Top 10 lies about Social Security (from those who just want to dismantle government)

Since the season of top 10 lists is upon us, here’s the Social Security Scrooge version:

  1. Social Security costs are escalating out of control. No. Costs are projected to rise from roughly five to six percent of GDP before leveling off.
  2. Americans want benefits but aren’t willing to pay for them. Wrong again. Americans across political and demographic lines support paying Social Security taxes. They also strongly prefer raising taxes over cutting benefits as a way to close the projected shortfall. The most popular option is raising taxes on high earners, since earnings above $106,800 aren’t taxed. But Americans prefer to close the gap on the revenue side even if asked to pay more themselves.
  3. Our children and grandchildren will drown in debt if we don’t cut the social safety net. No, future generations will drown in debt—their own or the federal government’s—if we don’t address health care cost inflation. Cutting Medicare or Medicaid benefits just pushes costs onto the private sector. And there’s no reason to lump Social Security in with other programs since it’s funded through dedicated taxes and prohibited by law from borrowing.
  4. The Baby Boomers will sink us. No, we saw them coming. Social Security began building up a trust fund in the early 1980s in anticipation of the Boomer retirement. The trust fund will keep growing for another decade to around $3.7 trillion, enough to last through the peak Boomer retirement years.
  5. We’re living longer, so we need to work longer. No—only some of us are living longer, and most of us are already working longer. Gains in life expectancy have been concentrated among people with higher incomes and more education, especially men. Meanwhile, the labor force participation of older workers is close to the postwar peak.
  6. We just need to save more for retirement. That’s a reason to expand Social Security, not shrink it. The average household has a retirement income deficit of $90,000, a conservative measure of how far behind they are in saving and accumulating benefits for retirement—and that’s without further cuts to Social Security. Retirement insecurity is increasing due to earlier Social Security cuts and the shift from secure pensions to do-it-yourself retirement accounts. (If anything, budget hawks should look to trim 401(k) tax breaks, two-thirds of which go to taxpayers in the top fifth of the income distribution and have little impact on saving.)
  7. Seniors are greedy. No, they’re struggling to make ends meet. By any reasonable measure, seniors and other beneficiaries are worse off than working adults, so it makes sense to increase contributions rather than cut benefits. Older households have incomes roughly half those of working-age households. The “greedy geezer” myth rests on the fact that seniors have lower official poverty rates than children and working-age adults, though an improved measure that takes into account higher medical expenses for seniors shows that the three groups have similarly high poverty rates. In any case, cutting Social Security would increase poverty for all. Also, while older households typically have accumulated more savings than younger households, these savings are not enough to maintain their pre-retirement standard of living through retirement.
  8. Benefits are generous. No, they’re modest and shrinking. The average retirement benefit is $14,000 a year—less than a full-time minimum wage worker earns—and benefits constitute two-thirds of income for the average older beneficiary. For a medium earner retiring at 65, benefits replace 41 percent of pre-retirement earnings, down from 52 percent in 1981. This replacement rate is scheduled to drop in the next 15 years to a meager 36 percent.
  9. We’ll just cut benefits for people who don’t need them. No, proposed cuts would hurt the middle class now and the poor later. Because benefits for high earners are modest and wealthy retirees few, supposedly “progressive” plans actually go after middle-class benefits in order to yield significant cost savings. Social Security’s enduring popularity rests on the fact that people earn the right to participate by working and contributing, in keeping with core American values. Moving from a universal social insurance program toward a need-based one would doom Social Security to the same fate as targeted programs like Medicaid, which are being squeezed even as demand for them grows. An even worse idea is cutting cost-of-living adjustments, which would have an impact on all beneficiaries, but especially the oldest old, who are also the poorest old.
  10. Social Security won’t be there for us. Only if we fall for these arguments. Social Security can pay full promised benefits for another quarter-century. Even if nothing is done to shore up the system, Social Security can continue to pay three-fourths of promised benefits after the trust fund runs out. Though this would be far from ideal, it’s certainly no reason to preemptively cut benefits. Instead, we should devote a small portion of the economic growth projected over Social Security’s next 75 years to continuing to build economic security on the cornerstone laid by President Franklin D. Roosevelt.

  • Gail Dratch

    Thanks Monique and EPI for this handy-dandy crib sheet for those testy holiday conversations.  I hope everyone will help spread this around.

  • Sarah L Byrne

    Nice work, Monique!  Like the smack-down style.  Will definitely use over the break.  Will attempt to refrain though from any literal smack-downs. 

  • Gregor

    Some don’t want to dismantle Social Security, but they do want to defund it by lowering the FICA withholding rate. This is the only direct source of funding for Social Security. I don’t believe Congress plans to pay interest on the Social Security funds they’ve appropriated to run the government, and their IOU’s are probably valid, but who knows. Comments?

    • Mark Bryant

      Our federal government has never defaulted on a bond payment (“I don’t believe Congress plans to pay interest”) and to suggest that congress would default on any bond payment is far fetched even when one considers the extreme ideological makeup of our current congress. Congress would have an even harder time of concocting and selling to the public a selective default where bonds (or interest from those bonds) created from Social Security revenue would not be paid.

      Any debt default by our federal government would be disastrous for the bond market and would set a precedent of enormous proportion in that few investors could or would risk purchasing America’s debt (bonds) for a very long time. Also, the cost of borrowing would be so expensive that government deficit spending would be minimal causing a great retraction of economic activity much worse than our current economic malaise.

      BTW, excellent article and you can’t say the items in this list enough.

      • Gregor

        I don’t believe the bond market is a valid consideration. When President Clinton “balanced” the budget by including FICA contributions in revenue, it was not considered borrowing. “How can you borrow from yourself?” is the rationale used by many Clinton appologists. If appropriated FICA funds are never repaid, a simple explanation will dismiss any bond market considerations. Again, this is just my belief.

        Now with Congress (BOTH sides of the aisle no less) considering a continuation of the lower FICA contribution rates, the defunding of the Social Security Trust Fund will complete what those who would dismantle SSI have only espoused.

        Most of us know people who rely on their Social Security income. Many of us will rely on a return on our FICA contributions in the future. So for those in Congress that consider a lowering of the FICA contribution rate to be a “tax break” for the working class, the question today is; “Should we rape the SSI Trust Fund for Two Months or Twelve Months?”.

        Still, this is an excellent article. It just doesn’t go far enough.

        • Richard

          Gregor– It wasn’t Bubba who included FICA revenues in ther generral budget.  It was LBJ, who “unified” the budget in 1968 by including Social Security along with all other trust funds (much smaller amounts).  This placed Social
          Security  ”on-budget.” 

  • Randy

    This is a good piece that lays to rest many of the lies about SS being accepted as “common knowledge.” However, one needs to be careful: Is it true that currently about $800 million in general fund revenue (I believe that’s the right figure) is going towards retirement of the T bills in the “trust fund” in order to pay current benefits? If this is accurate, what is the response to this question? 

  • C. Poplin JD MD

    Actually, I am surprised you did not mention what I think is the most nefarious lie about Social Security: that Social Security is a ‘pay as you go’ program, the Trust Fund is a fiction, the Treasury bonds are not ‘real’ Treasury bonds, just ‘pretty pieces of paper’, proceeds of the higher taxes we paid after the Greenspan commission have been spent, the cupboard is bare, and that Social Security must be cut in the future because there will be only two workers to support every retiree.

    You would be surprised how many people who should know better believe this.

    • EconProf

      The reason she doesn’t cite it as a lie is that it isn’t. It is and always was pay as you go. All economists know it and so do the defenders of the current system. But there is nothing wrong with pay as you go, as long as it’s an equitable system. Instead, the real lie is about this trust fund, which justifies turning Social Security into its present reverse-Robin Hood impact: transfers from the working poor to non-poor seniors, from the lower income current generation to last generation’s better off, from low income retirees to higher income retirees (who live a lot longer to collect as well). “We have to tax and distribute that way because we can only give back “what you put in.” No actuarial or accounting basis, but it’s a great rationalization. Solution: turn it into a welfare system. As long as you are healthy enough to work productively (mostly, those who were well off all their lives), you get nothing. If you are too broken down to be employable from a blue collar grunt life, you get to retire at 50. Instead, it’s the exact opposite today. Prediction: only seniors won’t be able to afford to retire.

  • http://twitter.com/Inconoclast Jacqueline O’Connor

    I wish, in addition to your comments–which I find valid–that you’d included the common, inaccurate statement by older people who say “I’ve earned my social security”.  They – we and me – have not “earned” our social security, in fact what we’ve put into the coffers is exhausted in 5-7 years usually.  Just to keep the record – and the outrage – straight.

  • EconProf

    There is nothing economically valid in this piece. No economist, progressive or conservative, could possibly defend these arguments nor the current system. It would be difficult to design a more unfair system, either intergenerationally or at any given point in time. A true progressive would realize this uncontestable fact, and stop the rationalizations. The elderly wealthy like to believe they are getting back what they put in. The elderly poor preserve the dignity that they are not on welfare. As with any such institution, politics makes strange bedfellows.

    The only question we progressives refuse to ask is the only relevant question: what is an efficient and equitable system to switch to and how do we get there with the minimum of transition costs? Instead, everyone circles the wagons to defend a hopelessly inequitable and indefensible system the way you cheer for your alma mater’s bad football team.

    Sure the Right wants Social Security replaced or made unsound. Must we react to oppose lock-step anything by the other side? Just because reactionaries propose a preposterous ”cure” does not make that the only alternative (or more likely, even a viable alternative, since conservatives have ulterior motives).

    Sure, health care is the real cause of long-term deficits. But that doesn’t answer the logical response from the Right: therefore, we must cut Social Security (or replace it with market savings accts) to offset those health care deficits. Where’s that in your list of lies??? It’s not a lie, and it trumps all your 10 in the list.

    You can’t beat something with nothing. So progressives need to get in the game. Many of the beneficiaries of the current system are not progressives anyway: they are in Red states or watch Fox. So why sell out programs to combat climate change, poverty among the working poor, deficient education and research? For what? To send more bucks from the working poor to the non-poor seniors? You won’t even get a thank you, and you’ll surely destroy everyone’s future. It’s such a burden to be a smart person who also cares about humanity.

    • EconProf 2

      Hard to understand how this EconProf calls SocSec “unfair”, inasmuch as s/he provides no specific facts, no data, no analysis to support the charge. The only clue is the claim that “elderly wealthy” believe “they are getting back what they put into it” and their poor counterparts believe that they are not receiving what is known as “welfare” benefits.  The claims appear to be false (for the elderly), possibly true (for the poor) but mainly irrelevant.  Social Security is social insurance–everyone pays in, everyone benefits from a system that covers the great contingencies of life. For the specific charges that EconProf would probably raise if pressed, see Monique Morrissey– good job, Monique!  from  EconProf2
       

  • Saliann16

    Can EPI provide an accurate analysis of the revenue that would be gained if the cap on income taxed for social security and medicare were eliminated?  And if this would go a long way to “save” social security and eliminate the need to cut benefits or raise age eligibility, why don’t the Democrats and President Obama make this case?  And, btw, why was a cap established and who (politically) would be opposed to eliminating it?
     

    • Krapotkin29

      I understand, that the opposition to remove the Cap, and tax all incomes, is based on fairness (Why), because the high income earners will not benefit as much as the low earners!

  • KCeconomist

    Under the current monetary system (U. S. Govt. has sovereignty over its own currency and flexible exchange-rates) the U. S. Federal Government cannot go broke in any meaningful sense of the term. The Fed. Govt.can create (its own) money without limit — which not to say without effect. At this point, the reflex reaction is: “Yes but this would be inflationary” –with visions of hyperinflation dancing in heads. The biggest lie/myth/fallacy is that Fed. debt is something that must be paid. It is rather like my left pocket owing my right pocket money. Since the crisis was manifest in 2007, the Fed, Reserve has maunfactured and pumped a cumulative amount of 29 trillon dollars into banking systems, especially the European Central Bank . Most of this is low interest loans allowing old friends on Wall Street to continue with high profits and nice executive bonuses. Anyone notice a hyperinflation? (Although speculation on commodities has inflated those prices.)  The U.S. is not Greece — which has no control over its own currency. The U. S. does not have to borrow from China — rather China would rather have its liquid dollar assets in U. S. bond rather than cash. Warren Buffet follows the same policy — liquidity in U. S. Govt Bonds — because it is a safe asset and it earns a little interest.  

  • http://www.facebook.com/sherrill.gilbert Sherrill P. Gilbert

    For some early retirement after being laid off/fired at 50 or beyond is devastating.  For some they have no choice, it can be the only way they can survive but yet they will live on barely nothing.  They will have worked and paid in those years anticipating retiring at 65 or later.  Today in the uncertainity, the stalled economy, the blackmail and threats if the President and democrats by the crumbs they are thrown attached to more cuts to programs that the most volunerable need and a time limit included so they can come back to feed again are programs that are vital also to the early retires whose career has been curtailed.

  • http://www.facebook.com/sherrill.gilbert Sherrill P. Gilbert

    President Franklin Roosevelt knew that the worker was not able to provide for his family and save money since most were struggling as workers are today to pay the bills.  Can you imagine the cost to society if we did not have Social Security and the numbers of people who would be living outside the fringes of society today and the overall cost to the community with the loss of the income that support local business.  This would hurt everyone!

    • Just some guy

      The problem with your statement is… most career oriented American families can easily afford retirement plans that would allow them to live comfortably after retirement.  What Americans CHOOSE to do is live in a $300,000 house when a $150,000 house would serve them exactly the same.  Or drive a $50,000 vehicle when a $30,000 vehicle is just as nice and does the same thing, or buying their kids $100 jeans when $30 jeans look just as nice… But because the ‘cheaper’ house isn’t in the ‘right’ neighborhood or town, or the ‘stripped down’ car model doesn’t promote their image, or the jeans don’t have the right name stitched on them, they don’t want them.   There are people who definately benifit from SS because they had no other option.  But for most Americans… they need SS because of how they chose to spend the money they had, instead of planning for the future.  I never made more than $50,000 in any single year I worked.  My wife never made more than $25,000 a year.  Yet, we both invested in our OWN retirement… and were able to retire in our 50′s with NO LOSS OF STANDARD OF LIVING!   We CHOSE to be responsible.  Neither us or our kids ever lacked for anything.  There is nothing special about us… other than our parents instilled a sense of personal responsibility in both of us.  Most of our fellow Americans are selfish and spend money foolishly.

      • Mike

        First, congratulations. You are one of the few and I respect your discipline immensely. Especially because you did this while also paying into SS. So you have retired with your individual retirement plan and your SS benefits. The other benefit you get from SS is that all of the rest of us are not lined up at your door, sleeping on your stoop and barraging you with pleas for your hard earned money. You can go about your business, enjoying your retirement without having to slough through the dregs of society with their pathetic hands out. Unless you want to live in a Charles Dickens nightmare, SS is beneficial to all. 

      • Doggone

         So,unless you worked under the table all those years and cheated society of your tax dollars, you are collecting the benefits of social security now, right?

  • Tubino

    A myth I think needs debunking is that Soc Sec is a retirement plan.  It’s more of an insurance plan, because it covers younger people also who have family deaths etc. It’s an important point because that aspect is not replaced by standard alternative retirement plans. 

    The other important point is that we have plenty of private investment alternatives NOW (401K, 529), so there is no need to privatize Soc Sec. to create that.

  • Peter Gatliff

    Dismantle the government? A polite way of saying the Right Wing wants to over throw the government. The same familys,Wall Street Banks and hate groups today attempted a Coup De ‘tat in 1934 of the US Government. It was called the “Business Plot”, by the “Dickstein-MCormack House Committee on UnAmerican Affairs , info in the Library of Congress. The goal in 1934 is the same as today. Disband the unions, abloish labor laws, dismantle SSI and all social programs that help the middle class.

  • Lyn Garfinkle

    As a retired Social Security Manager, I know the way to “save” the trust fund and AARP actually said that this would correct 99% of the projected shortfall.  Remove the cap on Social Security taxes.  Currently only the first $106,000 one earns is taxed.  If we remove that cap and tax all the money one makes the trust fund would grow to cover future benefits.  Since this affects a small portion of the labor force, the resulting higher benefits would not negatively impact the program.  For a person earning $100,000, 100% of their income is taxed for SS.  For a person earning $530,000, under current law, only 20% of their income is taxed.  Is this fair?

    • Garyholein1

      possibly the problem with this solution is that it would affect the income of congress because they all make over 150,000—–so they would struggle with their own selfishness to enact this change

  • Oops…

    I would like to lodge an official complaint concerning your picture choice. I’m sure you were not aware of the historical connotations of the anti-Jewish caricature when you posted it, but it pretty much turned me off to your entire article. That is the type of image that has been used in Europe and around the world as anti-Jewish propaganda for years, both to generate dupport for political movements and drum up anti-Jewish sentiment.

    Obviously Jewish people support Social Security. :p

  • hughsbayou

    SS benefits you long before you retire. If it didn’t exist in many cases you would be paying a lot out of pocket to take care of your retired parents. In my family’s case that would have been impossible. So a major benefit of SS is that it keeps the elderly from being a financial burden on their children.

    It would actually be possible to lower the tax rate for SS if the cap were to be removed. I’ve always thought that it was too high and that it should instead be adjusted every few years to match the need rather than build a “trust” fund.

    So many of the projections go so far into the future as to be absurd. The very nature of work and money will be far different in just 20 years much less 50.

    Of course terrible things could happen and the whole system could collapse, but so far mostly just some pretty bad things have happened, and we’ve muddled through. I think we will continue to do so. Most of the bad things that have gone wrong were done by people overly worried about what “might” happen.

    Calm down, it’ll be all right.

  • Just some guy

    Mmmmm… I wouldn’t mind talk of raising taxes for SS (although I have seen as many polls against raising SS taxes as those for) if it wasn’t our own dang fault for being in this mess.  If Congress hadn’t funded other social programs with social security monies all those years ago there wouldn’t be any shortfalls.  Instead of investing that money for future use or increasing benifits (or reducing the SS tax), Congress chose to spend SS revenues on other programs… flinging money around like drunken sailors on shore leave.  It is pathetic.  So now we have to resort to class warfare as being the only ‘reasonable’ solution to a problem that never should have happened in the first place.  When Congress chooses to hold itself to the same standard it holds the rest of the Country, I’ll take them seriously.  Until then…

  • Doggone

    Do you you claim to be Jewish by religion or by genetics? Do Italian Americans have the right to claim similar funding levels for Italian interests?  Would those claims be based on Italian genes or Catholicism? 

    I support Social Security too. 

  • Kevin Turner

    Do the math yourselves. IF:
    You earned 80% of the average hourly wage every year, beginning in 1968
    You contributed 3%
    Your employer contributed 3%
    These funds were paid into a fund indexed to the stock market
    YOU WOULD HAVE $343,096 WHEN YOU RETIRED IN 2010!
    THE GOVERNMENT IS LYING TO YOU!!!