One of the key rhetorical moves in the current push for creating private accounts in Social Security is to suggest that the system will literally run out of money and stop paying benefits entirely in 2042. This is completely false.
First, a couple of examples. Here's President Bush speaking during a White House interview with the Orlando Sentinel:
"We're really addressing a younger generation of Americans, many of whom believe they will never see a dime in Social Security," Bush said. Without changes, "they're going to be right."
And here's Bush speaking with USA Today:
"Well, if we don't act now, the solution for Social Security, when it becomes — starts losing money in 2018, and out of money in 2040, will be much more severe. The sooner we work and solve the problem, the easier it is to solve the problem."
"And this — the Social Security system goes into the red in 2018. That means more money going out than coming in, and it gets worse and worse and worse. And so that if you're 20-years-old today, by the time you retire, the system will be broke."
CBS News even encouraged this perception in a December 15 report flagged by the liberal Fairness and Accuracy in Reporting. Reporter John Roberts said, "In 2042, Social Security will become insolvent, and today's young workers risk losing their benefits." According to FAIR, "[a]n on-screen graphic explained that the workers-to-retirees ratio has been declining since the 1930s, with the final entry for the year 2042 reading: 'Insolvent = 0 benefits?'"
Thankfully, Rex Nutting of CBS Marketwatch destroyed this canard in a recent story:
And Time also debunked Bush's bankruptcy rhetoric in a new story:
Bush: "As a matter of fact, by the time today's workers who are in their mid-20s begin to retire, the system will be bankrupt. So if you're 20 years old, in your mid-20s, and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now."
The facts: The Social Security system cannot go "bankrupt," for it has no creditors. By law, the trustees will continue to pay reduced benefits even if the trust fund is exhausted. Payroll taxes will continue to come in and benefits will continue to be paid. According to the trustees' intermediate economic forecast (neither doom nor boom), the trust fund will be able to pay about 73 percent of scheduled benefits in 2042 and about 68 percent of scheduled benefits in 2078. Future presidents and Congresses could also choose to fully fund scheduled retirement benefits from general tax revenue.
The President last week surrounded himself with citizens ranging from children to an 80-year-old and warned that the Social Security system will be "flat bust, bankrupt" by the time workers in their 20s retire. As early as 2018, Bush said, "you're either going to have to raise the taxes of people or reduce the benefits." At another appearance intended to promote federal standards for testing high school students, Bush went off script to warn a group of teenagers, "The system will be bankrupt by the year 2040."
That sounds pretty scary--except that it's not true. What will actually happen in 2018, according to the Social Security trustees who oversee the program, is that the money paid out in benefits will begin to exceed the amount collected in taxes. And since Social Security will run a surplus until then (and has been running one for some time), it has billions available that it can tap to fill the gap. Even under conservative estimates, the system as it stands will have enough money to pay all its promised benefits until 2042 and most of its obligations for decades after.
And credit where credit is due - as Bob Somerby points out, the one journalist to challenge the Bush administration on this was Chris Wallace of "Fox News Sunday" during an interview with Dan Bartlett, counselor to the President, on Sunday:
WALLACE (1/16/05): Let's turn if we can to another big issue, maybe the top of your legislative agenda on the domestic front: Social Security. The president keeps saying that there is a crisis, that if there is no change the system will go broke by 2042. Let's look.
BUSH (videotape): I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now.
WALLACE: As a simple fact, isn't that wrong?
BARTLETT: Absolutely not! And the bottom line is—the fact of the matter is that when you take the Social Security system as it is, this is a mathematical issue, not an ideological issue. In 1950, there were about 16 workers—
WALLACE: Let me just interrupt, because I know the fact that there were 14 workers for every person when it was first— The fact is that in 2042, if you did absolutely nothing to the system, it wouldn't be "broke." It wouldn't be "bankrupt." In fact, there would be a problem, but you would be able to still pay about three-quarters of everybody's guaranteed benefits.
BARTLETT: But what you're talking about—in 2018 we go into the red. In 2042, you start actually bankrupting the system, which you're having to get funds elsewhere. You're right, the payroll taxes at that moment could pay about 70 percent of the benefits.
WALLACE: But that isn't "bankrupt."
BARTLETT: Well, it's absolutely bankrupt, because you're absolutely in the red, and you're having to take dollars from elsewhere. And that problem only continues to get worse.
The question is: will the press start to call the president on this one consistently, or follow the example of the Orlando Sentinel and USA Today and let him keep getting away with it?
Postscript - Debunking of two more bogus claims:
-Talking point: Blacks get less from Social Security because they die sooner - see the Minneapolis Star-Tribune
-Talking point: The life expectancy of the elderly has changed dramatically since Social Security was created, worsening Social Security's financial problems -- see Nutting
Correction 1/20: Dan Bartlett is now counselor to the president, not communications director. My apologies.