April 05, 2011
Okay, we haven’t seen this headline yet, but given current fashions in Washington policy circles it can only be a matter of time. Today the New York Times ran a column on Social Security by Alicia Munnell, the Director of the Center for Retirement Research at Boston College and a former member of President Clinton’s Council of Economic Advisors.
This column made the claim that Social Security does contribute to the deficit, telling readers that:
“scheduled Social Security benefits and current payroll taxes are included in long-term deficit projections by the Congressional Budget Office, the Office of Management and Budget and the Government Accountability Office. These projections matter: policymakers, investors and the bond markets use them to gauge the nation’s fiscal health. Since a shortfall in Social Security is embedded in these projections, eliminating that shortfall would substantially improve the long-term budget outlook and the nation’s creditworthiness.”
This is an interesting observation. These projections are supposed to reflect current law. Under the law, as Munnell points out, Social Security is prohibited from spending anything beyond the money in its trust fund. This means that if these baseline projections show deficits from the program spending at levels beyond what can be supported by the trust fund, then they are not making projections based on what Social Security can legally spend.
The more obvious complaint would seem to be with the nature of the projections than with the Social Security program. In effect, the projections assume that Congress will opt to maintain the level of scheduled benefits without doing anything to increase revenues. While this is a possibility, that seems a rather strong assumption to include in a baseline projection.
The column also includes another serious stretch. It tells readers that people are taking Social Security at the earliest possible age of eligibility because they are worried that the program will not be there for them if they wait until a later age. The article links to a USA Today article which supports this view by noting that the percentage of people who began taking benefits at age 62 rose sharply in 2009.
The most obvious reason that the share of people age 62 who took benefits rose in 2009 is that the unemployment jumped by 5 percentage points from its 2008 level. There were undoubtedly many workers age 62 who unexpectedly lost their job and saw little prospect of finding a new one. Therefore they decided to start collecting their Social Security benefits.
There has been a lack of confidence in the Social Security system for decades. And there has been much more serious talk of reform at other times, notably the late 90s and 2005 when President Bush proposed to privatize the program. Concern about the future of the program is not a plausible explanation for the jump in people collecting early benefits in 2009, nor is it likely a major factor in the decision of workers to take early benefits more generally.
(Thanks to Eric Kingson, the co-director of Social Security Works, for calling this one to my attention.)
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