Social Security Solid. Ignore the Latest Scare Tactics

by Mike Hall, Aug 25, 2008

Once again, the cries that “the sky is falling on Social Security“—usually shouted by the same folks who want to privatize it (hello, John McCain)—are nothing more than scare tactics.

The Congressional Budget Office (CBO) issued a new report Friday that shows the cornerstone of working families’ retirement security remains on darn solid footing after 73 years of never missing a payment—and will for decades to come.

The CBO report looks 75 years down the road, when benefits will be higher than they are today, and finds the Social Security surplus will be able to pay full benefits until 2049 and that incoming revenues will be able to pay 81 percent of benefits through 2082.

The privatizers would have us believe that Social Security, especially as the “baby boomers” start collecting their checks, is not only on the edge of bankruptcy, but that the nation’s entire economic health is threatened. There is even a new “Scary” movie out to frighten the bejesus out of working families.

Monique Morrisey, from the Economic Policy Institute (EPI), says there is not a monster under the bed or behind the shower curtain. In a new policy memo, she writes:

The report is a timely counter to the alarmism being peddled by Pete Peterson, a billionaire investment banker and Secretary of Commerce under President Nixon. The Peterson Foundation has bankrolled a new movie, I.O.U.S.A., billed as “An Inconvenient Truth for the U.S. economy,” to sell the message that the country is on the brink of a financial meltdown.

Yet, according to the CBO projections, Social Security is in decent shape. Without any changes at all, the projected long-term Social Security shortfall equals a mere 1 percent of taxable payroll.

The wave of boomer retirements isn’t the problem, she writes, it’s rapidly “growing income inequality.” Most workers pay Social Security payroll taxes on all their income, but not everybody, especially the well off.

Because the earnings of most workers have stagnated while those at the top have skyrocketed, the share of untaxed earnings above the taxable earnings cap (currently set at $102,000) has grown from 10 percent in 1983, when the system was last in balance, to around 17 percent today. So a better way to address the modest shortfall than an across-the-board tax increase would be to raise or eliminate the cap on taxable earnings.

Along with lifting the earnings cap, Morrisey writes that comprehensive health care reform would boost Social Security’s financial strength.

Controlling costs through comprehensive health care reform would not only close the projected Medicare and Medicaid gaps (which, unlike Social Security’s, are genuinely large), but would also give a boost to Social Security, because money spent on health benefits gets excluded from Social Security’s tax base.

McCain has called Social Security an “absolute disgrace.” But the real disgrace is the drive by McCain and extremist politicians and economists, to scare the American public into believing that Social Security is doomed unless we turn it over to Wall Street.

Now that’s scary.

One more thing to keep in mind. Unlike Sen. McCain, who has voted to privatize Social Security, Sen. Barack Obama has voted to strengthen Social Security and strongly opposes privatization. He also pledged not to cut benefits or raise the retirement age, two options McCain says are “on the table.” Scary Movie, Part II?

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