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Home Publications Blogs Beat the Press Steve Rattner's Defective Social Security Chart in NYT

Steve Rattner's Defective Social Security Chart in NYT

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Tuesday, 01 January 2013 08:37

Steve Rattner had a series of mostly useful charts in the NYT this morning describing the state of the economy. The major exception is the one on Social Security shown below.

01rattner592-ch6-tmagArticle

It is not clear what information this chart is supposed to convey. The average annual benefit in 2012 for a retired worker was $14,760 according to the Social Security Administration. It's not clear where Rattner got $23,135. The chart also shows adopting a chained CPI, presumably for adjusting the annual cost of living adjustment, would have led to a 4.0 percent cut in benefits by 2011. This is a considerably larger cut than is usually estimated, since the change would only apply to benefits after retirement.

It is also not clear why anyone would use median income (not defined) as a reference point. The point of Social Security is to protect retirees from economic fluctuations like the severe downturn caused by the collapse of the housing bubble. While more competent economic policy would have provided more protection to workers also, we have Social Security because we recognize that retirees have fewer options to boost their income (i.e. work more) than the working age population. Also, since the chart purports to show averarge benefits it would be more reasonable to at least include average income.

This piece also inaccurately refers to the report from the Bowles-Simpson commission. There was no report from the Bowles-Simpson commission since no plan received the necessary majority support.

Comments (8)Add Comment
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written by PeonInChief, January 01, 2013 10:37
It may be that the chart refers to the average household income from Social Security. If the wage earner has an income of $14,760, the spouse, on reaching retirement age, may collect 50% of that, which would bring their joint income to about $23K. First, it's wrong to compare family income to individual wages, but worse than that, I always find it fascinating that people look at an income of $23,000 providing those piggy seniors with European vacations, spa treatments, and fancy dinners out.

The only people who can believe that are those for whom $23K is their petty cash.
Source for Rattner Chart
written by AndrewDover, January 01, 2013 11:02
"Imagine, for example, a person born in 1935 who retired to full benefits at age 65 in 2000. People in that position had an average initial monthly benefit of $1,435, or $17,220 a year, according to the Social Security Administration. Under the cost-of-living-adjustment formula and 2012 inflation, that benefit would be up to $1,986 a month in 2013, or $23,832 a year. But if payouts were adjusted using chained CPI, the sum would be around $1,880 a month, or $22,560 a year — a cut of more than 5 percent and more as the years go by."

http://www.washingtonpost.com/...ained-cpi/

The Post then links to examplemax.html at ss.gov, which explains that 1435 was the monthly earnings for a "Worker with steady earnings at the maximum level since age 22" who retired in 2000. So $23,135 is what that person's SS income in 2011.

Anyhow, Rattner's main point is "the current adjustment formula has delivered benefit increases to Social Security recipients that are larger than the wage increases of average Americans". But the chart shows relative, not absolute increases. (Since median income is "indexed")

I consider most of this talk to be besides the point. Either the federal government puts more money into the Social Security system to meet the gap between scheduled and payable benefits, or it does not. If it decides not to add more money, then it can either smooth the benefit reductions over time, or not.
...
written by Mark Jamison, January 01, 2013 11:42
Mr. Rattner seems to suggest that stagnant wages are a good thing. The problem the chart shows is not that Social Security has grown too fast under the current formula but that wages are, basically, not growing at all.
The really perverse consequence is that the lower wage growth combined with any reductions in Social Security will put the average person far behind the curve when they retire. Their benefits will be smaller due to lower wages and reductions due to the use of chained CPI.
Rattner argues for mediocrity as a solution.
It wasn't just the housing bubble
written by matt carmody, January 01, 2013 1:52
I completely understand how the implosion of the housing bubble caused a dramatic decrease in demand that helped to propel the economy into the nosedive we experienced in 2008. I actually believe that the Bush people thought they could get away with the economy holding on until they got out of office and then the bubble would burst and everything would have been laid at Obama's feet. The thieves on Wall Street got a little too rapacious and the explosion happened earlier than planned.
But the crash of the housing market isn't the only reason we are in such dire economic straits. The tax cuts that Bush along with Democrats and Republicans in Congress implemented along with the endless wars have contributed to the problem. Bush's people were very smart having the cuts expire when they did because they knew it would be an election year and letting the cuts expire would be used by the GOP to paint Obama with wanting to pass a huge tax increase instead of letting things return to the level they were at when the cuts went into effect.
Wages in this country haven't increased in any significant way since the 70s yet executive pay/compensation has rocketed through the roof. I remember David Gordon, rest his soul, mentioning back in '86 that if the tax-cutting that Reagan's acolytes wanted was actually implemented, the economy would collapse within a generation. But no one ever listened to David, or Herb Gintis, or Sam Bowles, or Hyman Minsky, or even you, for that matter, even though they were more often right than the go-to economists that the NYT and WaPo like to quote.
An entire generation of Americans have grown up believing that Reagan and his people were concerned for the well-being of this country when they were, and are, only concerned about making sure that the rich stay rich and get even richer at the expense of everyone else. We are being put through the same wringer that Latin Americans were put through during the 80s but no one remembers that because no one knows our history, let alone the history of a bunch of countries god knows where.
The Norquist/neo-Confederate cabal that has taken hold of the GOP from DC on down to the governors and state legislatures has to be broken up.
Roberts shows his ideological colors with his know-nothing statements. I think he believes that the Supreme Court actually retains the aura of neutrality with the American people that it held prior to Bush v Gore. He doesn't realize, or doesn't care that it has come to be seen as nothing more than another branch of our government that the ideologues on the radical right have destroyed.
...
written by Chris, January 01, 2013 6:24
Odd, he could at least have compared median income with median ss benefits instead of comparing average benefits with median incomes.

There really should be a higher standards for sourcing and review of validity of sources for important data and charts. Statistics have the power to really mislead when in the hands of dastardly dimwits.
only 63.6% of the total Social Security payout is to retired workers
written by Brian Dell, January 02, 2013 2:09
$14 760 is what you get if you divide total amount of benefits paid to retired workers by the number of retired workers. If you keep the denominator but add to the numerator the total paid to spouses, dependent children, survivors, lump sum death benefits, plus the total paid to disabled workers, spouses and children you get about $23 200.

I would agree that it would be more reasonable to use average income if Social Security wasn't funded just off of payroll income that's capped at $110K.
Looks like a Soylent Green chart to me
written by watermelonpunch, January 02, 2013 3:04
It is not clear what information this chart is supposed to convey.


Not commenting on its accuracy... but what it conveys to me is that worker pay is not keeping up with the cost of living!

Is that what they were going for do you think?
Compare estate tax exemption with Social Security COLA
written by Charlie, January 02, 2013 1:56
Here is an eye-popper.

The estate tax exemption has been growing even faster than the rate of medical inflation in the US since 1980!

If it had grown at the rate of inflation since 1980, it would currently be $430K instead of $5M. If at the rate of inflation since 1987, when it was set to $600K, it would currently be $1.2M.

So on the one hand, setting the exemption to automatically go up at the CPI rate might slow down the rate of increase of the exemption. But why should that rate of exemption go up any faster than what we're offering social security recipients?

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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.

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