Tuesday, October 2, 2012

No, Social Security Won't Stop Existing in 2033



I read an op-ed online today by Scott Paulson, a conservative commentator, in which he exalts Romney for having a plan for Social Security's future and criticizes Obama for not having one. I take issue with his op-ed on a number of levels, but primarily because Paulson, in typical political pundit fashion, blows wildly out of proportion the problems faced by Social Security. At certain points in the op-ed, Paulson, whether deliberately or through ignorance, throws out lines that are demonstrably false. Let's take a deeper look, shall we?

First, Paulsen opens with this paragraph:
"It’s encouraging to see that the presidential challenger is tremendously concerned about the Social Security issue now because the program’s demise is only 21 years away. Furthermore, each year that passes, the method of fixing the program’s financial concern – by running totally out of money – becomes increasingly more difficult to correct."
This paragraph is utterly off-base, to be honest. Paulson seems to be implying that Social Security will simply cease to exist once the trust fund's contents run out. I initially thought that I may have been reading too much into things, but then my suspicions were vindicated:
"Continuing as it is, it will definitely be a non-functional program by the year 2033 due to lack of funds."
I'm not sure which Trustee's report on Social Security Paulson read, but the real report said nothing of the sort. In 2033, when the trust fund runs out, Social Security will keep right on functioning--all that would happen is that the money paid out would have to equal the money paid in. According to the Trustee's report, Social Security would basically be able to sustainably pay beneficiaries about 75% of the promised benefits. That is, if your monthly check was supposed to be for $1,000 it would instead be for $750. Hardly non-functional, if you ask me. For you visual learners:
Now, I'm not saying this isn't a big deal or that a 25% cut in benefits wouldn't be a bad thing, but  Paulson writing that the program will become non-functional only serves to distort peoples' efforts to understand the problem. A problem, I should note, that has been wildly overblown.

While bringing Medicare costs down is a tremendously complicated affair, the problems facing Social Security are simply a matter of accounting--we have to either cut benefits or raise revenues, that's it. Many people say we should raise the retirement age, but in pointing to our rising life expectancy, they miss the fact that life expectancy for the poor--those who rely most on Social Security--has declined over the past several decades. In any case, rather than seeing the sudden end of Social Security, the worst-case scenario we face is that benefits would face a 25% reduction, and that's if we literally sit on our hands for the next two decades.