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MYTH-BUSTING THE TRUTH SQUAD
August 12th 04:08:30 PM
Americans United to Protect Social Security, is a group that "seek[s] to counter an all-out campaign by the White House in support of its proposed overhaul of Social Security." Supported by a plethora of liberal groups, AUPSS has taken a one-sided approach to this debate, calling into question whether the debate over Social Security "privatization" is about reexamining the welfare state or just one more petty partisan squabble.
AUPSS uses a group dubbed "The Truth Squad" to attack the claims made by those who support instituting Personal Retirement Accounts in the Social Security system. It’s time to debunk some of the "truths" this group purports...
TRUTH SQUAD MYTH #1: Adding private accounts to Social Security does not add one day to the solvency of Social Security, as even senior White House advisors have now conceded. In fact, George W. Bush has been advocating privatization since he ran for Congress in 1976, and told people back then that Social Security would be bankrupt by 1988 without privatization.
Been there, done that; Social Security insolvency has been a recurring topic since its creation in 1935. That is why the 1983 commission, chaired by now-Federal Reserve Chairman Greenspan, was convened: to address the impending funding crisis.
The result? An increase in taxes and a reduction in benefits (through a COLA adjustment) – the 19th the system had seen since its inception in 1935. Here we are, 22 years later, addressing the same problem. Isn't it time to solve the system permanently, so we don't have to redress this issue twenty years from now? The late Democratic Senator Patrick Moynihan sat on both the 1983 and 2001 Presidential Committees to Strengthen Social Security and supported the integration of Personal Retirement Accounts into the current system in 2001: tax breaks did not work the first time around.
TRUTH SQUAD MYTH #2: Congress should only consider changes that strengthen the system's finances. The first step is making a commitment that all the money people pay into Social Security will be used to pay the benefits Americans have paid for.
Been there, done that. We've tried addressing only solvency, but it has become apparent that the structure of Social Security is outdated and does not reflect an economy or a population that has evolved over the last 70 years.
TRUTH SQUAD MYTH #3: Social Security can be strengthened for the long term with common-sense, bi-partisan changes. That has worked before, and it will work again. But real bi-partisan progress cannot happen until everyone agrees to focus on strengthening Social Security, instead of replacing it with a privatization scheme.
All evidence to the contrary. If Social Security reform had "worked" in the past, then we would not be addressing the problem once again today.
TRUTH SQUAD MYTH #4: They say privatization will be voluntary, but you will have your benefits slashed by 40% even if you don't volunteer to participate.
It appears that the "Truth Squad" is engaging in the fact-bending it accuses supporters of personal accounts of partaking in. Under Plan 2 constructed by the President's Commission to Strengthen Social Security, the growth of benefits would be cut, indexed to inflation rather than wages; benefits themselves will not be cut. Anyone who has taken a calculus class knows that while the slope of a line is decreasing, the line itself can still be increasing.
The growth of benefits will have to be cut under any plan, whether proposed by Democrats or Republicans. This is NOT a choice made by either political party, but an accounting problem.
The balance sheet doesn't care which party is in control; the system simply cannot afford to pay promised benefits.
TRUTH SQUAD MYTH #5: It's a Lose-Lose scam. Privatizers claim that you can keep your private accounts, but they don't tell you that the government will actually take back 70% or more of your account at retirement. If you invest poorly, you lose; if you invest well, you will be penalized more than 70%.
This statement is not rooted in fact. Under no proposed plan does the government have any ability to access your personal account. The entire purpose of personal accounts is that they are the PRIVATE PROPERTY of the citizen, able to be passed down to the next generation.
Furthermore, no one will be able to "invest poorly," because one does not choose their individual investments, but from fixed plans already in place. All plans currently on the table propose that no one will fall beneath a minimum level of benefits – not exactly a "risky scheme."
TRUTH SQUAD MYTH #6: They say people age 55 and over will be protected from any changes, but their plan will weaken the Social Security Trust fund that pays benefits.
Weaken the Trust Fund? I'm afraid it's a little late for that. The Trust Fund is merely a collection of IOU slips that the government owes itself. Furthermore, the Trust Fund is in enough trouble on its own; it is exhausted in 2041 if no action is taken.
Any changes to the system would not affect anyone over the age of 55. For those of us who are just starting our careers, however, the benefits are tangible.
Apparently "The Truth Squad" is a misnomer.
Posted by Chris Schrimpf
Comments
Americans United to Protect Social Security -- Please respond.
Posted by Adam Cahn on August 12th 07:48:38 PM
Hi, I read in SS 101 that "All money in the trust fund has been spent." I thought the trust fund was set up so that there would be money to fund the baby boomer's SS payments. How was it all spent? Why is it being spent now?
Thanks!
Posted by Iriemon on August 17th 12:27:47 PM
Iriemon,
The original intent of the trust fund was to put money aside so that they can use it to fund the baby boom generation. However, after a short time, Congress decided that it would be okay to "borrow" the money in the trust fund and spend it on other things.
So basically the trust fund, as it stands now, only contains a bunch of IOU's that the government wrote to itself. When the day comes (in 2017) that we will need to start using the trust fund, the government will have to raise that money somehow, through tax increases or benefit cuts.
It is almost exactly the same as if you decided to buy a car today with your retirement and justified it to yourself by writing an IOU to yourself for your retirement money plus interest.
When it comes time for you to retire, you won't have any *actual* money, just money that you promised to pay yourself.
It sounds absurd, but that's really the case. Let me know if you still have any questions.
Posted by Jeremy Tunnell on August 17th 12:39:51 PM
Thanks for the explanation. I agree, it does sound absurd!
Wouldn't social security be less of a crises if there actually was a trust fund with a bunch of money in it?
Why has the government been borrowing from the trust fund, anyway? Isn't that money supposed to be saved to pay for *our* SS benefits? Isn't that like stealing money from our future? Is the Government still doing it? If so, why? Maybe it should stop doing that! Maybe that is what we should be focusing on instead of personal accounts?
Posted by Iriemon on August 17th 02:48:24 PM
To answer your questions:
*Social Security would be safe until 2042 if the government hadn't spent the trust fund money.
*They've been borrowing from the trust fund because it allows them to spend more money than they have without it showing up as a bigger deficit. Because they are counting IOU's as real assets, they don't have to count the money they are spending as an actual expenditure. They're cheating, basically. It's just like saying that you really didn't spend any money for dinner as long as you promise to pay yourself back.
*Yes, the government is still doing it, again, because nobody has stopped them.
*What is important about personal accounts is that it solves both problems simultaneously. Since you would hold *real* assets in your personal account, the government would be prevented by law from spending that money, just like the government can't spend the money you have invested in your savings account or checking account. Further, personal accounts solve the long term solvency problem, too.
Even if we had money in the trust fund, the structure of the current program is flawed. We would still run out of money some day. Personal accounts change the *structure* of the program so that it is solvent forever.
Posted by Jeremy Tunnell on August 17th 03:03:41 PM
Seems to me if they just passed a law saying our government can not steal from the SS trust fund any more, that would solve a lot of the SS problem! I think we should try to get them to do that!
I have a question about personal accounts. If someone becomes disabled or dies, SS provides some benefits to them or their family, I think. What will happen to me if someone becomes disabled or dies and they haven't accumulated much in their personal accounts?
Posted by Iriemon on August 17th 04:32:20 PM
Iriemon,
You've got the right idea, but it's too late now. If we had saved the trust fund from the beginning, we would have enough money to last until 2042. However, we will only have a surplus for another 12 years, and it will decrease throughout those years.
We simply can't fix the system by only diverting the surplus to a real trust fund. We must change the structure of the system.
To answer your second question, the current system consists of the regular "pension" system and also a disability and survivor system. The personal account proposal would only affect the pension system. Also, currently when you die you forfeit your social security balance. However, with personal accounts, people would be able to pass their account balance on to their family.
Posted by Jeremy Tunnell on August 17th 06:51:45 PM
Thank you so much for your information. Quite an eye opener.
I was thinking about this, and getting mad. How much has been stolen from *our* SS trust fund? Ane the current Administration stealing from it now? How much has the current Administration stolen from our trust fund and replaced it with worthless IOUs? Why is Mr. Bush letting this continue to happen?
Why are they taking our SS trust fund money to spend on other things, anyways? Isn't that what regular taxes are for?
I think you should put a banner on the front page:
MR. BUSH: STOP STEALING FROM OUR SS TRUST FUND!
Let's get organized and stop the politicians from stealing any more of OUR SS money! This is a great cause!
Posted by Iriemon on August 18th 12:43:15 PM
A few points.
As of 2002,there was a "balance" of 1.22 trillion dollars of IOUs in the trust fund. That means Congress has spent 1.22 trillion dollars that was supposed to be earmarked for Social Security.
In 2003, $138 billion went to the trust fund.
I think we need to be clear about one thing, though. It is not the Administration's fault that this is happening. In fact, if it were up to President Bush, this problem would have been fixed last year.
Congress is the problem.
And we are organized. Care to join us? :)
Posted by Jeremy Tunnell on August 18th 02:55:30 PM
So the Republican Congress has stolen over $500 billion dollars from *our* SS trust fund in just the last 4 years alone? THIS IS OUTRAGEOUS! Now I think see why we are in a crisis!
Again, why are they taking *OUR* SS money? Why aren't they using regular tax dollars to spend? I don't get it. Why isn't anybody saying anything about this?
What has President Bush done to stop this Republican Congress from stealing over $500 billion from our trust fund and creating this crisis? Isn't President Bush the head of the Republicans? Can't he introduce laws to stop Congress from doing this? He has passed lots of legislation since he became president.
According to your figures, over $500 billion has been stolen from our SS trust fund since 2000? Why are you just excusing President Bush for this outrageous fiasco!?
Let's do something about it! Everybody should know about this! You don't have this information in SS 101 -- Put it in there. Let's tell everyone about how the Republicans have been stealing our SS money! I don't think most people understand this. It makes me furious! Maybe if enough people cry out about it we can get the Republican Congress and President Bush TO STOP STEALING OUR SS MONEY!!!!!
Posted by Iriemon on August 20th 12:15:05 PM
Iriemon,
I'm willing to give people the benefit of the doubt. This post has dropped off the front page long ago, and yet I have gone out of my way to make sure that I came back and answered all of your questions as thoroughly as I could.
Don't think I haven't figured out where you came from.
You may not believe it, but we honestly want to be bipartisan. I don't think that social security reform is a partisan issue. We have been contacting college democrats chapters all over the nation. In many cases, they won't even call us back.
I'm disappointed in your contrived confusion. You know as well as I do that the President can only submit a budget, and Congress actually creates the budget. Furthermore, the blame for this crisis falls squarely on both sides, Republicans and Democrats alike...Congress has been dipping into the trust fund for decades.
I really believe in what we are doing, and I will return here and answer as many good-faith questions as you can come up with. However, I refuse to feed your trolls any longer.
Posted by Jeremy Tunnell on August 21st 09:33:12 AM
Thank you, Mr. Tunnell. My feigned confusion was to tease information out of you, and I appreciate your response, and will say for the record you have answered honestly, if in my opinion a little biased towards the president's personal accounts plan.
Here are some sincere and honest questions if you care to address them for those that may stumble upon this thread:
If your organization is truly bipartisan seeking to ensure there will be social security around for today's college students, why have you not considered other potential "fixes" to social security? Such as:
1. Make SS payments means tested. Warren Buffet does not need to be paid SS benefits. I'm sure you know, as a group, the eldery (asset wise) are the richest group of Americans. If Social security is social insurance (as it provides disability and death benefits) it should not be a system that pays hundreds of billions of dollars each year to many who do not need it.
SS is a huge transfer or wealth from the poorest groups to the wealthiest. Stop this, make it means tested, and we fix a lot of the problem.
2. Change the retirement age to 70. We are all living longer and healthier and most of us will be working longer. Someone who is 68, in good health, working and making an above average salary does not need to be getting SS payments from the Govt.
3. Remove the $90,000 income cap on the social security tax. If it was taxed on all income, not just the first $90,000, my guess is we could make the SS tax rate a lot *lower* and still have plenty more funding.
3. Balance the budget. You know well that the reason the Govt has been stealing the SS trust fund monies and replacing them with Govt IOUs is to fund the huge deficits and debt this country has had since the trust fund concept was created in the 1983 SS reform act. The Government should raise taxes and cut spending, and balance the budget, so they STOP STEALING OUR SS TRUST FUND. I don't care who is in power. Right now it is Mr. Bush and the Republicans in power who stealing $150 billion from *our* SS trust fund every year, so they currently get the blame.
You acknowledged that more than $1.2 TRILLION has been stolen from the SS trust fund. Having those funds available would help the SS situation at least a little, wouldn't you agree?
Right now we should be putting $150 billion a year aside for the SS payments in the future. Instead it is being stolen to fund the deficits caused by tax cuts and increased spending. If we want to save SS, THIS MUST STOP.
Would not any of these proposals help fix the SS crisis? Why don't you consider them and put them on your website as alternatives if you are bipartisan and really concerned about social insurance for college kids.
Here are some problem I have with personal accounts, maybe you can help me out:
1. What happens if you live longer than your personal account fund? Or your funds are lost through bad investment choices?
2. What happens if someone becomes disabled?
3. What happens if a worker dies?
Right now, SS provides at least some benefit to people in those situations. Personal accounts will not. So you will still need social insurance (unless we want hordes of old people out begging on the street). Personal accounts are just a supplement. So what are the benefits? If someone dies earlier their heirs will receive the balance of their benefits. That just means the other component of social insurance taxes will be higher, because that money is not avaible for the general fund.
4. How are SS personal accounts going to solve the funding crisis we have? You are replacing SS tax revenue with personal accounts revenue. What about the millions of boomers retiring over the next 20 years? How will personal accounts plan pay for the boomers' retirement benefits?
5. Why do we need personal accounts? We already have them. Open an IRA and put some money in there. That is what I tell kids coming out of college. If you want people to have personal accounts, just pass a law requiring everyone to put a certain percent of their income in an IRA.
Thank you for considering these matters.
Posted by Iriemon on August 21st 12:20:19 PM
Those are fair questions. I'm really busy at the moment, but give me a couple of days, and I'll post a blog post with the answers.
Posted by Jeremy Tunnell on August 22nd 01:46:43 PM
Thank you. I look forward to it.
Posted by Iriemon on August 22nd 04:42:15 PM
Answer Here
Posted by Jeremy Tunnell on August 26th 01:10:37 PM
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