Truth - Al Franken [75]
The biggest reason of all was that Social Security was in crisis. The President explained the “looming danger” in his weekly radio address on December 11, 2004:
In the year 2018, for the first time ever, Social Security will pay out more in benefits than the government collects in payroll taxes. And once that line into the red has been crossed, the shortfalls will grow larger with each passing year. By the time today’s workers in their mid-twenties begin to retire, the system will be bankrupt, unless we act to save it. A crisis in Social Security can be averted, if we in government take our responsibilities seriously.
So that was the crisis: There would more money going out of the Social Security Trust Fund than coming in. Starting in 2018. That was only thirteen years away! That wasn’t as scary as the mushroom cloud he used to sell his last phony crisis, but still—pretty scary.
So what was his solution? Private accounts. Instead of paying money into the Trust Fund, you’d be able to put it into a private investment account. Crisis averted. But wait. If we put less money into the Trust Fund, how does that ensure that the Trust Fund will have more money? Hmm.
Didn’t make sense to me. But then again, I’m not an economist. I picked up the phone and called Peter Orszag, the Joseph A. Pechman Senior Fellow in Economic Studies at the Brookings Institution. “Bush says the Social Security Trust Fund will start losing money in 2018. But,” I asked Peter, “when will it start losing money under his plan?”
“Depends on when the plan starts,” Peter said.
“Let’s say it starts right away.”
“In that case,” Peter told me, “outflows from the Trust Fund would exceed inflows starting in 2006.”
“So, next year?”
“Yeah.”
Okay. So the year the Trust Fund started shrinking would actually be way sooner if Bush “fixed” it. So that couldn’t have been the problem Bush was trying to solve. It must have been more of a long-term problem. That’s when I remembered Bush’s other argument. On December 9, 2004, the President talked to reporters gathered at the Oval Office. In this instance, as you will soon see, he was talking to a reporter named “Steve.”
I think what’s really important in the discussions is to understand the size of the problem. And that is we are faced with a present value of unfunded liabilities of about $11 trillion. What’s important, Steve, is before we begin any discussion is to understand the scope of the problem.
My God. Eleven trillion dollars. Where would we get that kind of money? I mean, that really was a crisis. And I kept hearing the number over and over. From Vice President Dick Cheney. From Treasury Secretary John Snow. On right-wing radio, it was hard to hear any other number.
Where did that number come from? Well, it came from the Social Security Administration. Bush’s Social Security Administration. And the number, $11 trillion, represented the total Social Security shortfall, adjusted for inflation, from now until the year Infinity.
That’s right. The year Infinity. Not the year 2018. Not the year 3018. Not the year 3,000,018. No. The year ∞.
That kind of put it in a different perspective. If you think about it, $11 trillion over infinity years is nothing. Think about it. Over the first 11 trillion years, that’s just one inflation-adjusted dollar a year. Easy. After that, it’s nothing. You’re done. What exactly was the problem?
Why would Bush’s Social Security Administration come up with such a number? I mean, unless it was to mislead people. As it turned out, the American Academy of Actuaries, of which (full disclosure) I am not a member, had a similar concern. Taking aim at the projection out to the “infinite horizon,” they wrote a letter to the Social Security Advisory Board saying that it could “mislead” people into “believing that the program is in far worse financial condition than is actually indicated.”
A reporter asked Treasury Secretary Snow about this very matter.