HANDS OFF SOCIAL SECURITY!

As I've mentioned before, I'm just about done with a short book on Social Security and its non-existent troubles. It will be called, appropriately enough, Hands Off Social Security! There may be a picture of a grandmother on the cover, wearing boxing gloves and glaring belligerently.

What I want to do with HOSS! is provide an easy to understand, funny explanation of the whole Social Security issue. Nothing like it currently exists. And despite my previous protestations, the truth is Social Security is an extremely interesting subject. There's a lot to it by itself, and its implications for politics overall in the US are huge. That's why the Bush administration is going after it.

Indeed, as bad as you think the Bush administration's lies about it are, I guarantee you they're worse. They're using a non-existent problem as an excuse to do things that wouldn't solve the problem even if it existed, in order to take us back to the 19th century. I hope very much we can avoid this. From what I've heard the 19th century wasn't much fun, what with all the poorhouses and cholera.

Soon it will be possible to pre-order the book at a special low price. (Very low -- like $5.) In the meantime, here's a draft section from the beginning that explains the Social Security basics. I would greatly appreciate any thoughts you may have about this -- either about what I say or anything I've left out.

What is Social Security?

Social Security has several parts. The main one, founded in 1935, is a government-guaranteed retirement program. This is what people usually mean when they talk about Social Security.

Today, an average retiree -- I'm going to call her Mary, after my grandmother -- gets about $15,000 in benefits. Mary is guaranteed to get this $15,000 every year as long as she lives. Her savings might run out, the stock market might crash, and her old company might go bankrupt and stop paying her pension. But she will still get Social Security. Just as important, her benefits are protected against inflation. So if prices double, her benefits will automatically double to $30,000.

In addition, Social Security provides disability and life insurance. It pays benefits to workers so sick they have to retire young, and to the children and spouses of workers who die.

45 million of us, or about one in every six Americans, receive Social Security benefits. It's the most successful and most popular government program in U.S. history. In fact, it may be the most successful and popular government program in the history of the world.

How does Social Security work?

It's very simple: essentially the government takes 12.4% of every worker's paycheck in what are called "payroll taxes." Then the Social Security Administration sends the money off to current retirees and other beneficiaries. The amount each retiree gets varies. The more you paid in during your working life, the more you get when you're retired.

As I say, once set, a retiree's benefit stays the same but is guaranteed no matter how long he or she lives, and is protected against inflation. That's a lot of the "Security" part of "Social Security." It's very hard to get that anywhere except from the US government.

Hands Off Social Security! explains the nitty-gritty of this, but for now there are only two more things you need to know:

First, the promised benefit level for each new batch of retirees rises over time. Mary, our average retiree in 2005, receives about $15,000. However, an average person retiring in 2040 is promised $20,500 -- in 2005 dollars. This means that, even after inflation is taken into account, retirees get higher real benefits as time go on.

Second, if the Social Security Administration takes in more in taxes than is needed to pay current beneficiaries, the money is used to purchase U.S. treasury bonds. These bonds make up the Social Security Trust Fund. If the Social Security Administration takes in less in taxes than is promised to current beneficiaries, it cashes in some of its trust fund bonds to make up the difference. (See "What is the Social Security Trust Fund?", below.)

Why is Social Security in crisis?

Actually, it's not. There is no Social Security crisis. Under the main government projections, Social Security can pay full benefits through 2042 -- and then continue forever to pay average retirees benefits higher than the $15,000 Mary gets today. Under other government projections, Social Security is fine through 2052. Under still others, Social Security is fine indefinitely, until the sun explodes. (Admittedly, there are some problems at that point.)

Here's a graph showing this, based on the most recent Social Security Administration projections (full benefits through 2042) and Congressional Budget Office projections (full benefits through 2052). All numbers are in 2004 dollars; that is, higher benefits are higher in real value, not higher because of inflation.

Source: "Basic Facts on Social Security and Proposed Benefit Cuts/Privatization" by Dean Baker and David Rosnick.

(For more details, see the questions about Social Security projections below.)

But didn't President Bush just say Social Security is in crisis?

He did. In December, 2004 he said that "the crisis is now."

However... President Bush sometimes says things that aren't 100% true. Perhaps you remember him telling us about Iraq's terrifying weapons of mass destruction.

The Social Security crisis is just as real, and just as terrifying, as Iraq's WMD.

Then why is Bush saying there's a crisis?

Because he wants to dismantle Social Security.

Conservative Republicans have hated Social Security since before it began. In 1935, Republican Senator Daniel Hastings said Social Security would "end the progress" of America. Ever since, conservatives have been saying Social Security is about to collapse. When people who are now receiving Social Security checks were starting to work in the 1960s, conservative Republicans were telling them they'd never see a dime.

However, because Social Security is so popular, Republicans have always been scared to make serious moves to kill it. Social Security has often been called the "third rail" of American politics -- touch it and you die. While conservatives believed it was extremely important to get rid of Social Security, it wasn't so important they wanted to lose elections.

But things have changed. As a recent internal White House memo put it, "For the first time in six decades, the Social Security battle is one we can win." The person who wrote this was being honest: conservatives have been fighting against Social Security for 60 years.

In other words, it's not that Social Security is "in crisis" any more than it was in the past. The only thing that's changed is that now conservatives think they can finally get rid of it.

Now, you may be wondering: why exactly do conservatives hate Social Security? Why do they think something so many Americans like is so terrible?

Here's one answer: $$$$$$$$$$$$$$$$$$$$$$$$

President Bush's plans for Social Security would mean billions and billions of dollars for Wall Street. As Fortune magazine recently put it, Wall Street is "salivating" over this.

Another answer is that conservatives believe getting rid of Social Security would make them more powerful. Their thinking about this is too complicated to go into here. It's interesting, though, and is discussed in Hands Off Social Security!

But... don't people on the news talk about Social Security being in crisis too? Didn't Bill Clinton say we had to "save Social Security first"?

You do see many people on television saying there's a Social Security crisis. But again -- you also saw many people on television saying Iraq had weapons of mass destruction. Just because you're on TV doesn't mean you have any idea what you're talking about.

In fact, people on TV usually have less idea what they're talking about than the rest of us. It's not that they're stupider than we are -- it's that being on TV takes up lots of time. For instance, if you're Bill O'Reilly, you have to spend most of each day putting on makeup, coiffing your hair, sexually harassing employees, and so forth. (Sorry; allegedly sexually harassing employees.) This doesn't leave you much time to learn about Social Security.

Bill Clinton is a different story. Clinton did say, in his 1998 State of the Union address, that we should "save Social Security first."

This was a catchy political slogan. But what he actually meant was something different, and less catchy: "Reduce the debt/GDP ratio first, thereby increasing the general solvency of the federal government."

Confused? That's okay, it's confusing.

Hands Off Social Security! explains what Clinton was talking about. (For a little help now, see "What is the Social Security Trust Fund?", below.) But the point is that most of what Clinton said was reasonable at the time, but it didn't mean Social Security was facing a crisis.

I still don't get it. Is all the talk about the "Social Security shortfall" just made up?

It depends on what you mean by "made up."

Every year, Social Security's actuaries are required by law to make projections of the program's health over the next seventy-five years. For reasons too economic to go into, these 75-year projections have usually shown a shortfall. In fact, the projected shortfalls in the 1950s, 1960s and 1980s were much bigger than the one now. And yet retirees have never missed a check. (An explanation for all this appears in HOSS!)

This isn't the fault of the actuaries -- it's very hard to predict the future. No one in 1930 could predict spam email, Christina Aguilera, or spam email about Christina Aguilera. Likewise, we can't predict much about 2080. (Except for the killer robots.)

The following questions have been taken into the shop for repair, and will be returned shortly.

But what happens if the Social Security projections are exactly right?

Why is Social Security privatization a bad idea?