Over at Corrente, Joe Firestone provides details about one of the many false arguments about the Social Security ‘crisis’–the claim that Social Security is DOOOMMMEEEEDDD!!! is based on incredibly pessimistic and historically unwarranted assumptions about GDP growth (italics mine):
Second, the deficit terrorist projections of GDP growth are way out of line with historical averages, and that is why they think we cannot grow our way out of hard times. In effect, they are projections from the Bush and recent Obama Presidencies. If one computes 10 year growth ratios of GDP unadjusted for inflation, the historical growth ratio norm (average) is roughly 2.0. In contrast, the very conservative CBO projection from 2010 – 2020, is 1.54, just a bit higher than the 1.50 of the decade now ending. If the Government were to forget neo-liberalism, and follow continuously aggressive stimulative policies of the kind opposed by the deficit hawks, and proposed by Modern Monetary Theory, the growth ratio is very likely to return to the historical norm, since other than in the 1930 – 40 decade, the only time it dipped below 1.69 was during the current decade. Since deficits depend on tax revenue, and tax revenue, in turn, is closely related to GDP, the conservative GDP projections of the CBO and the deficit terrorists, more generally drive up the deficit numbers, and by depressing the GDP numbers also drive up the public-debt-to-GDP ratio – a double whammy supporting their fantasy that there’s s deficit/debt/debt-to-GDP ratio “problem.”
This is why the Social Security Trustees always claim that Social Security will be ‘bankrupt’ (a ludicrous concept itself) 30-38 years from the time of the estimate–a unit of time known as the Samuelson unit. In fairness, the Trustees are obligated by law to release pessimistic estimates (actually, they typically release three estimates*, ranging from kinda bad to “Oh God, Oh God, we’re all gonna die!”), but the rest of us need to use our brains in interpreting this.
Put another way, for Social Security to become ‘bankrupt’, we need to have the same dismal economy we’ve had for the last two years for three more decades. And if that happens a slight absolute increase in the payroll tax will cover things (of course, if we were to remove the cap on the payroll tax–a highly regressive tax–even the highly pessimistic assumptions predict no Social Security shortfall).
What I’ve never understood about these predictions and assumptions is that were the economy to perform this poorly for so long, this would be a social and economic disaster (if Jewish history is any guide, I might possibly be dead). Does any politician or Fed Reserve chairman ever stand up and pronounce, “If elected (or appointed), I promise thirty years of economic performance as bad as the Great Depression”?
So why do we use these estimates to predict future growth, especially when it has never happened?
Maybe someone’s not being forthright about their motives? (Just saying).
*Usually, the middle ground is the one discussed in news reports.