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.

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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.