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Home Publications Blogs Beat the Press Has the Washington Post Gone Mad?

Has the Washington Post Gone Mad?

Wednesday, 11 August 2010 03:38

Confused readers may wonder based on its lead editorial complaining that supporters of Social Security: "pursue a maddening strategy of minimizing the existence of any problem and accusing those who seek solutions of trying to destroy Social Security (emphasis added)."

The piece begins by telling readers that: "THIS YEAR, for the first time since 1983, Social Security will pay out more in benefits than it receives from payroll taxes -- $41 billion. This development is not an emergency, but it is a warning sign (emphasis in original)." It certainly is a warning sign. The falloff in Social Security tax revenue is a warning that the economy is seriously depressed due to the collapse of the housing bubble. Double digit unemployment leads to all sorts of problems, including the strains that it places on pension funds like Social Security.

In a sane newspaper the next sentence would be pointing out the urgent need to get back to full employment. Instead the Post tells readers:

"Too soon, this year's anomaly will become the norm. By 2037, all the Social Security reserves will have been drained and the income flowing into the program will only be enough to pay 75 percent of scheduled benefits. If that sounds tolerable, consider that two-thirds of seniors rely on Social Security as their main source of income. The average annual benefit is $14,000. Those who care most about avoiding such painful cuts ought to be working on ways to bolster the program's finances -- and soon, when the necessary changes will be less drastic than if action is postponed."

Let's see, it would be intolerable to have Social Security pay 75 percent of scheduled benefits in 2037, but one of the Post preferred cuts is raising the retirement age to 70,a 15 percent cut in benefits when fully phased in. So the Post thinks it would be just fine to have beneficiaries get 85 percent of scheduled benefits in 2037.

Of course doing nothing today, or for the next decade, or even the next two decades, does not imply that beneficiaries will see their benefits cuts by 25 percent in 2037. The Post may not be familiar with the way Congress works, but it tends to wait until issues require action. They would know this if they had heard about the Greenspan Commission, which was established in 1982 to deal with Social Security's last crisis. It produced a set of fixes which is now expected to keep the program solvent for 54 years, and no one missed a check.

While it would not be desirable to wait until the system was literally facing a shortfall, as was the case when the Greenspan Commission, there is little obvious harm to waiting now in terms of the program's finances. A Greenspan Commission size fix put in place in 2030 would leave the program fully solvent for most of the rest of the century.

There is also a very good reason for delay. The opponents of Social Security have been spending huge amounts of money deliberately promoting misinformation. Peter Peterson, the richest and most prominent opponent, has repeatedly asserted that the Social Security trust fund does not exist. This flat earth view of the program has been given respectful treatment at the highest levels of government. When Peterson put on a daylong program on the deficit in the spring both of the co-chairs of President Obama's deficit commission took part in the program as did former President Clinton.

This massive effort to undermine confidence in the program has been largely successful. Polls show that substantial majorities of younger workers do not expect to receive their Social Security benefits.

That is not a good environment in which to debate substantial changes to the country's most important social program. Since there are several decades until the program faces any real problems, it is entirely reasonable for those who support the program to focus on educating the public about the program's financial health and to seek to delay any major changes until the Peterson-type misinformation campaigns have been defeated.

Comments (16)Add Comment
Where does the editorial advocate raising the retirement age to 70?, Low-rated comment [Show]
written by BruceMcF, August 11, 2010 6:15
Dean says it is one of the Post's preferred positions. He did not state that the Post stated that position in this editorial, but that of course would have been more honest than raising the alarm on a 25% benefits cut in one editorials on in others clamoring for a 15% cut.
written by skeptonomist, August 11, 2010 9:28
Every time the subject of SS comes up, it may be necessary to repeat that:

*there is supposed to be an outflow from the Trust Fund starting in a few years*

*the Trust Fund is supposed to reach zero around 2037 (more or less) - this will not indicate "bankruptcy", but that SS is operating exactly as designed*

Obviously these things are not widely understood, possibly even by WaPo editorialists and pundits. Nevertheless, claiming that either of these inevitable events signal a crisis is the Big Lie of Social Security.
Question about payroll taxes
written by MB, August 11, 2010 11:27
Regarding this from your Borat Economics article posted today on commondreams.com:

"The 2009 projections assumed that the cost of employer-provided health insurance would continue to rise. The 2010 projections assume that the cost will actually decline at the rate of 0.1% a year. This makes a small difference in improving the solvency of social security, since wages are subject to the payroll tax, while employer-provided health insurance is not. Therefore, the new numbers mean the taxable wage base is projected to increase more rapidly through time."

Employer-provided health insurance premiums are paid with pre-tax dollars. (Right? Right. Ok, got that.) But. From pre-tax Federal Withholding plus FICA? Must have thought it was exempt just from FWT, did not realize pre-tax health insurance takes a piece out of Social Security and Medicare. Is that right? So pre-tax private health insurance is partially subsidized by reduced tax payments towards SS & Medicare? Does that mean that employees accrue lower SS benefits as a consequence of pre-tax health insurance/pre-tax retirement contributions?

At the very end of the health reform food fight I realized this pre-tax issue is more significant than it seems to ordinary people. That might explain the Cadillac excise tax controversy, which now seems like it was a very poorly communicated attempt to chip away at the pre-tax status of pvt health insurance---for which there may well be very valid, beneficial reasons for doing so. But that concept could have been explained better; it really was unnecessary for the public debate to focus on provoking resentments over it.

During health reform it might have been helpful if educating-the-public efforts had been applied to the mysteries of the paycheck and payroll taxes as reported on pay stubs. This is not a challenge for sophisticated money types but a lot of regular people really have no idea. Pre-tax health insurance and pre-tax retirement contributions are confusing. Pre-tax dollars are perceived/promoted as free money, but they're not really. So guided tours of the pay stub might be helpful in the future. Not that you specifically should do it, just in general. For example, it is significant that SS and Medicare get their own payroll taxes. It matters for individuals but also for the pool of public money. It separates the lap lanes from the diving area, sort of. A lot of people don't get that.

Okay! back to the grindstone.
Payroll taxes
written by Mike B., August 11, 2010 1:31

Pre-tax health insurance premiums and health care flexible spending account contributions are exempt from FICA taxes, but not pre-tax retirement contributions. SS benefits are based on wages that are taxed, so they are affected.
Cutting benefits avoid higher taxes on rich
written by Fred Donaldson, August 11, 2010 2:47
By not paying the trust fund, the rich will escape that financial responsibility and keep their 70% of the nation's income. All mention of fairness is sop for the serfs, who sadly seem willing to let their children and grandchildren receive benefits cuts of 25% for the sake of fiscal (don't tax the rich). More investigation of the relationship between the Post and Peterson's Fiscal Times may reveal financial incentives corrupting public service.
Check out the retirment plan for Congress and demand that for the "lesser people." http://www.senate.gov/referenc...L30631.pdf
In a nutshell: They spent the money
written by LJM, August 11, 2010 5:53
It's pretty obvious the $2.5 trillion that is supposed to be in the trust fund got spent on things like Bush tax cuts for the rich and his two wars. They claim that they have to borrow money to make the trust fund whole. They could do ther things, but this is the line they use. They want to default on the debt. It's that simple.
written by Lightship, August 11, 2010 9:16
Though it burns my fingers even to pass this through the keyboard, I think it's worth quoting from a current column in The Atlantic by -- who else? -- Megan Mcardle. She's writing about the end of historically high returns on stocks, but can't help taking time out to lie about Social Security:

"In 2010, for the first time, payouts to retirees and the disabled have exceeded the program’s revenues from payroll taxes. Infusions from the general fund are now needed if the government is to keep mailing checks—a situation that is projected to become a permanent, and growing, problem by 2016."

As you see, the official business editor of a major national magazine shows no knowledge that the Social Security Trust Fund even exists!. No recognition whatsoever that all the surplus paid by working people over the last 25 years was earmarked for exactly this purpose and now needs to be paid back, as planned. WIshing the Trust Fund out of existence amounts to a multi-trillion-dollar theft, with the rich taking it from the poor, and the Establishment is completely in line to support it.

If there were ever a clearer demonstration that the Establishment press is aligned to help the rich against the poor, I haven't seen another one of this magnitude.
written by GPC, August 12, 2010 9:48
LJM says: "They want to default on the debt. It's that simple."

Thank you. It is that simple and I've been looking for a straightforward way to express it. You caught it precisely.
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written by Infrared Thermometer, December 13, 2010 1:00
pretty obvious the $2.5 trillion that is supposed to be in the trust fund got spent on things like Bush tax cuts for the rich and his two wars. They claim that they have to borrow money to make the trust fund whole. They could do ther things, but this is the line they use. They want to default on the debt. It's that simple.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.