Tuesday, March 18, 2008

Another Hysterian on Social Security at WaPo: Allan Sloan

So, the drumbeat of hysteria about social security in the MSM continues today with Allan Sloan in the Washington Post. He has an egregious column repeating with no criticism the forecasts of the intermediate projection of SSA Trustees, and pronouncing that doom will arrive when the fund starts to supposedly run a deficit in 2017. This is supposedly because (gasp!) paying the cashed-in assets from the trust fund will require funds from the general fund.

So, I shall only not two things. One is that in the last ten years the economy has outperformed the low cost projection, and the low cost projection has a deficit never appearing, no 2017 at all. The second is that medicare is already running a deficit, which is rapidly rising, and the earth has not stood still (or, maybe that is why Bear Stearns failed?). The fiscal problem the US faces is medicare, and medical care more broadly, not social security.


S Molnar said...

"So, I shall only not two things." Hah! Your logician genes are showing.

rosserjb@jmu.edu said...

Well, of course I meant to write "knot."


jamzo said...

the money changers (financial industry) will not rest until it gets its hands on social security dollars

they like the 401K revenue stream and fantasize about what they could do if they got social security

but i doubt congress will give up their control of social security monies

Jack said...

So what does Sloan suggest? Would our old age insurance be better handled by the geniuses at Bear, Sterns? The market goes up, down, all around, and all the time generating fees and commissions to the managers. That's the only guarantee that "private" accounts offer. Ask your broker what he's going to do for you now that the girations of investment capital markets is quickly reducing your nest egg to zero. I'll bet that those Bear, Sterns employees are very happy to know that at least they will have social security to fall back on now that their 401ks are likly in the crapper.

rosserjb@jmu.edu said...

Sloan is pretty vague. He spends most of his time denouncing all the people who do not realize what a terrible crisis it all is. "Something" must be done, whatever.


Bruce Webb said...

Sloan is a demagogue. Note that Social Security hysterics never put anything in numeric form. Under Intermediate Cost assumptions we are faced with borrowing $30 billion dollars in 2017 to make up the difference between projected cost and income in Social Security, anyone who thinks that is some huge burden needs some remedial math training. You are talking about 2 1/2 months of war spending or a fraction of the current stimulus package. There is no point at which the burden of financing Social Security approaches current deficit levels when adjusted for inflation. You could look it up, but tragically few people do. Not to mention the fact that both shortfall and depletion have been pushed back in time as the actual numbers roll in. 2017 is the new 2012 and 2041 is the new 2029 when comparing the 2007 Report to the 1997 one.
This pushback is likely to continue.
Table VI.F7.-Operations of the Combined OASI and DI Trust Funds, in Constant 2007 Dollars, Calendar Years 2007-85

But Barkley maybe you could amplify on this:
"The second is that medicare is already running a deficit, which is rapidly rising, and the earth has not stood still"
This is misleading at best. Medicare Part B (outpatient) and Part D (drugs) are paid out of the General Fund and so have no other deficit than the combined General Fund deficit. It would make sense to discuss them as increasing or not as a share of overall General Fund spending but there is no account labeled 'Medicare Part B/D' that could be said to be somehow in 'deficit'.

On the other hand Medicare Part A (Hospital) is paid for by a dedicated income stream derived from a payroll tax set at a combined 2.9% (1.45% from employer and employee). This money is accounted through the HI (Hospital Insurance) Trust Fund which can go either in a positive/surplus direction or a negative/deficit direction in any given year. For 2007 the Trustees projected the balance in the HI TF to increase from $305 billion to $321 billion, as it turns out it actually increased to $326 billion.
It really does not make sense to describe the General Fund component of Medicare to be running either in surplus or deficit and where it would as in Part A/HI the Trust Fund is currently running surpluses actually in excess of projections.

rosserjb@jmu.edu said...

Bruce W.,

I have come to understand that I have been making mistaken remarks regarding the funding situation of medicare. It is more complicated than I have presented on occasion, and it is not strictly true to say that it is currently in deficit. I shall have to drop that line from my repertoire.


Bruce Webb said...

While it is unlikely people will stumble on this now dead thread it can't help to point out that the 2008 Social Security Report is due to be released on Tuesday the 25th. You can download the PDF version, review the HTML or order a paper copy here:

Or you can get to the HTML version with certain tables broken out for convenience here: