The Truth about MoveOn.org's Social Security "Myths"

I have taken a special interest in the future of Social Security, in part because I worked for the Social Security Administration for 38 ½ years before retiring on January 2, 2009. So, when I ran across an article on the MoveOn.org website (not a site I frequently visit, but occasionally I like to spy on the enemy) entitled Top Five Social Security Myths, I read it carefully, thought about it, realized that it is mostly nonsense, and decided to explain to readers of this blog (both of them) why it is mostly nonsense. I encourage you to read the same thing I read buy opening the article in a new window or tab on your browser and follow along.


The first alleged myth is "Social Security is going broke." The article state that by 2023, Social Security will have a $4.3 trillion surplus and can pay schedule benefits with no changes and after 2037, will be still be able to pay 75% of scheduled benefits. The trust fund deserves its own discussion, which I will get to shortly, buy think about that business about being able to pay 75% of scheduled benefits. That is meeting 75% of an obligation. Would any of the people that you have to make regular payments to, like your utility companies or your the financial institution that holds your mortgage (if you own your home) or your landlord (if you rent) be happy if you told them that you cannot make the full amount of your payments in the future but you can make 75% of them? Of course not, and anyone who expects to receive Social Security benefits after 2037 would not be very happy either. If being headed in the direction being able to pay only 75% of what it obligated to pay is not going broke, then what is?


The second alleged myth is "We have to raise the retirement age because people are living longer." The article says that this is a myth because the reason life expectancy is going up is because many fewer people die as children than they did 70 years ago. The article makes reference to a June 2010 study by the Center for Economic and Policy Research entitled Social Security and the Age of Retirement. I read the study. It does indeed make a very good case that most of the increase in life expectancy in the United States over the last several decades has been because of decreased death rates of people who have not reached retirement age. However, some of the increase is because on average people of retirement age are living longer, which is a case made by the the bipartisan Social Security Advisory Board in its September 2008 report, Working for Retirement Security, in which a case is made that to improve income security of older Americans, they should be encouraged to lengthen the number of years in which they work. MoveOn.org also points out that higher income workers live longer on average than lower income workers and so raising the retirement age discriminates against people with lower income. Raising the retirement age is not the only way to address the solvency of Social Security and it may not be the best way, but it is one option.


The third alleged myth is "Benefit cuts are the only way to fix Social Security." First the article says that Social Security does not need to be fixed, which is nonsense. Then they suggest that a better way to strengthen Social Security is to raise the maximum income from which payroll taxes are assessed. For 2010, no taxes are assessed from the employer or employee for earned income in excess of $106,800. Raising the cap would indeed increase revenue. It would also increase the eventual Social Security benefits of those high income workers because the amount of Social Security benefits is computed based on a formula that considers average income. However, the formula is weighted to favor lower income workers, so raising the cap may raise more than enough revenue than needed to pay the higher income workers their Social Security benefits once they retire. I'll concede this point to MoveOn.org; benefit cuts are not the only way to fix Social Security. There are other ways. However, saying that it does not need to be fixed is still nonsense.


I am going to combine my comments about myths four and five because the arguments that the MoveOn.org article makes that them contradict each other. Myth four is "The Social Security Trust Fund has been raided and is full of IOUs" and myth five is "Social Security adds to the deficit." There argument regarding myth four is that the Social Security trust fund is made composed of U.S. Treasury bonds that are backed by the full faith and credit of the United States. The argument regarding myth five is that by law Social Security funds are separate from the budget and therefore Social Security cannot add a penny to the deficit. Both arguments can easily be refuted in one short sentence: "Those Treasury securities are not going to pay themselves." Lets say that this year a hypothetical worker, lets call him William Worker, earns an income such that he and his employer each pay a payroll tax of $1000. Lets also assume the Social Security system is taking in more money than it is paying out and all of the $2000 goes into the trust fund. What does the government do with the money? It does two things. One thing it does is spend the money. The other thing it does is issue securities to the trust fund that represent a promise to pay the money back with interest. Years later, when the Social Security system has reached the point that it is paying out more in benefits than it is receiving in payroll taxes, William has retired and has applied for his Social Security benefits. Lets say that the money to pay for them for his first year of retirement comes from that same $2000 in treasury bonds plus interest. So, the bonds are redeemed. Since they don't pay themselves and the government has already spend the money to pay them, it has to raise more money. There is just no other way to look at this. The government has spent the money and has increased its debt by issuing a securities that promise to pay the debt with interest. Saying that a Treasury security is not an IOU not saying anything that changes the situation. Saying that Social Security does not increase the deficit because it is not part of the budget is like saying that if you close your eyes you can't see it and therefore it isn't really there. When management officers at Enron kept transactions that put its shareholders off its books to hide them, it was eventually recognized as accounting fraud and people went to prison for it. When the government does it, no one goes to prison, because it is the government that puts people in prison. It is legal, but only because it is the government that is playing this game that makes the laws. What they cannot do is make it ethical. The scams that Charles Ponzi and Bernie Madoff ran were small potatoes compared to this one.


Recommended reading for those who want to understand the financing of Social Security include the 2010 Social Security Trustees Report on The Status of the Social Security and Medicare Programs (click here for PDF version) and any of several publications that the Cato Institute has published. The advantage of the Trustees Report is that it is politically neutral and written by the actuaries whose job it is to manage the Social Security and Medicare trust funds. The advantage of the Cato Institute publications is that they are written by people who have some good ideas for how to deal with the problem.

You don't have to be crazy to want the job, but it doesn't hurt.

I have often joked that a person would have to be crazy to want to be President of the United States and therefore anyone who wants the job should not be allowed to have it. I am currently taking a graduate school course entitled Legislatures and Legislative Behavior. From what I am learning in that course added to what I already knew, I think my observation about the job of President applies also, though maybe not as much, to the job of member of Congress. Who can observe the work product of the politicians in the federal government and conclude that those people are sane? The work product includes laws whose pages measure in the thousands and are too complex for anyone but an attorney to understand and even they have to go to court to argue among themselves what it all means. If we expect people to obey the law, is it too much to ask that the laws be understandable and not unreasonably complex?

In the first place, think about what it takes just to be considered for the job. You have to beg people to give you money to finance your campaign. During the most recent election cycle, the average winning Senate race cost $5.6 million and the average winning House race cost $1.1 million. Then, you have to travel all over your state or your district and convince people that you are a really nice guy who has their best interests at heart. You tailor you message to your audience and say things that contradict each other, hoping that no one will notice. You have to have your competition for the job and the people who support them saying things about you that are nasty and often not true. You have to spend time away from your family and give up leisure time. If you get elected to the Senate, you get a little break, but if you get elected to the House of Representatives you have to begin running for reelection almost as soon as the election is over. In effect, you have to reapply for the job every two or six years and prove yourself all over again. Once you get elected, what is the job like? The salary is not bad, about three times that of the typical American family, but well below that of top corporate executives, whose jobs involve no more responsibility or hard work. Considering that most people who run for Congress come from a background with high status and earnings potential, few politicians (at least the honest ones) are in it for the money; they could usually find ways to make more money. Each member of Congress serves on several committees and subcommittees, with meetings whose schedules often conflict. Committees are where the real work gets done, but what kind of job is it that involves attending committee meetings all the time? They have to understand and know how to take advantage of arcane procedural rules. Members of Congress typically put in long days and travel frequently between the Capitol and their states or districts. They attend events of constituents and interest groups. They have to answer questions that they would rather not answer and deal with hostile people.

Who would want such a job? Unfortunately, the answer is that the person who usually wants such a job is a person who wants to pass laws to change things, whether they need changing or not. It is a person who thinks that working ridiculous hours and trying to please everybody is a rational thing to do. It was a mistake to call these people legislators or lawmakers. We should have called them something like code maintainers. What we do not need is more laws; we have plenty. All we really need is a code of laws that needs to be maintained, so that laws that have become obsolete or never worked to begin with are repealed or amended. Introducing laws that are entirely new should be a rare event, and less common than laws that amend or repeal a law that is on the books. Some states, Texas for example, have part-time legislators that meet for a few months every two years. If it is not necessary for the job of a state legislator to be full-time, it is not necessary for the job of a member of Congress to be full-time. In fact, it would be good for members of Congress to spend much more time outside the Beltway, living a life that resembles more the life that a normal person would live and understanding the problems that normal people have. I have learned that the approximate time that being a member of Congress became a full-time job was when air conditioning was installed in the Capitol building. Letting them install that air conditioning probably ranks among the the biggest mistakes that the United States has made.

I'm a Yankee Doodle Teabagger

Yankee Doodle is now the state song of Connecticut, but it was created by the British during the French and Indian War to make fun of American soldiers. I don't know how the word “Yankee” came to refer to Americans in general or New Englanders in particular, but I did find out that the word “Doodle” came from the low German word “dudel,” which means fool or simpleton. In the first verse of the song, Yankee Doodle sticks a feather in his hat and calls it macaroni. Macaroni does not refer to a kind of pasta, but to a kind of wig that was considered highly fashionable. The unsophisticated Yankees were being made fun of for pretending to be high society. So, a song that was intended to make fun of and possibly to intimidate Americans is now sung proudly as a patriotic song. As Eleanor Roosevelt is quoted as saying, “No one can make you feel inferior without your consent.”

The modern equivalent of the British singing Yankee Doodle is making fun of members of the Tea Party movement, accusing them of racism or even violence, or calling them “teabaggers.” In a column in Nation magazine dated May 3, 2010, Richard Dreyfus says that the recent bungled car bombing attempt in Times Square was likely the work of either a “... lone nut job or a member of some squirrely branch of the Tea Party, anti-government far right.” I for one am not even mildly intimidated by such an outrageous mischaracterization of the Tea Party movement. I have a bumper sticker on my car that proclaims me to be a Tea Party Patriot and have considered buying a tea-shirt from Cafe Press that says “Teabagger and proud.” I think I will not buy the tea-shirt, however, for the very reason why members of the Tea Party movement have been called teabaggers – because “teabagging” is a slang term for a particular sexual practice. If you are unfamiliar with it, you can consult the Wikipedia article, “tea bag (sexual act).” I don't mind being called a teabagger, but I don't want to have some dudel read a tea-shirt I am wearing and think that it refers to anything other than my political beliefs. I have other tea-shirts and bumper stickers to make it clear what kind of teabagger I am.

The accusations that the Tea Party movement is racist, anti-government, and having violent tendencies are completely off base. I forget where I saw it, but a survey found that 79 percent of members of the Tea Party movement are non-Hispanic caucasians, which is not far from the 75 percent of the general population that is non-Hispanic caucasian. I have been to several Tea Party events and have not yet heard a racial slur, although there is a particular President of the United States that is not totally caucasian that many at these events are not particularly happy with. They are also unhappy with non-Hispanic caucasians who share his political philosophy, such as Harry Reid, Nancy Pelosi, Christopher Dodd, and Barney Frank. What these upsets Tea Party members about these people is their political philosophy. Race has nothing to do with it. Neither does Nancy Pelosi's gender or Barney Frank's sexual orientation. The accusation about having violent tendencies is backwards. The only violence I have heard of associated with a Tea Party was when Kenneth Gladney was physically assaulted at a Tea Party in St. Louis and called a “nigger” by some thugs wearing SEIU tea-shirts. Note that it was the people attacking a Tea Party member that were the violent racists. The charge that Tea Party members are anti-government is partially true. We are not anti-government; what we are against is big, bloated government. I, for one, fear that if the federal government doesn't get its debt under control, the time will come within a decade or two that nearly the entire budget will be composed of entitlement payments and payments and interest on the debt. When that happens, the government will not be able to function effectively. I am not anti-government and I don't know anyone who is. I am for government that is sustainable. and does things that only governments can do.

As in any large group of people, the Tea Party movement does contain some kooks. There have been some people who oppose the Tea Party movement who have advocated infiltrating it and exhibiting extreme behavior in order to discredit it. We shouldn't be judged by the fringe and by whatever moles there may be, but we have been and will be again.  Critics don't have our consent to make us feel inferior.