Samuel Freeman

EDINBURG, Aug. 22 - This is the first of a series on Social Security. In talking with people, I find the vast majority, irrespective of age, really do not understand the Social Security program.

This is especially true for the various components of the program other than what normally is thought of as “retirement benefits.” Probably the most confusion and lack of understanding is in regards to funding and the fiscal health of the program.

With respect to Social Security’s fiscal health, much of the confusion and lack of understanding results from an intensive campaign of deceit, distortion, misrepresentation, and lies promulgated by wrong-wing Republicans. Their intense hatred and gross misrepresentation of Social Security has been going on since its inception in 1935. Interestingly, many of the lies being told today are the same lies told 75 years ago. Perhaps, given uncertainties surrounding such a new program in 1935, opponents’ dire predictions 75 years ago might be somewhat understandable. No one really knew how the new Social Security system would perform. Today, Social Security has a proven record; and we can see just how intellectually dishonest and despicable today’s liars are.

Some of the discussions, particularly in this initial column, will be relatively technical in nature. However, they are necessary if we are to understand Social Security, and the magnitude of deceptions and lies being promulgated by those who would destroy Social Security and profoundly damage the lives of tens of millions of people.

Arguably the most successful government program in our nation’s history, Social Security recently celebrated its 75th anniversary. The Social Security Board of Trustees also recently issued, as required by law, an analysis of the program’s “health.” Among the Trustees’ requirements is the somewhat silly prediction of where Social Security will be in 75 years. That is, with Social Security now 75 years old, Trustees are to look as far into the future as Social Security is old. It doubtlessly would be interesting to look at the Trustees’ predictions 75 years ago to see how accurate those predications are with today’s Social Security.

Of course, 75 year predictions are totally absurd, as an examination of the Trustees’ first predictions surely would demonstrate. For example, given the “pay as you go” philosophy on which Social Security was founded, there is no way 75 years ago Trustees would have predicted, in the summer of 2010, the Social Security Administration would be sitting on a surplus of slightly over $2.5 trillion. “Pay as you go” means annual revenues equal annual expenditures. That is, today’s workers pay the retirement benefits of today’s retirees.

This “pay as you go system” was modified significantly in two steps, beginning in 1977 under President Carter with a combination of Social Security (technically known as FICA, or Federal Insurance Contribution Act) tax increase and modest reductions in benefits. The second step, a much larger increase in the Social Security tax, occurred in 1983, coupled with an increase in the retirement age from 65, originally established in 1935, to 67.

Workers still can retire at age 62 and receive reduced benefits. The increased retirement age is being phased in, with people born between 1943 and 1954 eligible for full benefits at age 66. For those born after 1954, the retirement age increases by two additional months per year until those born in 1960 or after are not eligible for full benefits until their 67th birthday.

While the 75 year projections have proven to be wildly inaccurate, and consistently underestimating the fiscal solvency of Social Security, the also legally mandated ten year projections have proven to be reasonably accurate. However, once again, at the end of almost every ten year projection, the fiscal solvency of Social Security has been stronger than was predicted ten years prior. That is, the Social Security Board of Trustees almost always predicts an economy that performs less well than it actually performs. This results in the Trustees predicting less revenue than the Trust Fund actually receives, and lower annual surpluses than the Trust Fund accrues.

The 1977 and 1983 combination of increasing FICA taxes, reductions in benefits, and increasing the retirement age produced substantial annual surpluses for the Social Security Trust fund. Although Social Security is projected to pay out slightly more than it receives in tax revenues this year, Trustees predict the surpluses will return in 2011 and continue until 2018. While expenditures will exceed tax revenues this year, the surplus will continue to grow because the interest earned on the $2.5 trillion surplus will be more than enough to cover the tax revenue shortfall. Thus, some wrong-wing commentators who claim Social Security will run a deficit or will go broke this year are lying.

According to Trust Board projections, beginning in 2018, Social Security will begin paying out more in retirement and disability benefits than it receives in tax revenue and interest combined. From that point, there will be a continuous net reduction in the surplus until it is exhausted in 2037. This is down four years from the pre-“Great Recession” estimate of 2041. 

As noted above, however, one should remember these predictions almost always have been conservative. Assuming we climb out of this recession within the next couple of years, it is more than conceivable the “crossover” date will be pushed back toward 2041. Although any recovery is not likely to be strong given Republicans destructive economic proposals and Democrats non-constructive policies, should the economy somehow manage to generate a strong recovery, even the 2041 date could be overly conservative. However, given neither political party appears the least bit interested in genuine economic recovery, 2041 probably is about the best we can hope for.

Of course, once the Trustees issued their report, wrong-wing Republicans were full of histrionics, distortions, misrepresentations, and outright lies regarding the future health of Social Security. They love to claim Social Security will be “bankrupt” by 2037. In fact, some of these hate filled predictors of doom and gloom would have you believe Social Security will be “bankrupt” as early as 2018. As noted above, a few claim Social Security is broke now.

The fact wrong-wingers cannot agree on whether Social Security is broke now or when it will go broke should tell us something. They are lying, of course. But to say wrong-wing Republicans are liars is to be redundant. These people play on the fact most Americans simply do not know or understand any of this.

Once the Trust Fund surplus is exhausted, assuming nothing is done between now and then, Social Security tax revenues will be sufficient to pay about 75 percent of current benefits. Naturally, that is a chunk of income to lose for retirees living primarily, and especially those living exclusively on Social Security benefits. Thus, there is considerable cause for concern; and the sooner Congress finds the spine and the will to address this issue, the smaller the impact any solution will have. However, to say Social Security will be “bankrupt” is a blatant lie. Furthermore, there are multiple effective solutions to this problem.

There are advantages and disadvantages to each of these potential solutions, but any of them can resolve the problem of insufficient funds to pay 100 percent of benefits after 2041. In addition the wrong-wingers push for partial or full privatization--both of which would destroy Social Security and inflict immeasurable injury on tens of millions of people.

All of these proposals, and the numerous benefits of this immensely successful and essential program will be addressed during this series.

Samuel Freeman is a political science professor based in the Rio Grande Valley. His Left Is Right column appears exclusively in the Guardian.

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