at birth, implying that a black man who retires has just three years to collect benefits. But, as Paul Krugman has explained, a black man who lives to age 65 can expect to live 14.6 additional years, compared to 16.6 for white men. Not a figure to be proud of, for sure, but not the "rip-off" Murdock claims it to be.

In fact, because African-Americans are (tragically) worse off economically in our society, they benefit more from Social Security's progressive benefit formula.

Even if Murdock were not wrong on these two points, what he -- echoing the president himself -- is assuming is that, over the course of the next century, blacks cannot expect to gain parity in life expectancy or income. If that's your economic plan, then that's truly a rip-off.

MYTH: Social Security is evil; privatization will give "choice"

Under a privatized system, a worker can simply enter into a computer his desired benefits and retirement age. The computer then specifies how much he must withdraw from his salary each month in order to meet those goals. In such a manner, the worker can sculpt his retirement savings to meet his individual needs. Giving people more of a choice in their retirement planning will better connect them to the economy. (Williams)

Blacks instead should enjoy what so many whites do today: Estate planning through personal portfolios and the power to bequeath wealth as generously as they wish to spouses, young or grown children, other loved ones, and/or favored charities. Social Security forbids Americans such elementary control of their own money. (Murdock)

It was a forced transfer of wealth from younger persons to an older one [sic].  (Jacoby)

Between Medicare and Social Security, more and more of the federal government will be devoted to spending on the elderly as baby boomers retire. Would your strict preference be that the federal government shut down its other functions so that it can devote itself fully to catering to the American gerontocracy? (Lowry)

Bottom line: The transition costs of unwinding ourselves out of the bind of the institution of slavery seemed far too high. (Star Parker, "Transforming moral problems into politics," Town Hall, 2/15/05)

REALITY

In his 1954 book on the stock market crash of 1929, John Kenneth Galbraith wrote, "The defeat of the Democratic candidate in 1952 was widely attributed to the unfortunate appearance at the polls of too many youths who knew only by hearsay of the horrors of those days." Republicans today seek to take advantage of our short memory by completely missing the point of why we have Social Security. Or maybe they would risk rampant poverty among the elders to dismantle a popular New Deal program, that has traditionally benefited their political opponents.

Savings had vanished in speculation, and a poor economy left most seniors in poverty and dependency. In order to give workers security above and beyond their savings, we instituted a national old-age pension to guarantee a modicum of sustenance. By encompassing the entire working population in this insurance, we are able to eliminate personal risk for this portion of retirement income. As a society, we decided we will not allow those too old to work to be hungry or homeless, and we have largely achieved this goal. This achievement is one of the most successful accomplishments of any government in history. It is this achievement that Ms. Parker compares to slavery!

Privateers believe that the payments we make into this insurance are a "bad investment" of "our own money," but they do not understand that it is not an individual investment. It is a social investment, and only a universal insurance like Social Security can offer the guarantee of support without risk. Individuals can "choose" to return their Social Security checks, but they cannot choose to opt out of American society.

Privateers want more individuals to invest savings in the markets, and we concur. But they also want to eliminate the baseline guarantee of Social Security, the most successful government program in history, simply because they are ideologically opposed to government. Fringe ideology should not supplant a real debate of costs and benefits affecting millions of Americans.