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Home Publications Blogs Beat the Press Washington Post Does Cover Up Duty for Republican Plans to Cut Social Security

Washington Post Does Cover Up Duty for Republican Plans to Cut Social Security

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Thursday, 21 October 2010 04:39

The Washington Post headlined a piece on a Republican proposal to cut Social Security benefits, "GOP Social Security plan would cut benefits for higher earners." This headline may lead one to believe that the plan would only cut benefits for relatively affluent workers. In fact, the plan would cut benefits for 70 percent of all workers, as indicated in the first sentence. The plan also raises the retirement age to 70, which amounts to an additional benefit cut of roughly 15 percent for all workers. 

The table accompanying the article also badly understates the impact of the cuts proposed in the Republican plan. It compares the benefits that a medium earner would get under the Republican plan in 2050 with the earnings that a medium earner would get today. The more appropriate comparison is the currently scheduled benefits for a medium earner in 2050. This is projected to rise by more than 48 percent to over $1,800 a month (in 2010 dollars) by 2050. The Republican plan would imply a cut of more than 35 percent against this scheduled level of benefits.

The article also presents an inaccurate statement from a spokesperson for Representative Ryan (the author of the Republican plan) without pointing out to readers that it is wrong. The spokesperson said that:

"According to the Social Security Administration, Congressman Pomeroy's do-nothing plan will impose painful, across-the-board benefit cuts on current seniors and those nearing retirement."

Actually, the trustees project that the program can pay full benefits for through the year 2037 with no changes whatsoever, at which point it would be able to pay 75 percent of scheduled benefits. Very few current retirees can expect to live more than 27 years.

 

[Addendum: Actually, the numbers in the chart refers to benefits that are indexed to the average wage in the economy. This means that if benefits doubled in nominal dollars and the average wage doubled, then indexed benefit would show no increase. The size of the cuts in the plan put forward by Representative Ryan depend on the exact point a worker's wages fall in the distribution.  If one combines the impact of the change in the indexation formula proposed by Representative Ryan and his proposed increase in the retirement age, it would lead to a 25 percent cut from scheduled benefits for medium wage earner.]

 

Comments (4)Add Comment
Tear Down This Wall Mr Obama
written by izzatzo, October 21, 2010 7:52
This is projected to rise by more than 48 percent to over $1,800 a month (in 2010 dollars) by 2050.


That's a 48% raise over 40 years!

There is one sign the socialists can make that would be unmistakable, that would advance dramatically the cause of austerity and financial stability. General Secretary Obama, if you seek solvency, if you seek prosperity for the USA and its allies, if you seek a balanced budget, come here to this gate. Mr. Obama, open the gate of this communist trust fund Mr. Obama, Mr. Obama, tear down this wall!
Yesterday I couldn't even spell fogy, now I are one.
written by diesel, October 21, 2010 10:13
Today, unemployment is approximately 15%. Where will these seniors between the ages of 62 and 70 work? And where will the young people, whose entry into the workforce is made still more difficult by a bunch of old fogys hanging on to their jobs into their dotage, work?
Policy Director
written by Robert Naiman, October 21, 2010 3:07
One more thing about this article:

"More to the point, Sweeney said, failing to overhaul Social Security - which is already paying out more than it collects from payroll taxes - will cause more immediate harm."

The phrase "which is already paying out more than it collects from payroll taxes" is misleading, since it deliberately implies that this is an indication of poor health or impending doom. But, under the Greenspan reform of the 1980s, which led to an increase in the payroll tax, it was always part of the plan that first, there would be a period in which tax receipts exceeded payouts, and money would build up in the Trust Fund, then, the money in the Trust Fund would be drawn down to help pay for the retirement of the baby boom demographic bulge. If you were never going to have a period in which payouts exceeded receipts, then you would never have any reason to build up money in the Trust Fund. So this is a stupid and misleading statement.
The alternate view
written by AndrewDover, October 22, 2010 3:02

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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.

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