Social Security Monitor reports on misleading statements and lies about Social Security in the media and by politicians and officials.

 

Dean Baker has been busy over at Beat the Press, trying to clear up confusion over Social Security. Lately that means taking David Brooks to task over his comments on a potential default, criticizing Sen. Tom Coburn for suggesting we reduce the annual cost-of-living adjustment (COLA) to Social Security to make it more accurate, and questioning the Washington Post's coverage of the budget negotiations.  
You would think someone in the media would have picked up on this by now, but Dean Baker over at Beat the Press has been correcting everyone lately. Fact: The Simpson-Bowles report never got the support from the necessary majority of the commission, which means no report was approved by the commission. So the next time you read about cuts to Social Security recommended by the Simpson-Bowles deficit commission, please remind the person who wrote that the deficit commission never approved a report. It's like a unicorn, it doesn't exist.

The Honorable Robert Andrews
2265 Rayburn House Office Building
Washington, DC 20515

Dear Representative Andrews,

President Obama recently proposed using the chained CPI to evaluate benefits and cut costs to Social Security while raising revenue. During an interview about this proposal, you voiced your support and said, “There is an appetite in the country among all groups to stop the practice of having our children pay our bills,” and that, “There is a realization that we can’t achieve that objective without real sacrifice by a lot of people, that there is some small group of elites that can pick up the whole tab.”

It is not clear that the chained CPI is more accurate than the current measure. The Bureau of Labor Statistics (BLS) has found that an experimental elderly index (CPI-E), that tracks the consumption patterns of people over age 62, actually shows a higher rate of inflation for the elderly than the CPI currently used for adjusting Social Security benefits.

While the CPI-E is not a full index since it does not look at the specific items bought by the elderly and the specific outlets they use for their shopping, there is no reason why BLS could not construct a full CPI-E. If the concern is having an accurate cost of living adjustment then it would seem that you should support having Congress instruct BLS to construct a full CPI-E. For my part, I don’t know whether this measure would show a higher or lower rate of inflation than the current CPI used for indexing benefits, but it would be a more accurate measure.

As it stands, switching to a chained CPI would undoubtedly mean a cut in scheduled benefits. Using this measure of the CPI would reduce benefits for retirees by 3 percent in 10 years, 6 percent in 20 years and 9 percent in 30 years. We know that the vast majority of retirees are struggling to make ends meet already. Retirees are not the people responsible for wrecking the country’s economy and they depend on Social Security far more than the small group of elites who did. Social Security benefit cuts of this magnitude seem like a major step in the wrong direction.

You should also be aware that there are no plausible projections that do not show our children being considerably wealthier on average than we are today. For example, the Social Security trustees projections imply that wages will on average be almost 40 percent higher in 30 years than they are today. Most workers may not see this gain if income continues to be redistributed upward. However, you are not addressing the pain that upward redistribution will inflict on children when you take Social Security benefits away from their parents.

I hope that you will have the time to review the indexation and generational equity issues more carefully. I would be happy to provide you additional background on the topic if it would be helpful.

The Honorable Rick Berg
323 Cannon House Office Building
United States House of Representatives
Washington, DC 20515

Dear Representative Berg:

A recent article noted that you, along with other members of the Republican party, characterized Social Security as "a problem which needs to be addressed." In the article, you said, “We have a lot of attention today because I think the president has recognized this as an issue that should be talked about, should be debated.  Everybody I’ve talked to back in North Dakota is concerned about Social Security, and I think it’s been used as a political football by different people, different interests all along.”

With all due respect, Social Security is not a problem that needs to be addressed right now. The recommendations of the National Commission on Social Security Reform in 1983 led to the growth of a large surplus in Social Security. This surplus was used to buy bonds and now, Social Security holds more than $2.6 trillion in government bonds. As such, the Social Security trustees’ projections show that the program will maintain full solvency through the year 2036.

Even if Congress never makes any changes to the program, Social Security will be able to pay close to 80 percent of scheduled benefits from then on. There is little to debate about this. A program that is fully solvent for a quarter century and then is almost 80 percent funded in subsequent decades hardly seems like a major problem that needs to be addressed in an economy with 9.2 percent unemployment. As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of the program. If you would like any additional background on the program, I would be happy to assist you.

The Washington Post thinks it's spoiling the ending of the budget negotiations. According to the Post, "No matter what the outlines are for a final agreement to lift the debt ceiling, the deal will include cuts to some of the nation’s major entitlement programs: Medicare, Medicaid and Social Security." Over at Beat the Press, Dean Baker takes the Post to task for the comment as well as some of their claims about a cost-of-living adjustment.

The Honorable Tim Walz
1722 Longworth House Office Building
Washington, DC 20515

Dear Representative Walz:

During an interview about the proposal to use the Chained CPI to evaluate cost-of-living adjustments for Social Security benefits in the context of negotiations over the debt ceiling, you said that it is a “positive sign” that President Obama “sees it as an opportunity for a grand compromise, one that actually would do what we all want to do, bring some type of stability”. You also said that you, “would like to think that there’s a fairly large number of [House Democrats] that would be willing to look” at the idea.

It is not clear that the Chained CPI is more accurate than the current measure. The Bureau of Labor Statistics (BLS) has found that an experimental elderly index (CPI-E), that tracks the consumption patterns of people over age 62, actually shows a higher rate of inflation for the elderly than the CPI currently used for adjusting Social Security benefits.

While the CPI-E is not a full index since it does not look at the specific items bought by the elderly and the specific outlets they use for their shopping, there is no reason why BLS could not construct a full CPI-E. If the concern is having an accurate cost of living adjustment then it would seem that you should support having Congress instruct BLS to construct a full CPI-E. For my part, I don’t know whether this measure would show a higher or lower rate of inflation than the current CPI used for indexing benefits, but it would be a more accurate measure.

As it stands, switching to a Chained CPI would undoubtedly mean a cut in scheduled benefits, regardless of whether or not it involves a more accurate cost of living adjustment. Using this measure of the CPI would reduce benefits for retirees by 3 percent in 10 years, 6 percent in 20 years and 9 percent in 30 years. We know that the vast majority of retirees are struggling to make ends meet already. Retirees are not the people responsible for wrecking the country’s economy. Social Security benefit cuts of this magnitude seem like a major step in the wrong direction.

I hope that you will have the time to review the indexation issue more carefully. I would be happy to provide you additional background on the topic if it would be helpful.

The Honorable Pete Sessions
2233 Rayburn House Office Building
United States House of Representatives
Washington, DC 20515

Dear Representative Sessions:

In a recent article, you described your new proposal allowing people to opt out of Social Security and put their payroll deductions into individual accounts as, "… an attempt to guarantee that those contributing to the program would have something to take out when it is time to retire."

Under current law, people are already guaranteed that something will be there to take out when they retire. The Social Security trustees’ projections show that Social Security will maintain full solvency through the year 2036. Even if Congress never makes any changes to the program, Social Security will be able to pay close to 80 percent of scheduled benefits from then on, which would be more than current beneficiaries receive.

On the other hand, if retirees were to put their money into private accounts, there would be no guarantee (unless the government provided it) of what they would get in retirement. Also, your proposal would likely raise the cost of administering such a program at least ten-fold since the administrative costs of private systems are far higher than for Social Security.

As a member of Congress, I hope that you will be careful to present the situation more accurately in future public statements. If you would like any additional background on the program or the Social Security projections, I would be happy to assist you.

The Honorable Mike Crapo
239 Dirksen Senate Office Building
Washington, DC 20510

Dear Senator Crapo:

During a recent interview, you were quoted as saying "I don’t see how anybody can argue against having accurate formulas," regarding a change to using the Chained CPI-U to make cost-of-living adjustments to Social Security benefits.

It is not clear that the chained CPI is more accurate than the current measure. The Bureau of Labor Statistics (BLS) has found that an experimental elderly index (CPI-E), that tracks the consumption patterns of people over age 62, actually shows a higher rate of inflation for the elderly than the CPI currently used for adjusting Social Security benefits.

While the CPI-E is not a full index since it does not look at the specific items bought by the elderly and the specific outlets they use for their shopping, there is no reason why BLS could not construct a full CPI-E. Given that you "don’t see how anybody can argue against having accurate formulas," it would seem that you should support having Congress instruct BLS to construct a full CPI-E. For my part, I don’t know whether this measure would show a higher or lower rate of inflation than the current CPI used for indexing benefits, but it would be a more accurate measure.

As it stands, switching to a chained CPI would undoubtedly mean a cut in scheduled benefits, regardless of whether or not it involves a more accurate cost-of-living adjustment. Using this measure of the CPI would reduce benefits for retirees by 3 percent in 10 years, 6 percent in 20 years and 9 percent in 30 years. We know that the vast majority of retirees are struggling to make ends meet already. Social Security benefit cuts of this magnitude seem like a major step in the wrong direction.

I hope that you will have the time to review the indexation issue more carefully. I would be happy to provide you additional background on the topic if it would be helpful.

One of the major arguments in Washington right now surrounds the role Social Security plays in the debt. Over at the Washington Post, Glenn Kessler, who writes the Fact Checker blog, attempts to explain the connection, but as Dean Baker notes over at Beat the Press, Kessler gets some of his facts wrong. 

The Honorable Sam Johnson
1211 Longworth House Office Building
United States House of Representatives
Washington, DC 20515

Dear Representative Johnson:

Recently, you were quoted in an ABCNews.com article as having said, “Social Security needs cash, and I don’t know where Treasury gets the cash to redeem the bonds. In times of this deficit, Treasury has to borrow it. Today the U.S. borrows 40 cents for every dollar that it spends, much of it from the Chinese and sends the bill to our children and our grandchildren, and part of that’s to cover Social Security.”

However, this fundamentally misrepresents the problem. The government already borrowed the money when it sold the $2.6 trillion in government bonds to the trust fund. As you know, the bonds held by the trust fund are included in the $14.3 trillion of debt subject to the ceiling. What is at issue is simply turning over bonds, something that the government does all the time, not new borrowing. If you were concerned about the government borrowing money this should have been raised at the time when the money was originally borrowed from Social Security. Rolling over these bonds requires absolutely no new debt.

Assuming that the government does not default on its debt, Social Security is fundamentally sound. The trustees’ projections show that Social Security will maintain full solvency through the year 2036. Even if Congress never makes any changes to the program, Social Security will be able to pay close to 80 percent of scheduled benefits from then on. Under the law, the bonds held by Social Security are to be treated like any other debt.

While it would be unacceptable to have benefits drop by more than 20 percent, Congress has more than a quarter century to prepare for this situation. The projected shortfall is substantial, but nonetheless considerably smaller than other budgetary changes we have seen in recent years. For example, it is more than 20 percent less, measured as a share of GDP, than the increase in annual defense spending than we have seen from 2000 to 2010.

I hope that you will be careful to present the situation more accurately in future public statements. If you would like any additional background on the program, I would be happy to assist you.

According to the New York Times, Oklahoma Senator Tom Coburn and other Republicans are concerned about the growth of programs like Social Security and support "the idea of an alternative measure of inflation, known as the chain-weighted version of the Consumer Price Index," because they believe it is "more accurate." On Beat the Press, Dean Baker points out we have no way of knowing what Coburn actually believes. As Dean noted this morning in a statement, unless the Bureau of Labor Statistics constructs a full elderly index that could take account of actual purchase substitution patterns among elderly consumers, "simply switching to the C-CPI-U without undertaking this research is consistent with a desire to cut Social Security, not make the [cost-of-living adjustment] more accurate."
The business-backed "progressive" group Third Way is going after Social Security again with some pretty deceptive language, tossing around phrases like "deep financial trouble" and "an escalating leakage of dollars." As Dean Baker notes on Beat the Press, recent projections from the Social Security trustees suggest otherwise and Third Way's proposed cuts to solve this imaginary problem would "have a larger impact on the living standards of low and middle income retirees" than the wealthy retirees they supposedly target.

The Honorable Kent Conrad
United States Senate Budget Committee
624 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Conrad:

In your statement today on the Congressional Budget Office’s new long-term budget outlook, you emphasize your support for the “deficit reduction plan produced by the President’s Fiscal Commission.”

With all due respect, the plan that you are referring to was only a proposal put forth by the Fiscal Commission co-chairmen.  As you may recall as a member of the Commission, you and your fellow members did not even vote on a final report because there was not enough support for the co-chairs’ proposal to enable the Commission to report out.

Your statement also indicates your support for the inclusion of “entitlement changes” in the co-chairs’ proposal.  These changes include cuts to Social Security, which under the law can only spend money that came from its designated tax or the interest on the bonds held by the Social Security trust fund. It has no legal authority to spend one dime beyond this sum. In that sense, Social Security cannot contribute to the deficit.

As the discussion over deficit reduction continues, I hope you and your staff will have the opportunity to review the other legitimate plans, such as the Congressional Progressive Caucus’ People’s Budget. In addition, last week I published an analysis that you may find useful: “7 Things You Need to Know About the National Debt, Deficits, and the Dollar.”

If you would like any additional background on these issues, I would be happy to assist you.

Thomas Friedman is warning his readers that Social Security is bankrupting the country. As Dean Baker points out over at Beat the Press, you could make the same claim about the Commerce Department. Sure, Commerce's budget is less than 0.3 percent of total spending, but it's fun to point at any government spending and make that claim without backing up your argument with evidence. Try it! 

The Honorable Lindsey Graham
290 Russell Senate Office Building
United States Senate
Washington, DC 20510

Dear Senator Graham:

The Congressional Quarterly recently reported that you stated, “Social Security’s going to go broke.  We should put it on the table to save it from bankruptcy.”

However, this is not the case. The Social Security trustees’ projections show that Social Security will maintain full solvency through the year 2036. Even if Congress never makes any changes to the program, Social Security will always be able to pay close to 80 percent of scheduled benefits from then on. This means that when you retire in 2021, you will receive $33,120 a year (in 2010 dollars). After 2036, you would still receive $24,840 a year in Social Security benefits for the rest of your life.

From the context of the article, “the table” that you’re referring to is negotiations over the national debt and budget deficits.  In terms of Social Security and the deficit, under the law it can only spend money that came from its designated tax or the interest on the bonds held by its trust fund. It has no legal authority to spend one dime beyond this sum. In that sense it cannot contribute to the deficit.

As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. This week I published a primer that you may find useful: “7 Things You Need to Know About the National Debt, Deficits, and the Dollar.”  If you would like any additional background on the program, I would be happy to assist you.

The Honorable Sam Johnson
1211 Longworth House Office Building
United States House of Representatives
Washington, DC 20515

Dear Mr. Johnson:

The Congressional Quarterly recently reported that at a hearing earlier month you stated about Social Security, “The system is broke and you know it.”  In reference to the Treasury bonds held by the Social Security trust fund, it was reported that you said, “Sure they’ve got pieces of paper over there, but that’s not real.”

With all due respect, these assertions are mistaken. The recommendations of the National Commission on Social Security Reform in 1983 led to the growth of a large surplus in Social Security. The surplus has always been used to buy bonds. Currently, Social Security will be able to pay full benefits through the year 2036, and close to 80 percent thereafter. This is a far cry from broke.

The Social Security trust fund now holds more than $2.6 trillion in government bonds that are honored by the “full faith and credit” of the U.S. government, the same credit that gives the dollar bills in our wallets their value.  These bonds a part of the $14.3 trillion federal debt covered by the debt ceiling. About two-thirds of this debt is held by the public, made up of both American and foreign investors. The remaining one-third is held by government entities, including Social Security, the U.S. Military Retirement Fund, and the U.S. Civil Service Retirement Fund.

Under the law, the bonds held by Social Security are to be treated like any other debt. In assessing the prospects for Social Security it seems that we have to work from current law, since none of us can really know how the program will be changed in the future. And under current law, the program is projected to be fully solvent for more than a quarter century with no changes whatsoever.

As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. This week I published a primer that you may find useful: “7 Things You Need to Know About the National Debt, Deficits, and the Dollar.”  If you would like any additional background on the program, I would be happy to assist you.

The Honorable Kay Bailey Hutchison
284 Russell Senate Office Building
Washington, DC 20510-4304

Dear Senator Hutchinson:

Today you held a press conference to announce a new proposal, the Defend and Save Social Security (DSSS) Act, that both raises the Social Security normal retirement age to 69 and cuts cost-of-living adjustments for Social Security beneficiaries. While you say that your proposal will not cut “any core benefits”, this is not the case.

The DSSS Act would reduce the annual cost-of-living adjustment for Social Security beneficiaries by 1.0 percentage point. This is a benefit cut both measured against current law and in real terms. If enacted, a 1.0 percentage point reduction in the COLA for beneficiaries would result in a benefit cut of 12 percent for a retiree at age 75 and a cut of more than 20 percent for a retiree at age 85.

You also propose raising the normal retirement age for Social Security to 69 by the year 2027. As can be seen from the Social Security trustees’ report, the normal retirement age for Social Security has already been raised to 66 and is scheduled to increase to 67. Raising the retirement age further would amount to another cut in benefits with each successive increase in the retirement age. While the intention may be to have people work later into their life, our research shows that nearly half of older workers are employed in physically demanding jobs in which working to age 69 will be difficult. For workers who are unable or unwilling to work at older ages, this proposal would result in a 4 percent reduction in future benefits for workers currently between the ages of 54 and 58 and a 10 percent reduction for workers between the ages of 44 and 48.

Finally, the Trustees report projects that Social Security will remain fully solvent through 2036 and will be able to pay almost 80 percent of benefits for many decades past this point. It is also worth noting that the necessary increases in funding to maintain full solvency are relatively small compared to items like the rise in defense spending over the last decade, so there certainly are not major economic obstacles to maintaining full funding for Social Security.

As a sitting Senator responsible for authoring and voting on legislation that affects millions of Americans, I hope that you will be careful to present the situation more accurately in the future. If you would like any additional background on the program, I would be happy to assist you.

The Honorable Joe Heck
132 Cannon House Office Building
U.S. House of Representatives
Washington, DC 20515

Dear Dr. Heck:

Earlier this week on Alan Stock’s radio show on KXNT, you stated, “You know and it’s already said that Social Security is probably going to be insolvent in about 20 years.”

However, this is not the case. The Social Security trustees’ projections show that Social Security will maintain full solvency through the year 2037. Even if Congress never makes any changes to the program, Social Security will always be able to pay close to 80 percent of scheduled benefits from then on. This means that when you retire in 2028, you will receive $36,210 a year (in 2010 dollars). After 2037, you would still receive $27,158 a year in Social Security benefits for the rest of your life.

You also stated that “previous Congresses have raided the trust fund for other pet projects and to try to balance the budget and use it for other projects.”

However, the fact that Congress opted to spend the money it borrowed from the Social Security Trust Fund is irrelevant to the finances of the program. In exchange for the money it lent to the government, the Trust Fund now holds more than $2.6 trillion in government bonds that are honored by the “full faith and credit” of the U.S. government.

The fact that the government spent the money borrowed from Social Security makes no more difference to the status of these bonds than it would with any other bond issued by the U.S. government.

The bonds held by the Trust Fund are a part of the $14.294 gross federal debt covered by the debt ceiling. About two-thirds, or $9.6 trillion, of this debt is held by the public, made up of both American and foreign investors. The remaining one-third is held by government entities, including Social Security, the U.S. Military Retirement Fund, and the U.S. Civil Service Retirement Fund. The revenue raised by all of these bonds, not just those held by Social Security, went to the general fund, and were spent, as you contend.

Under the law, the bonds held by Social Security are to be treated like any other debt. The bonds held by the Trust Fund are as good as the credit of the U.S. government, the same credit that gives the dollar bills in our wallets their value.  In assessing the prospects for Social Security it seems that we have to work from current law, since none of us can really know how the program will be changed in the future. And, under current law, the program is projected to be fully solvent for more than a quarter century with no changes whatsoever.

As the discussion over Social Security continues, I hope you and your staff will have the opportunity to further review the design and finances of Social Security. If you would like any additional background on the program, I would be happy to assist you.

Sincerely,

Mark Weisbrot
Co-Director, Center for Economic and Policy Research

You'd think after insulting the head of a major national women's organization, making obscene gestures at the AARP, lobbing expletives at reporters and mistaking a rapper for a loveable cartoon beagle, the media would be wary of reporting on anything that comes out of former Wyoming Senator Alan Simpson's mouth. Yet here we are. In his latest Truthout column, Dean breaks down Alan Simpson's consistently incorrect views on Social Security.

Those pushing for cuts in Social Security and the other big items on the right’s agenda can get the basic facts about Social Security, the budget, and the economy wrong over and over again and it doesn’t in any way affect their standing in the public debate on these issues. Now, in addition to getting the facts wrong about cutting Social Security benefits, Sylvester Scheiber in a Progressive Policy Institute brief has referred to CEPR as "a research arm of the AFL-CIO," presumably because we promote policies that advance the interests of ordinary workers but despite the fact that the CEPR site states that we accept no funding from "corporations, unions, or foreign governments." Dean Baker has the full takedown of the PPI brief here.

There was both good news and bad news in the Social Security trustees' report released last week. The bad news is that the program is projected to cost somewhat more in the latest report than in the 2010 report. However, the bad news is also the good news. The main reason that the program’s finances deteriorated between the 2010 report and the 2011 report is that in the 2011 report the trustees assumed that we would enjoy substantially longer life expectancies than they did in the 2010 report. Nonetheless, the picture is hardly as dire as many politicians in Washington are claiming. Read CEPR's Social Security Byte here and Dean Baker's further analysis here for the whole story.


GuideStar Exchange Gold charity navigator LERA cfc IFPTE

contact us

1611 Connecticut Ave., NW
Suite 400
Washington, DC 20009
(202) 293-5380
info@cepr.net

let's talk about it

Follow us on Twitter Like us on Facebook Follow us on Tumbler Connect with us on Linkedin Watch us on YouTube Google+ feed cepr.net rss feed