The Return of the "Social Security is Going Broke" Myth

As if there wasn’t enough panic coming from the Republicans in D.C. (along with some Democrats like Harry Reid) about detainees from Gitmo being re-located to American suburbia, now comes the obligatory ‘Social Security is going broke’ myth from one of the usual suspects on the right, Robert Samuelson, columnist for the Washington Post. ”The recession had made everything worse…trust funds run dry; promised benefits exceed dedicated payroll taxes…retirees would scream. Hospitals might shut.” Chicken Little Samuelson cries. Mr. Samuelson’s solution? “It's increasingly obvious that Congress and the president (regardless of the party in power) will deal with the political stink bomb of an aging society only if forced. And the most plausible means of compulsion would be for Social Security and Medicare to go bankrupt.” Good idea, let them both go away, paving the way for another all-time greatest hit from Samuelson and his fellow travelers, privatization. (Note: the preceding contains sarcasm). Just a couple of problems with the panic scenario. One, Social Security isn’t going broke. Two, the fiscal outlook for Social Security and Medicare are completely different. Of course the privatizers know this, they just like to lump them together to make the numbers bigger and scarier. “About a decade ago, conservative and libertarian economists who oppose Social Security, Medicare and other entitlements came up with a clever rhetorical strategy. They would calculate the gap between the payroll taxes that pay for these programs and estimated costs over time. But there was one problem: The gap isn't all that scary, at least in the near future. So in order to frighten the American people and their elected leaders, deficit hawks cite the sum total of Social Security's "unfunded liabilities" over 75 years. But even this -- a paltry $4.3 trillion over three-quarters of a century, according to the 2008 report -- isn't sufficiently terrifying.  [So they combine Medicare and SS] [This] produces a suitably spooky 75-year shortfall of $42.9 trillion. And if this is not alarming enough, deficit hawks can cite the truly apocalyptic figure of $101.7 trillion in combined "entitlement" spending over an infinite time horizon. The anti-Social Security lobby always presents the "unfunded liabilities" of "entitlements" in scary dollar terms, rather than as percentage points of GDP. Here's why: Over the next 75 years, the Social Security shortfall at most hovers around 1 percent of total U.S. GDP over that same period.” Samuelson claims that Social Security will run out of money by 2037. Never mind the fact that this projection is based on an annual economic growth rate of 2.6% and the average annual growth rate since the Civil War is  nearly 3 percent. At a rate of 3%, Social Security is solvent for 75 years, not 28. Even using the conservative estimates, an increase in the payroll tax from 12.4% to 14.4% would completely eliminate the shortfall. Medicare is a problem right now. But President Obama’s proposed health care reform would go a long way towards solving it. “Medicare is entirely different. It's a monster. But fixing it has everything to do with slowing the rate of growth of medical costs -- including, let's not forget, having a public option when it comes to choosing insurance plans under the emerging universal health insurance bill. With a public option, the government can use its bargaining power with drug companies and suppliers of medical services to reduce prices.” So you see, no need to panic, Republicans. Resume focusing on KSM being your next door neighbor.