You Call This a Crisis?
USA Today, Apil 10, 2000
The latest Social Security trustees' report shows that the program will be able to pay all promised benefits for the next 37 years, with no changes whatsoever.
Even after this date, the program still will be able to pay benefits that average more than 15% higher -- in today's dollars -- than what a typical retiree gets now.
This doesn't fit most people's definition of a crisis.
Furthermore, this projection is not based on rosy assumptions about the future. The trustees assume that economic growth will average less than 1.7% annually over their 75-year planning horizon. This is about half the growth rate of the past 75 years.
The trustees also are pessimistic about wage growth. If wages were to grow at the same rate as in Europe, for example, the Social Security trust fund would be fully solvent 60 years into the future, with no changes whatsoever.
The only reason that Social Security is ever projected to face a funding shortfall is that people are expected to live longer in the future. Longer lives mean longer retirements, which will cost Social Security more money.
Politicians have been scaring people for years about Social Security.
Some focus misleadingly on the drop in the number of workers for each retiree, ignoring the fact that this has already been included in the calculations. Others refer to the size of the projected shortfall over 75 years, in trillions of dollars.
This is enough to scare anyone, until one realizes that it is less than 1% of national income over the whole period.
Some politicians imply that the U.S. will default on the bonds held by the trust fund, as though this would be ethically defensible or even a political possibility in a nation that has far more retirees than we do now.
The country faces real problems child poverty, 43 million Americans without health insurance coverage, a stock market that many economists estimate is overvalued by 50%. These issues deserve our attention -- not the possibility that generations earning wages 50% to 60% higher than ours might have to pay a little bit more for our nation's largest retirement program.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The End of Loser Liberalism: Making Markets Progressive. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.