Truth - Al Franken [76]
REPORTER: You emphasized in your opening statement the $11.1 trillion unfunded liability over the infinite horizon.
SNOW: Right.
REPORTER: You began publishing that number in 2003, and after you published it, in 2004, the American Academy of Actuaries wrote you a letter and said that the number was misleading.
But the reporter wasn’t done. He had a more specific point to make.
REPORTER: And I understand that in coming up with that number, you extend longevity to 150 years and keep the retirement age at 67. Now, doesn’t that provide a misleading number for the American people?
Hold on a sec. In order to get that number, $11 trillion over infinity years, they had to assume that people would live to an average age of 150, but still retire at 67. That’s an eighty-three-year retirement. They’re never gonna get to that without stem cell research.
Snow did the honorable thing and passed the buck to the Social Security actuary who’d been told to work with those assumptions.
SNOW: They’re his numbers. He’s the actuary. I’m not an actuary. I have great respect for actuaries.
One reaction to the “crisis” of an unaffordable eighty-three-year retirement would be to raise the retirement age to a more reasonable, say, 110. But this wouldn’t have to be done immediately. You could wait until, maybe, oh, the year 2,000,005.
Or you could take the Bush approach: privatize and slash benefits.
So let’s face it. The $11 trillion shortfall could not possibly have been the actual motivation behind Bush’s Social Security crusade. Or more properly, jihad.
Of course, that doesn’t mean there wasn’t any projected shortfall. Depending on whose assumptions you trust—and you’ll remember from Alan Greenspan how precise these things can turn out to be—the Trust Fund will contain zero dollars in 2042 (Social Security Administration) or 2052 (Congressional Budget Office). At that point, the money that comes in from workers paying their payroll taxes will be the only source of money for Social Security benefit checks. As I’ve said, the pessimists over at SSA tell you that at that point the government would have to cut benefits by 27 percent. The slightly less pessimistic, but still far from irrationally exuberant, wonks at the CBO contend that benefits would be cut by 19 percent.
But either way, there is a projected shortfall. That’s what people are talking about when they talk about the solvency problem. And it’s not new. Solvency problems in Social Security, much bigger ones, have been dealt with before. As Mark Weisbrot, economist for the liberal Center for Economic and Policy Research, has written:
Social Security is currently more financially sound than it has been throughout most of its entire history. To cover any shortfalls that may occur over the next 75 years would require less than we came up with in each of the decades of the 1950s, 60s, 70s, or 80s.
There is literally an infinite number of ways to deal with the projected solvency issue. Especially over the infinite horizon. One way is to, as Bush has proposed, lock in cuts to future benefits. But that doesn’t seem like a solution to the problem of maybe having to cut benefits down the road. A more elegant solution might be to simply wait and see what happens. In their projections, the Social Security Trustees assume that the economy will only grow at a sluggish 1.8 percent a year. But the last time the economy was that bad for any length of time was during the Great Depression. From 1961 to 2001, the average growth rate was 3.4 percent a year. It’s good to be cautious when planning for retirement, but it’s not like we’re gonna get extra stupid over the next four decades and let the economy sputter out. I’m optimistic. I think we can grow at 2 percent, or maybe even 2.3 percent a year. I pulled those numbers out of my ass.
See, every year, the Social Security Administration makes three forecasts: an optimistic projection, a pessimistic projection, and an intermediate projection. The press takes a Goldilocks approach and assumes that the intermediate projection is just