AP has been running a series of widely distributed columns that have been trying to convince readers that the Social Security system is in crisis and is in desperate need of fixing. These pieces have contributed to the misinformation on the topic that has been widely disseminated by wealthy people like Peter Peterson and the Washington Post.
These pieces routinely try to scare the public by expressing the size of the projected Social Security shortfall in large numbers that lack any context. This pattern continues in the last AP column. The article told readers:
"Once Social Security's surplus is gone, the program is scheduled to pay out $134 trillion more in benefits than it will collect in taxes over the next 75 years, according to data from the agency. Adjusted for inflation, that's $30.5 trillion in 2012 dollars."
These are really big numbers and the piece would have provided just as much information to its readers if it substituted the words "really big number" for $134 trillion or $30.5 trillion. Virtually none of the people reading this article has any idea of how large the economy will be over the next 75 years so they have no basis for assessing the size of these numbers.
It is easy to express the projected shortfalls in ways that would be understandable to readers. The Social Security trustees projection of the size of the shortfall is equal to approximately 0.9 percent of GDP over the 75-year planning horizon. The Congressional Budget Office's projection of the shortfall is equal to approximately 0.5 percent of GDP. Put another way, the shortfall projected by the Trustees could be fully met with a tax increase equal to roughly 5 percent of projected wage growth over the next three decades. It would have been much more informative to use such ratios to express the size of the shortfall, although perhaps somewhat less scary.
The piece is also misleading in its comment:
"But the sooner changes are made, the more subtle they can be because they can be phased in slowly. Each year lawmakers wait, Social Security's financial problems loom larger and the need for bigger changes becomes greater, according to an analysis by The Associated Press."
While this is true (if we cut benefits or raise taxes for more people, then the benefit cut or tax increase per person would be less), the article implies that the increase in the projected size of the shortfall from the 2011 Trustees report to the 2012 Trustees report had little to do with waiting. The main reason that there was a sharp increase in the projected shortfall is that the Trustees used more pessimistic assumptions about the program. If the program had been brought into balance based on the 2011 projections, the changes in projections in 2012 would again show the program to be unbalanced. Waiting had nothing to with it.
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