Monday, February 07, 2005

Yet More Misinformation on Social Security

by Tom Bozzo

Sunday's Wisconsin State Journal ran a front-page article on Social Security reform under the enormous headline "Social Insecurity."

As is seemingly obligatory, a 30-something, in this case a hair stylist, is called upon to represent the younger generation's view that they'll have to retire without Social Security:
Michele Braem, 30, mens' hairstyle director at ANIU Salon in Middleton, said young people believe personal investment, not Social Security, will sustain them in retirement. She and her husband, Scott, a supervisor at American Girl, have been putting money into their own IRAs for 10 years, she said.

"The baby boomers outnumber us," Braem said. "Unless something drastic happens, I don't think I'm going to get back what I pay in. I feel like I can't rely on it being there."
This is true only to the extent it becomes a self-fulfilling prophecy.

Reality is that Social Security has a dedicated funding source sufficient to pay out a large fraction of "scheduled benefits" (a term of art that merits some additional discussion) — indeed, higher benefits, adjusted for inflation, than are paid to current retirees — forever. Why aren't the Michele Braems better informed?

This is one of several mass delusions caused by incessantly repeated mendacious statements by authority figures, of which the widespread belief in the continued existence of Iraqi WMD was previously the prime example.

Bush-voting visitors, if there are any, this is a big part of the reason why there's still a Kerry bumper sticker on my car. On Social Security, the lack of the fig leaf of 'intelligence failure' leaves no doubt as to the bad faith on the part of Junior and his administration.

In the case of this story, the weak fact check ("'Bankruptcy' is a scary term that... could easily give the wrong idea") follows 17 paragraphs of he-said, she-said, including a quote from Comptroller General David Walker with scare-inducing figures on the magnitudes of benefit reductions or payroll tax increases once the Trust Fund runs out.

Meanwhile, I'll suggest that other lefty bloggers be aware of a few terms of the debate that contribute to the confusion. Not that these go completely unaddressed, but given the terms of the debate, I worry that in our educated person's delusion that people will research accessible facts. Here are my two suggestions for the day:

1. Don't assume people know that current benefits can be paid out forever. Discussion of possible "cuts" with respect to "scheduled benefits" that are far higher than current levels is confusing, and semantically favors the privatization side since the future need to "cut" benefits is a prima facie problem.

2. The use of "real" (inflation-adjusted) returns to evaluate private account scenarios facilitates communication among serious analysts but can be bad "public economics." Most of what's in the news, and on retirement account statements that provide the information, is "nominal" returns without inflation adjustment. To the extent people are encouraged to compare nominal returns they encounter with the real returns needed to make private accounts "work," this makes private accounts look much better than they really are.
Figuring that the Social Security debate is going to be the big ticket political discussion of year, I have forced myself to pay attention. Your posts on it are great: very reader friendly, very precise. The Q/A session on news shows have also been pretty good. But at times I think that it is all irrelevant. Right now, fear drives people to think conservatively, to resist any idea of draconian change (26% approve of the Bush SS plan according to the newest Newsweek poll). But fear is a malleable thing. Note how the administration has worked in the very crude sound bite: by the year xxxx it will be bust! Ridiculous, but effective. Watch the approval numbers shift over the next few months.
Thanks, Nina.

While the mainstream left blogs are hardly ignoring the Social Security issue, my view is that the assault from the right is so multifarious as to warrant the mobilization of all available keyboards.

And, as your comment suggests, Junior never gives up on something just because it's a bad and/or unpopular idea.
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