The Mainstream Media Won’t Tell You , But I Will

SOCIAL SECURITY IS NOT BROKE

As with so many of his positions, Obama’s stance on Social Security has ‘evolved.’ In September of 2008, Slate’s Peter Bray asked, why did Obama delete the following from his on-line position paper on Social Security:

“[Obama] does not believe it is necessary or fair to hard working seniors to raise the retirement age.”

POOF. Gone from his website. The astute readers here at No Quarter know that was not an anomaly. Things were always mysteriously disappearing from his website.

And it doesn’t make any difference what he says anyway. What he says and what he does are two different things. FISA anyone???

Many of Obama’s economic advisors are not strong proponents of Social Security or even health care, for that matter.

Single-payer health insurance violates Austin Goolsbee’ free market philosophy. David Cutter believes high health costs are good for the economy. And Jeffrey Liebman favors privatization of social security.

If you wnat to make sure an on-going Social Security benefit will be there for you when you retire, you need to read this, because Social Security is not broke.

I am going to make a caveat right from the start. I am writing this post from the perspective that a fairly healthy economy exists. We have competent economists saying we are in a recession, or a depression, or a complete meltdown, and that hyper inflation is just days away. I do not have a degree in economics, so I do not know for sure what we are in. I do know that the economy is on very shaky ground and that a deepening recession or outright depression, even hyper-inflation may be on the horizon.

If any of these dire predictions occur then certainly they will affect the Social Security system, as it would affect every government and every private entity and every citizen in America. I have not found any articles or research that deals with how a worsening economy will affect Social Security. Maybe some of the economic gurus who write for NQ can help us out there.

Good economy or bad, I would affirm that Social Security has survived for 74 years through wars, through ups and downs in the economy, and through other recessions. The Social Security program was born in the Great Depression yet it managed to grow and help hundreds of thousand of retired people in the last years of that depression stay out of the poorhouse and live with dignity.

The system also managed to stay afloat and grow both during and in the years right after World War II when the deficit in this country was at the highest level ever in our history. (Obama’s current hysteria and fear mongering not withstanding.)

Take a look at the chart below.

National Debt Graph

Source: Zfacts.com

As you can see from this chart, our national debt after WW II was 90% of GDP. That is the highest it has EVER been. During the administrations of Presidents Truman, Eisenhower, Kennedy, LBJ, Nixon, and Carter that percentage decreased nearly every year. We paid off that WW II debt. Under Reagan and Bush I our national debt as a percentage of GDP began a precipitous rise. It came down some what in Clinton’s administration, but rose again during Bush II’s term of office.

Debt today is 70% of GDP. That is 20% lower than right after WW II.

I point this out only to say that Social Security managed to successfully do its job when we had a larger debt than we do right now. And Social Security did not go bankrupt then. Today is certainly a challenge. But we as a nation we have met and exceeded other challenges far worse. I believe we can do so again now.

Having said that – is Social Security broke?

In a word, NO.

Let’s examine this by looking at some basic facts. Below is a Social Security clock from zFacts website:

Source: Zfacts.com.

From this clock you can see that the Social Security Trust Fund is very healthy. In fact, it is healthier than the U.S. Treasury. If this is true than why are so many politicians telling us otherwise? Because in Washington D.C.today the Social Security system is where the money is.

According to History News Network (HNN) in an article titled, “How Historians Can Help Frame the Next Social Security Debate,” by Larry De Witt:

“The Social Security program is the largest single function in the federal government’s budget (accounting for about one-quarter of all expenditures.) “Indeed, the annual budget of the Social Security system is larger than the gross domestic product of all but about the dozen richest nations of the world.”

Economists and Other Groups Agree – Social Security is Not Broke

1. Renowned economist Dr. Irwin Keller, chief economist for Capital One Bank and at the leading financial website MarketWatch.com, and Distinguished Scholar of Economics at Dowling College, stated in an article titled:

“Why Social Security Isn’t Going broke,” April, 2008,“ Reports that the Social Security system will soon run out of money have been greatly exaggerated.”

“Although flush with cash now and over at least the next 10 years, the Social Security system is expected to gradually begin paying out more in benefits than it takes in from payroll taxes with the result that by 2041 its assets, in the words of the trustees, will be exhausted……..”

“……… Meanwhile, the Congressional Budget Office, which makes these projections as well, recently thought the system will remain solvent until at least 2052.”

The long and the short of his analysis and arguments are that the Social Security trustees make not just one, but three separate predictions. There is a low cost, an intermediate cost, and a high cost. Each of these projections reflect the “trustees’ consensus views regarding such inputs as economic growth, productivity, inflation, earnings, employment and interest rates.”

The alarms are raised by the intermediate projection and that projection, and only that projection, is what is reported by the press.

Quoting Dr. Keller again,

“Guess what? Under the actuaries’ low cost projection, the Social Security system never runs out of money!”

You can read the rest of Dr. Keller’s article here:

2. Mark Weisbrot, and Dean Baker, co-directors of the Center for Economic and Policy Research, in Washington, D.C., wrote a book entitled Social Security: The Phony Crisis (University of Chicago Press, 2000.) About their book Weisbrot states on his website:

“We showed that there was no financial, economic, actuarial, or other reason to be worried about the future of Social Security. The whole idea that Social Security would run into trouble when the baby boomers retire was an urban legend — and still is.

“Among others, The Economist — a conservative British magazine — reviewed the book and agreed. In fact no one dared challenge what we wrote. How could they? The numbers we used were the same that everyone — including the current campaign of President George W. Bush — uses. They are straight from the Social Security Trustees’ annual report.”

You can read the rest of his article here.

3. The American Association of Retired People (AARP) agrees that Social Security is not broke. Their website clearly states:

“Social Security is not going broke. It can pay 100% of promised benefits until 2040. After that, without any changes, incoming revenues will be enough to pay more than 70% of benefits for decades to come. This isn’t good enough — getting 70% wouldn’t be fair for today’s retirees and it certainly isn’t fair for tomorrow’s. AARP is in favor of strengthening Social Security so that it continues to pay full benefits to our children and grandchildren. “ [Emphasis mine]

You can see the entire statement here.

4. Over at The Economists Voice, a website published by The Berkeley Electronic Press, Barbara R. Bergmann, of the University of Maryland and American University answers the question, could social security go broke this way:

“The public is anxious because it has often been told that Social Security will “run out of money around 2042″, that it “won’t be there for our young people,” that it will “go bankrupt.” In truth, our Social Security system will never “go bankrupt.” Businesses or individuals can go bankrupt when they are legally obligated to make payments, but don’t have enough money coming in to make them, and no way to increase that inflow of money. A U.S. government program like Social Security is in an entirely different situation. Social Security gets the money it needs to make benefit payments from taxes. If Social Security taxes and benefits get out of balance, either or both can be adjusted by our democratic processes.”

You can view the entire article here.

5. AFSCME answers the question is Social Security Going Broke with a resounding, “No.”

“Reports of Social Security’s imminent demise have been vastly overstated. Even if no changes are made, Social Security will continue to pay full benefits, on time, until 2040. After that, the system will have a 25 percent shortfall, not empty coffers. In fact, as long as the Social Security payroll tax continues (6.2 percent of wages, paid by both the employer and employee), the system can never go broke. The challenge for Social Security is to ensure that 100 percent of benefit obligations are paid far into the future.”

You can see their entire article here.

6. The Los Angeles Times, Robert Scheer, and Paul Krugman have all weighed in and said that Social Security is not broke.

Well if all of these eminent economists, thinkers, scholars and editorialists think the system is not broke, why do I keep hearing so much about Social Security being broke? And why do I keep reading about privatization?

Good questions.

The answer lies in something I wrote a few paragraphs back: The Social Security system is where the money is. $$$$$$$$$$$$

And we will answer those questions in Part 2 of is Social Security Broke?