spread the word (before it's too late)

Social Security is not going broke *

from the Economic Policy Institute

Each year, in early spring, the trustees of Social Security release their report. As required by law, the trustees present what can be described as their best guesses for three different scenarios for the future of Social Security. In their annual report for 2004, the trustees project that Social Security will take in more in income than it will pay out in expenditures until 2018.

Between 2018 and 2028, interest income earned on the trust fund assets is forecasted to make up the difference between income and expenditures.

After 2028, Social Security is expected to draw down its trust funds to pay for the expenditures that are not covered by income.

Finally, in 2042, the trust fund assets are expected to be gone, and income is projected to be less than expenditures. However, the trustees project that Social Security will still be able to pay 74% of its promised benefits from 2042 to 2078, and those benefits would still be higher in real (inflation-adjusted) terms than retirees are being paid today.

Social Security is not going broke. The trustees instead project a financing shortfall that may happen almost 40 years from now. The nonpartisan Congressional Budget Office doesn't project a shortfall until 2052. The trustees' projections are based on pessimistic assumptions.

Real growth is expected to fall to between 1.7% and 1.8% over the long-run, which has never been the case for an extended period of time during the post-war years. Similarly, the trustees assume that in the long-run the economy will settle on an average productivity growth rate of 1.6%, which is again too low by historical standards.

Higher productivity and consequently faster real wage growth -- which have both historically been about 2.0%—would be more realistic and improve Social Security's finances.

* but the financial services industry, the White House and Fox News want you to believe otherwise

---

for talking points see: MaxSpeak, you listen!

see also:

Buying into Failure
17 December 2004, Paul Krugman

Borrow, Speculate and Hope
10 December 2004, Paul Krugman

Inventing a Crisis
7 December 2004, Paul Krugman