Posted as received.Economist Dean Baker: Social Security ‘Problem’ Doesn't Exist
Tuesday, 05 Jul 2011 02:50 PM
By Julie Crawshaw
More ways to share...
Economist Dean Baker says the much-publicized fears about Social Security are nothing more than political posturing.
"While you can sound really smart in Washington by saying that Social Security is going bankrupt, the facts say the opposite," Baker writes in the Des Moines Register.
"According to the Social Security trustees' report, if we did absolutely nothing the program could pay every penny of scheduled benefits through the year 2036."
According to Baker, there’s a lot of other nonsense being circulated about Social Security.
“Many opponents of Social Security insist that its $2.6 trillion trust fund does not exist or that it is ‘just sheets of paper,’" says Baker, co-director of the Center for Economic and Policy Research.
“The trust fund is held in the form of U.S. government bonds, which are indeed sheets of paper. However, investors everywhere eagerly seek out these 'sheets of paper' as the safest asset in the world."
Even if no changes were made to Social Security, the trust fund could always pay close to 80 percent of scheduled benefits, says Baker, and while it would be unacceptable to pay people a smaller benefit than had been promised, the scheduled benefits for new retirees are projected to rise by 1 percent a year in excess of prices.
“This means that in 2036, the average scheduled benefit for a new retiree will be more than 25 percent higher than it is today,” Baker says. Even if no changes are made to the system, new retirees in 2036 receiving just 80 percent of their scheduled benefit would still be receiving a benefit that is larger than what retirees get today.
“In other words, there is no plausible story in which our children or grandchildren will have to worry that there won't be anything there for them.”
Meanwhile, proposed changes to the manner in which the Consumer Price Index is calculated could affect how much money Social Security beneficiaries receive, the Daily Kos reports.
Social Security benefits are adjusted annually to account for inflation — when the cost of living increases, benefits automatically increase so that their purchasing power does not erode over time. The proposed changes to CPI calculations would mean a cut in Social Security benefits for current and future beneficiaries.
That cut would grow deeper the longer an individual received benefits, making this cut especially painful for women who have longer life expectancies, rely more on income from Social Security, and are already more economically vulnerable than men.
Meanwhile, AARP, a lobbying group for retirees, recently said it is willing to support cuts in Social Security over “the long term” to shore up the program’s finances while stressing its opposition to any benefit changes as part of current efforts to slash the federal debt.
“We are open to talking about different options to strengthen Social Security for the long term” including “changes on the benefit side,” David Certner, the group’s legislative director, told Bloomberg.
The issue of trimming Social Security and Medicare benefits for seniors has become supercharged as members of Congress are trying to agree on a deficit reduction plan before an Aug. 2 deadline to raise the U.S.’s $14.3 trillion debt limit, Bloomberg reported. Lawmakers aren’t likely to include Social Security changes in any agreement, with Democrats opposed to them.
© Moneynews. All rights reserved.
Read more: Economist Dean Baker: Social Security ‘Problem’ Doesn't Exist