Killing zombie lies and exploding the Social Security myths

For Social Security purposes, the correct question is not how many live to age 65, but rather how long those reaching age 65 live thereafter. Here the numbers are not as dramatic. In 1940, men who survived to age 65 had a remaining life expectancy of 12.7 years. Today, a 65 year old man can expect to live not quite three years longer than he might have in 1940, or 15.3 years beyond reaching age 65. For women, the comparable numbers are 14.7 years beyond age 65 in 1940; 19.6 years in 1990.

… [George W.] Bush sought to prove the point that Social Security was unsustainable through the use of a terrible deceptive and misleading factoid. The president announced, "And instead of sixteen workers paying in for every beneficiary, right now it's only about three workers."

"Sixteen workers paying in for every beneficiary" is a meaningless statistic that never affected policy in the slightest. The 16-to-1 ratio is a figure plucked from 1950, the year that Social Security expanded to cover millions of theretofore uncovered workers: farm workers, domestic workers, and others. Those 1950 amendments followed the recommendations of the 1948 advisory council ….

… all pension programs that require a period of employment for eligibility, private as well as public, show similar ratios at the start, because all newly covered workers are paying in, but no one in the newly covered group has yet qualified for benefits. The president could just as accurately have said that in 1945, the ratio of works to beneficiaries as 42 workers paying in for every one beneficiary or the equally accurate but misleading ratio from 1937, 26 million workers paying in for about a dozen beneficiaries.

… what is important is not the worker-to-beneficiary ratio at the start of the program but the ratio when the program reaches maturity. Consistent with the meaninglessness of the 16-to-1 factoid, the worker-to-beneficiary ratio was halved to eight workers for every beneficiary within five years, and by 1975, the ratio was where it is today. The 1994-1996 advisory council had not agreed on much, but it made one very valuable contribution. Its report included the appendix that stated that "the fundamental ratio of beneficiaries to workers was fully taken into account in the 1983 financing provisions, and, as a matter of fact, was known and taken into account well before that...

Bob Myers watched Bush on television from his home right outside Washington and stared in disbelief. In 1934, not only could Myers foresee the world as it changed, he had forecast these changes with great specificity. He was the one who had crunched the numbers for Roosevelt's Social Security proposal. Myers and Otto Richter, the senior actuary with whom he had worked, had been extremely farsighted. Myers knew, in 1934, that people in the twenty-first century would live longer and draw benefits longer.

As it turned out, Myers and Richer were a shade too conservative in their projections, believing the percentage of the population that would be elderly in the future would actually be higher than it turned out to be. Specifically, in 1934, he and Richter projected that, in year 2000, 12.7 percent of the population would be age 65 or older. How accurate were they? According to the 2000 census figures, the percentage of those aged 65 and over was 12.4 percent of the population.

Ronald Reagan said back in the 1960s:

But we're against those entrusted with this program when they practice deception regarding its fiscal shortcomings, when they charge that any criticism of the program means that we want to end payments to those people who depend on them for a livelihood. They've called it "insurance" to us in a hundred million pieces of literature. But then they appeared before the Supreme Court and they testified it was a welfare program. They only use the term "insurance" to sell it to the people. And they said Social Security dues are a tax for the general use of the government, and the government has used that tax. There is no fund, because Robert Byers, the actuarial head, appeared before a congressional committee and admitted that Social Security as of this moment is 298 billion dollars in the hole. But he said there should be no cause for worry because as long as they have the power to tax, they could always take away from the people whatever they needed to bail them out of trouble. And they're doing just that.

A young man, 21 years of age, working at an average salary -- his Social Security contribution would, in the open market, buy him an insurance policy that would guarantee 220 dollars a month at age 65. The government promises 127. He could live it up until he's 31 and then take out a policy that would pay more than Social Security. Now are we so lacking in business sense that we can't put this program on a sound basis, so that people who do require those payments will find they can get them when they're due -- that the cupboard isn't bare?

...in the 1980's, Ronald Reagan's indiscreet budget director David Stockman admitted that the purpose of ginning up the social security crisis was "to permit the politicians to make it look like they are doing something for the beneficiary population when they are doing something to it, which they normally would not have the courage to undertake."

And then with masterful chutzpah, considering his famous "Choice" speech from 1964 excerpted above, Ronnie then went on to use the so-called "looming" SS crisis to great effect --- he flogged the GOP contention that the program was insolvent (as they'd been doing for fifty years) and also raised the payroll taxes which they immediately raided to cover their budget deficit. And now, lo and behold, we are "in crisis" again. Imagine that. Brilliant.