Bush spends SSA money hyping SSA "bankruptcy"

[Rspaight]

Agency Running Social Security to Push Change
By ROBERT PEAR

WASHINGTON, Jan. 15 - Over the objections of many of its own employees, the Social Security Administration is gearing up for a major effort to publicize the financial problems of Social Security and to persuade the public that private accounts are needed as part of any solution.

The agency's plans are set forth in internal documents, including a "tactical plan" for communications and marketing of the idea that Social Security faces dire financial problems requiring immediate action.

Social Security officials say the agency is carrying out its mission to educate the public, including more than 47 million beneficiaries, and to support the agenda of President Bush.

But agency employees have complained to Social Security officials that they are being conscripted into a political battle over the future of the program. They question the accuracy of recent statements by the agency, and they say that money from the Social Security trust fund should not be used for such advocacy.

"Trust fund dollars should not be used to promote a political agenda," said Dana C. Duggins, a vice president of the Social Security Council of the American Federation of Government Employees, which represents more than 50,000 of the agency's 64,000 workers and has opposed private accounts.

Deborah C. Fredericksen of Minneapolis, who has worked for the Social Security Administration for 31 years, said, "Many employees believe that the president and this agency are using scare tactics to promote private accounts."

Social Security trustees say the program's financial problems will grow as baby boomers retire. The program will pay out more in benefits than it collects in revenue in 2018, they say. By 2042, they say, the trust fund will be exhausted, and tax income will be sufficient to pay only 73 percent of scheduled benefits.

Social Security employees denied that their concerns were motivated by a bureaucratic mentality, a fear of change or a desire to protect their jobs.

"There's a lot more to it than that," said Colleen M. Kelley, president of the National Treasury Employees Union, which represents lawyers and paralegals at the Social Security Administration. "There's a genuine concern about how people will live when they retire, a real fear that Social Security benefits could be eroded by private accounts."

In campaign-style speeches, President Bush and other officials have said that Social Security is headed for bankruptcy, and that workers should be allowed to divert some of their payroll taxes into private accounts, as a way to build wealth for themselves and their heirs.

"The system is broken, and promises are being made that Social Security cannot keep," Mr. Bush said in his Saturday radio address.

Such comments have prompted inquiries from the public to Social Security offices. Agency managers said they expected a torrent of calls after Mr. Bush highlights the issue in his inaugural address on Thursday and his State of the Union speech two weeks later.

Mark R. Lassiter, a spokesman for the Social Security Administration, said he could not discuss the agency's communications plans because they were "internal documents." The agency, he said, has a duty "to educate the public about the financial challenges facing Social Security," but has not prepared a script for employees to use in answering questions from the public.

The Bush administration ran afoul of a ban on "covert propaganda" when it used tax money to promote the new Medicare drug benefit and to publicize the dangers of drug abuse by young people. The administration acknowledged paying a conservative commentator, Armstrong Williams, to promote its No Child Left Behind education policy. But on Social Security, unlike those issues, the government has not concealed its role.

The agency's strategic communications plan says the following message is to be disseminated to "all audiences" through speeches, seminars, public events, radio, television and newspapers: "Social Security's long-term financing problems are serious and need to be addressed soon," or else the program may not "be there for future generations."

The plan says that Social Security managers should "discuss solvency issues at staff meetings," "insert solvency messages in all Social Security publications" and spread the word at nontraditional sites like farmers' markets and "big box retail stores."

Also, the document says, agency managers should observe and measure how much their employees know about the solvency of the program.

Mr. Bush has created a sense of urgency by declaring that "the crisis is now."

A slide show, presented to various audiences by James B. Lockhart III, deputy commissioner of Social Security, says that "benefit cuts would be drastic" after 2042 if the Social Security law and payroll tax rates continue unchanged.

A policy brief prepared by the agency says those benefit cuts "would double the poverty rate of Social Security beneficiaries aged 64 to 78," increasing the number of indigent people in that age bracket to 1.8 million, from 875,000.

Witold R. Skwierczynski, president of the Social Security Council of the federation of government employees, said: "Some of the information being imparted by agency officials is not factual, not accurate. There is no immediate crisis."

In interviews, other Social Security employees expressed similar views. But council members were more willing to allow use of their names because a federal law generally protects them against "penalty or reprisal" when they speak publicly or testify before Congress.

The official policy brief, analyzing the consequences of inaction, was written by Andrew G. Biggs, the associate commissioner of Social Security for retirement policy. Mr. Biggs, 37, joined President Bush in making the case for private accounts at a White House forum this week.

When he was an analyst at the Cato Institute, Mr. Biggs championed private accounts, saying they "would pay substantially higher retirement benefits than the current Social Security program" because some payroll taxes could be invested in stocks and corporate bonds rather than in government securities.

In 2003, just before he became associate commissioner, Mr. Biggs said that AARP, the lobby for older Americans, was "spreading disinformation" about the risks of private accounts. Mr. Biggs, who has a doctorate from the London School of Economics, said critics were wrong to suggest that personal accounts meant large cuts in benefits. In fact, he said, Social Security cannot pay the benefits it has promised.

The combination of benefits from traditional Social Security and a private account would substantially exceed what the current program can actually pay, Mr. Biggs said.

Other analysts, including the Congressional Budget Office, have reached a different conclusion. They say the combination of benefits from the trust fund and individual accounts is likely to be less than actual benefits under the current system.

In a document sent each year to millions of workers, the government emphasizes the looming financial problems. The document shows a worker's earnings history and estimated future benefits. But it says the scheduled benefits could be cut because "without changes, by 2042 the Social Security trust fund will be exhausted."

Agency employees raised their concerns with Reginald F. Wells, a deputy commissioner of Social Security, and two associate commissioners, David L. Feder and Roger McDonnell. Mr. McDonnell confirmed that employee representatives had shared their concerns with him, but he declined to say how he replied.

Robert M. Ball, who worked at the Social Security Administration for three decades and was commissioner under Democratic and Republican presidents from 1962 to 1973, said: "It's fine for the agency to answer factual questions, but it's unusual to use the Civil Service organization to push a political agenda, especially because what they're saying is not true. The program is not going bankrupt."

When asked about the outlook for Social Security, several agency officials pointed to a White House "fact sheet" that says, "By 2042, when workers in their mid-20's begin to retire, the system will be bankrupt - unless we act now to save it."

[Matt]

Related:

http://www.factcheck.org/article301.html#
Social Security Ads: Risk or Protection?
Pro-Bush group's first TV ad states the problem correctly. But the AARP uses a misleading photo.

January 15, 2005
Modified:January 15, 2005
Summary

A pro-Bush TV ad gets the central fact right about Social Security: by the time today's young workers retire there are projected to be only two workers paying Social Security taxes for every one person receiving Social Security Benefits. Today there are 3.3 workers per beneficiary.

But a different ad opposed to Bush's efforts uses a misleading photograph. It shows wild trading in commodities like cocoa futures to depict the risk that workers could face with private Social Security accounts. Actually, what's being proposed is not investment commodities, but in far less risky stock and bond mutual funds, which would be broadly diversified.

Analysis

These ads constitute the opening of what may eventually become an enormously expensive public lobbying campaign over the future of Social Security. So far, we find only minor factual problems.

Progress for America Ad "Courage"

Announcer: It took courage to create Social Security.

(On screen: Footage of former President Franklin D. Roosevelt signing Social Security Act of 1935)

Franklin D. Roosevelt: This Social Security measure...

Announcer: It'll take courage and leadership to protect it.

(On screen: Footage of George W. Bush at a bill signing ceremony)

Announcer:Once, sixteen workers supported one retiree. But when today's workers retire, only two workers will support one retiree.

(Text on screen: 1950: 16 workers supported 1 retiree; 2 workers will support 1 retiree)

Washington must strengthen Social Security: No changes for those at or near retirement, but younger workers should have the option of a personal savings account.Call Congress today. Urge them to strengthen Social Security for everyone.

Progress for America

This is a lobbying organization allied with the Progress for America Voter Fund, which spent nearly $50 million during the 2004 campaign on ads bashing John Kerry and praising President Bush. This new ad began airing on CNN and Fox on Jan. 10.

Some may find the ad's comparison of Bush and Franklin Roosevelt to be a stretch, since Bush has yet to propose a specific Social Security plan, let alone secure passage. And in fact, Roosevelt's grandson, James Roosevelt Jr., wrote the ad's sponsor saying, "My grandfather would surely oppose the ideas now being promoted by this administration and your organization." But that's a matter of opinion and PFA is entitled to theirs. It's also a matter of opinion whether Bush's eventual plan will "protect" Social Security or not.

Where it states facts, the PFA ad gets it essentially right. The ad says: "Once, 16 workers supported one retiree. But when today's workers retire, only two workers will support one retiree."

That's right -- except that workers who pay into Social Security are supporting not only "retirees" but also are supporting millions of disabled workers and surviving dependents. To be strictly accurate the ad should have said "beneficiaries" instead of "retirees."

But the central point is quite true -- demographic trends make it certain that the current system cannot be maintained without increasing taxes or cutting the growth of future benefits.

As recently as 1950 there were 16.5 workers paying Social Security taxes for every one person receiving Social Security benefits, according to statistical tables published annually as part of the Social Security trustees report . Currently, there are 3.3 workers paying in for every one beneficiary receiving benefits, and the situation will worsen dramatically when the post-World War II "baby boom" generation begins reaching age 62 -- the age when many choose to begin receiving early retirement benefits -- in about three years.

And just as the ad says, within 15 years that ratio is projected to decline to 2.2 workers paying in for every one person getting benefits. And it is forecast to continue declining to 2.0 workers in 2040, when workers who are now in their 20's reach retirement age.

That's a pretty solid projection -- All those who will receive benefits in 2040 have already been born and counted. Changes in projected life expectancies, immigration rates or birth rates could throw it off some, but not much, and not soon. The projection uses "intermediate" assumptions, but even under a "low cost" set of assumptions (birth rates 13% higher, improvements in life expectancy slow by half, and immigration increases 44%) each of today's young workers would have only 2.4 workers supporting them at retirement in 2040. Either way, the system faces an enormous financial crunch.

A Misleading Photo

Meanwhile, the AARP opened a series of full-page newspaper ads attacking Bush's concept of private Social Security accounts. One of them said "winners and losers are stock market terms. Do you really want them to become retirement terms?" But the ad used a misleading photograph.

Instead of stock traders, the photo shows a wild trading pit and a board listing "cocoa," "sugar," "coffee" and other commodities. But none of the options under consideration would allow owners of private Social Security accounts to speculate in commodities, which are notoriously volatile and risky. The kinds of ideas under discussion all call for accounts to be invested in broadly diversified stock and bond funds. There's a big difference.

The AARP is correct to suggest that even stock and bond funds carry risk. For example, the Dow Jones Industrial Average (an index of 30 stocks) lost nearly 23% of its value in a single day, Oct. 19, 1987. More recently the Dow Jones average lost nearly 38% of its value in a long slide that bottomed out Oct. 9, 2002. And despite big gains since the bottom, on Jan. 14 the Dow Jones average was still 9.9% lower than it was when it hit its historical peak exactly five years earlier.

However, the stock market also holds the promise of substantial gains for those who invest and hold stocks for the long term. According to Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School, from 1802 through 2003, the broad stock market provided “real” returns – adjusted for inflation – averaging 6.8 percent a year. “On average, you have doubled your purchasing power every decade in the stock market,” Siegel said during a recent talk. He said that while stocks have failed to meet that average over a few long periods, performance has been remarkably consistent.


Sources

Table IV.B2.--Covered Workers and Beneficiaries, Calendar Years 1945-2080 , "THE 2004 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND DISABILITY INSURANCE TRUST FUNDS," 23 March 2004; 46.

"The Short- and Long-Term Outlook for Stocks," Knowledge@Wharton website, The Wharton School, University of Pennsyvania: 2 June 2004. (Free subscription required.)

"Five Years On, DJIA Opens 10% Below Its Peak," OsterDowJones Commodity Wire, 14 Jan 2005.

[Dob]

However, the stock market also holds the promise of substantial gains for those who invest and hold stocks for the long term. According to Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School, from 1802 through 2003, the broad stock market provided “real” returns – adjusted for inflation – averaging 6.8 percent a year.

How can the entire country make money by investing in the stock market? We all put money in, and we all take more money out...where is this extra money supposed to come from? Foreigners?

In the old days, stock investors used to make money from dividends, but I don't think a revival of dividends is what permabulls (like Jeremy Siegel) have in mind.

Perhaps the secret is that, as time goes on, more and more money keeps coming in to the stock market -- enough to give profits for the initial round of investors. Then, as even more money comes in, the second round of investors can cash out with a profit, and so on.

Actually, there is a technical term for this idea...it's called a pyramid scheme.

[CitizenDan]

More scare tactics to push a backwards agenda. The General Accounting Office disagrees with Bush, and every even-handed study says the SS fund is fine if it's maintained with some care and forethought. But W. needs to take care of his buddies in the private sector, and that takes precedence over everything. His shamelessness is only trumped by the gullibility of his acolytes.

[Rspaight]

But W. needs to take care of his buddies in the private sector, and that takes precedence over everything.

Rolling back a portion of the Bush upper-class tax cuts would fund SS well into the next century.

Ryan

[Dob]

This made me chuckle (full story in today's Washington Post).

As many of you probably know, Congress is taking its first week-long break since Bush outlined his bid to add private accounts to Social Security. Some GOP congressmen are taking the opportunity to campaign for the plan by holding town meetings on the issue.

Sen. Rick Santorum (R-Pa.), the Senate's third-ranking GOP leader, is touting the plan with a slide show and a well-prepared speech at 10 public forums throughout Pennsylvania this week, several of them on college campuses. On Tuesday, he was at Drexel University in Philadelphia.

Santorum's argument is that the approaching baby boomers' retirement -- beginning in 2008 -- will swamp Social Security if it is not restructured. He introduced the topic at Drexel through a rhetorical question, which backfired when one of the students in the audience shouted out an unexpected response.

Santorum: "Anybody know what happens in 2008?"

Student: "George Bush leaves office!"

I wish I could have been there to hear the howls of laughter and see Santorum's reaction.

[Rspaight]

I also enjoyed reading tales of his supporters chanting, "Hey ho, hey ho, Social Security's got to go!"

Ryan

[Patrick M]

Bush Failing in Social Security Push

[Matt]

I still hope they do something to guarantee full benefits.

http://www.ssa.gov/qa.htm

[chrischross]

But W. needs to take care of his buddies in the private sector, and that takes precedence over everything.

Rolling back a portion of the Bush upper-class tax cuts would fund SS well into the next century.

Ryan

This whole thing sucks the shit sandwich.

Reagan and Greenspan pushed through a payroll tax increase in the 1980's that was supposed to take care of Social Security in perpetuity, with due consideration to the baby boom generation. The retirement age for my generation was bumped up to 67. All of this was reasonable, and I have paid my fair share in payroll taxes under this scheme. The thinking in the 1980's was that federal deficit spending would subside after the supply side tax cuts miraculously rescued the economy, and that a surplus would accrue into the Social Security trust fund. Under Clinton, we were finally able to run a surplus and build the trust fund.

What happened is that Bush spent your trust fund through his tax cuts. That's the nasty little secret. Rather than have a prudent fiscal operation, he's doling out truckloads of cash to his buddies. It's like the drunk dad with a gambling addiction who spends the retirement account, and you're called in to fix it.

No matter what your opinion of Bush is, his fiscal mismanagement is Exhibit A in how poorly he has run the country. Since 1981, 16 out of those 24 years since then have been run by a Republican administration -- and not a one has run a balanced budget. The federal debt was $900 billion when Reagan entered office, it's now $7.6 trillion -- or $36,000 for every man, woman and child. And before any Republican chimes in and blames Congress, remember, you've run that operation since 1994 as well.

Hey, at least when the country declares fiscal default, you won't have to worry about those damn gays getting married!

[lukpac]

I still hope they do something to guarantee full benefits.

http://www.ssa.gov/qa.htm

Yeah, that would be nice. But Bush has even said that private accounts don't actually do anything to fix the problem.

And it turns out that Medicare is actually a far larger problem than Social Security:

Medicare's deficit 7 times Social Security's
Why Bush, Congress aren't addressing this issue
The Associated Press
Updated: 6:48 p.m. ET March 1, 2005

WASHINGTON - A looming Medicare shortage is seven times the size of the one that Social Security faces and nearly four times the entire federal debt. It is not being addressed by President Bush and Congress, and, to some, that is just as well.

Social Security, which Bush has hoisted atop his domestic agenda, is $3.7 trillion short of what it will need for benefits over the next 75 years, under the latest federal projections. Medicare, the health care program for the elderly, must find an estimated $27.8 trillion.

By 2018, Social Security is on track to start paying more annually to recipients than it collects in payroll taxes — an ominous tipping point that Medicare reached last year.

While Social Security is expected to exhaust its reserves in 2042, Medicare should deplete the trust fund financing its hospital benefits in 2019, the latest forecasts show.

Medicare’s problems are full of political and technical complexities that are thornier than those confronting Social Security.

That makes it a daunting mix the White House would rather tackle later.

“Once we modernize and save Social Security for a young generation of Americans, then it will be time to deal with the unfunded liabilities in Medicare,” Bush told reporters last month.

Social Security supports 47 million people, most of whom are elderly and disabled. It is the largest federal program at $517 billion this year.

Medicare, costing $325 billion, provides health insurance to 42 million old and disabled people.

Though Medicare is smaller today, the government and public trustees who oversee both programs projected last year that Medicare’s costs would overtake Social Security’s by 2024 and nearly double them by 2078.

Baby boomer crunch
Helping make Social Security the current priority for the president and fellow Republicans is its relatively clear problems and potential solutions. It faces a crunch from the retirement of baby boomers starting later this decade. It either will need more money from the 12.4 percent payroll tax that workers and their employers split, or cuts in benefits, or extra federal borrowing.

Medicare faces the same demographic tidal wave — plus the added costs and complications of health care. Progress in medicine and medical technology are helping increase health care costs by about 7 percent a year — more than double general inflation.

As a result, few people think Medicare expenses can be definitively contained without stemming the growth of overall medical costs — an intricate task on which there is little consensus. It also would involve taking on the potent lobbies of the nation’s doctors and other health care providers.

“I don’t think anybody has a good idea how to resolve” Medicare’s woes, said Senate Budget Committee Chairman Judd Gregg, R-N.H. He acknowledges that he lacks the votes to overhaul Medicare in the budget that Congress will write this year. “Let’s solve the one we can solve.”

The Medicare problem is “several multiples more difficult than is Social Security,” Federal Reserve Chairman Alan Greenspan told a House committee last month. But he advised against tackling Medicare until advances are made in medical information technology, which is expected to save money by increasing the health sector’s efficiency.

“If we do it now or even next year, I’m fearful we would be restructuring an obsolete model and have to come back and undo it,” Greenspan said.

Adding to the appeal of tackling Social Security first is a sense by many Republicans of a potential long-term political triumph.

Struggle over personal accounts
Bush is struggling to win support in Congress for his plan to add personal savings accounts for the retirement program. Even so, many Republicans say enactment of a plan buttressing Social Security would win them gratitude from younger voters who think the current system will go bankrupt and is too financially stodgy.

A similar political gain from reshaping Medicare seems more elusive. Congress attached prescription drug coverage to the program in 2003, adding $724 billion to Medicare’s costs over the next decade, according to White House estimates. An immediate effort to cull savings from Medicare could be seen as an admission of error by Bush and the GOP-led Congress.

“It would be embarrassing to suddenly say this is a program in dire need of restricting,” said Robert Reischauer, president of the liberal-leaning Urban Institute and former head of the Congressional Budget Office.

Sen. Kent Conrad of North Dakota, the top Democrat on the Senate Budget Committee, says Bush’s focus on Social Security first could be “a diversion from how big the overall problem” of budget deficits and costly programs such as Medicare really is.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, says Democrats’ talk about Medicare “looks a lot like a ploy to do nothing.” He added, “We shouldn’t let Medicare prevent us from making real progress on Social Security.”
© 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

[Rspaight]

Yeah, that would be nice. But Bush has even said that private accounts don't actually do anything to fix the problem.

Private accounts actually make the problem *worse* by further depleting the trust fund through siphoning off of payroll taxes into the accounts. The short-term pain is tremendous, since retiring boomers will expect full benefits while younger people will be paying in less money. We'd have to spend trillions in tax money to cover the shortfall.

And here's the rub: Future retirees will probably get less in benefits from a combined private account/SS scheme than fully funded SS -- as much as 50% less. In fact, they'll even get up to 34% less than if we did NOTHING and let the trust fund run out on schedule.

That's right -- the Bush plan is WORSE than the looming "bankruptcy crisis" he's warning us about.



(Image from Atrios. The "Graham plan" is widely believed to be very close to Bush's unannounced plan.)

Great deal, huh? I guess we know why he's not releasing any details.

Private accounts are simply snake oil to funnel dollars to Bush's investment banker buddies.

Ryan

[chrischross]

I beseech you -- if you have your retirement account with Charles Schwab, move it somewhere else. They are one of the prime movers in the privatization proposal. I had a little email exchange with them and they claimed otherwise, which is kinda funny since Schwab himself is writing $250,000 checks to the RNC.

[krabapple]

What *I* want is a 'privatization' plan modelled more on the George W. Bush life model: whenever my personal investments and business ventures go tits up, a bunch of obscenely wealthy friends of the Bush family will step and and set me right back on my feet.

[Dob]

What *I* want is a 'privatization' plan modelled more on the George W. Bush life model.

Or the retirement plan that congressmen get.