Framing Social Security

Hopefully, talking about Social Security will be marginally less inflamatory than evolution or global warming, and it illustrates many of the points made in various discussions. First, though, I want to clear the deck about some misconceptions about Social Security (I have a lot of the links here and here, so I won't repeat them below):

1) Social Security will most likely be solvent in perpetuity without any need for tax increases or benefit cuts. No, really. For even marginal tax or benefit alterations, the economy has to grow at a rate about 20% lower than the average U.S. historical growth rate... for forty years straight. Even then, any needed payroll tax increases would be far lower than previous payroll tax increases (50-100%). Even the mediocre performance during the reign of El Jefe Maximo is good enough.

2) Related to point 1, the dire forecasts are mandated by law. Were either the historical growth rate or the even higher estimates that the Congress and the president postulate when constructing their five year estimates used, Social Security is solvent.

3) Social Security generates a large annual surplus (about 25% of revenues). That surplus doesn't wind up under a mattress out at Area 51, but is used to purchase government securities, which, if need be, can be liquidated to pay out benefits (see point 4). Essentially, the government loans itself the surplus. Alternatively, think of the annual Social Security surplus as the world's largest municipal bond issue... held by you. The real crisis is not the solvency of the program, but the drop in excess revenue that will most likely occur. That would affect the general (national) debt (and budget deficit obviously).

4) In the bad case scenarios, Social Security will no longer generate enough surplus revenue, and would probably have to dip into the Social Security surplus to pay out benefit. This would represent the U.S. liquidating the debt that it itself, raising the official U.S. debt (if you hold your own debt, it doesn't really count as debt).

5) While the Baby Boomers are responsible for a great many things, they will not be the primary reason that Social Security will no longer generate surpluses and have to dip into the securities (they'll be dead by then).

Ok, so now, some discussion of framing. Overall, the Social Security discussion is a good example of either failed framing, lying, and blindness.

Failed framing: I'm not making up any of the points above because this is all based on the Social Security Board of Trustees' report. Certainly, this view has not been successfully promoted. Lord knows, Dean Baker has tried (an aside: Baker is a liberal economist, but conservatives have reviewed his work, and found nothing significant wrong with his analyses because he's using the same figures everyone else is).

Outright lying. Both political parties have been lying about this. To switch from Social Security to private accounts would cost trillions, and, in other countries were this had been tried, it has performed poorly. If part of the surplus were to be invested in something other than government securities, that might not be a bad thing per se, but there's no need for 'private' accounts or 'choice'; one is simply trying to maximize the return on the surplus to provide higher government pension benefits*. Why would we think individual people would make better choices, particularly when trying to minimize long-term financial risk which is the whole point of the program.

All that Social Security 'lockbox' stuff? It's bullshit too. I suppose it's a success of framing, at least politically, and I didn't mind the outcome, but, in the long run, lying doesn't help. The argument that 'Social Security is really precarious, so don't mess with it!' might have been a good short-term tactic, but, in the long-term, it simply reinforces the idea that Social Security is doomed, when, in fact, that's not true.

Another common frame lie is that 'entitlements' are in troubled. Yes, if you combine Social Security and Medicare, then things look dire. But they're separate programs with separate revenue streams. It would be like arguing if we lump together Social Security and defense spending, there's insufficient revenue, and, consequently we need to cut defense spending....HEY, WAIT A MINUTE!

This is framing, used for Evil.

Blindness. More than once, I've seen Baker make his points, moderators and fellow commentators agree, and then they continue the discussion as if what he said had never been uttered. I don't think it's lying, as much as it is an inability to perceive what's happening, in much the same way that the Punditocracy for so long thought of Bush as a popular wartime president, even when his polling numbers sucked. No level of 'framing' will crack through that level of obtuseness.

So, anyway, my frame: "Social Security--it's the surplus, stupid!"

Discuss. It's Friday.

*We don't like to think of Social Security as a government pension (for everyone). It sounds, well, Communist, but that's what it is.

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"-- The Disappearing Trust Fund: You may have heard that Social Security will run out of money in 2018. But this is like saying that Bill Gates will be in financial trouble if he decides to work only half-time. He will still have $40 billion in assets, enough to keep him and his descendants living well for a very long time. Similarly, the Social Security Trust Fund will have $3.7 trillion (in today's dollars) in 2018. Together with payroll tax revenues, that is enough to pay promised benefits until 2042 -- or 2052, if we use the CBO estimates."

Fantasic! This was exactly what my representative told me; ahhh, it won't be a problem for another 40 to 50 years. Oh wait, I retire in 2045. Whoops.

"-- "There are currently 3.3 workers for every beneficiary; by 2035 there will be only 2.1." True enough, but about as useful as one half of a baseball score. The other half of the score is that productivity (output per hour) will grow by more than 70 percent during the same time, so we won't need nearly as many people working to support a larger retired population."

Why does a Ponzi scheme work just because you want it to? How is productivity going to increase 70%? What data is being cited here?

"This is not the case. As the trustees have said, Social Security will not be out of money when the trust fund surplus is exhausted in 2034. The trust funds will continue after that to receive large sums from payroll tax collections. The problem is that, according to the trustees' calculations, the incoming revenues after that date will be sufficient to cover about 70 percent of benefit payments, rather than 100 percent. That is what is meant when the term "insolvency" is used to describe the condition of the trust funds after the third key date."

"In 1950, there were 16 workers paying Social Security taxes for every retiree receiving benefits. According to the 2003 Social Security Board of Trustees Report, today, that number has fallen closer to 3, and it will fall even further, to only 2 workers per retiree, within the next two decades.

Indeed, over the years, even as payroll taxes have risen from 2% in 1949 to 12.4% today, the retirement age has been raised, the amount of income taxable by Social Security has been raised, and other superficial adjustments have been made, the system remains in jeopardy."…

My main beef with Social Security is that my money is taken and I have no guaranteed payout; despite paying in, I have no legal right to a payout. If the program ended tomorrow, I would have no recourse. My taxation to date is not savings; it is a transfer payment. If someone can distinguish between SS and a Ponzi scheme, please explain the relevant differences.

I would much prefer to invest the money myself. My rate of return on investments is historically pretty high. I don't need or want the government to nanny my retirement at anyone else's expense.

*Whew!* If you were a politician, I'd SOO vote for you! Even if your assertions are all lies, I sure like the way it sounds! (Hey...isn't that how all politicians get elected?!) Seriously, I sure hope you're right, because I really want to actually retire, and not work at McDonald's when I'm 80!

My conversations with otherwise reasonable people seem to get stuck on the scale of billions of anything. Whether it's billions of dollars for Social Security or billions of years for evolution most people's eyes glaze over and the discussion goes downhill. Often leads to a Carl Sagan impression.

Blindness. More than once, I've seen Baker make his points, moderators and fellow commentators agree, and then they continue the discussion as if what he said had never been uttered. I don't think it's lying, as much as it is an inability to perceive what's happening, in much the same way that the Punditocracy for so long thought of Bush as a popular wartime president, even when his polling numbers sucked. No level of 'framing' will crack through that level of obtuseness.

Amazing when this happens. I made similar points back in undergrad in my course on economic issues of the post-cold war and got the same response including from the professor who had been a member of Clinton's economic policy group during his first campaign. How does this happen? Do people after awhile just start believing what they are saying over and over again?

Social Security will not be there when I reach the age, of that I am certain.

AS a Darwin Youth, I am unconcerned.

I know that the fit will survive.

If any of this money became available for privatized accounts, providers would be lined up for miles.

Consider this: You, the provider, will have a steady flow of money coming in like clockwork for years to come, guaranteed. All you have to do is provide glowing reports on the improving health of the investments. Then, when the time comes to steal away like a thief in the night, move all the money overseas into untraceable accounts and leave a bunch of patsies holding the bag.

Or, if you're a long-term planner, you can siphon the money off steadily, buying up armies and countries with oil wells. Nobody will know the money isn't there, because the issue cannot be tested until the dupe reaches retirement age.

To me this 'privatization' drive is just an attempt to loot the nation's savings.

There's a funny thing -- when various folks have proposed investing part of the surplus in securities markets, the usual "conservative" suspects have screamed about how that would be socialism or unwarranted government interference in the stock market because of the money flowing to investment picks, or Just Plain Wrong.

But a couple hundred million people doing the same thing with the same money, that's fine. Just as long as they're not allowed to get together and talk about how they'd like the companies they own to behave, or negotiate en masse with brokerage firms about their fees.

There. IS. NO. Social Security Fund.

It all comes from taxes on younger workers.

The oldsters ARE going to have another problem though.

They will have aborted over fifty million young people.

Make that 100 MILLION in another thirty years.

When we have too many old people, can DEATH WITH DIGNITY legislation be far behind?