News Release

Social Security: The Manufactured Crisis


The White House is hosting a two-day conference on the economy with special emphasis on Social Security starting tomorrow.

Weisbrot is the co-director of the Center for Economic and Policy Research and co-author, with Dean Baker, of Social Security: The Phony Crisis (University of Chicago Press). He said today: “The following facts have been left out of the debate on Social Security ‘reform’:

— According to the numbers used by everyone, including the President’s Commission, Social Security can pay all promised benefits for the next 38 years without any changes at all. The nonpartisan Congressional Budget Office (CBO) just upped that estimate to 48 years.

— By either measure, the ‘long-term problem’ faced by Social Security over the whole next 75 years is actually less than it faced in each of the decades of the 1950s, 60s, 70s, and 80s.

— By either measure, Social Security is more financially sound than it has been throughout most of its 69-year history.

— The projected shortfall for the whole 75-year period is about 0.7 percent of GDP (according to Trustees’ numbers which the President’s Commission is using) or 0.4 percent of GDP (according to the CBO). This is about one-third to one-fifth of the cost to the Treasury of the 2001 and 2003 tax cuts, if made permanent.”
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Author of the book After the New Economy, Henwood said today: “It looks like the Bush administration is going to try to sell Social Security privatization with the same strategy it used to sell the war in Iraq: fear, exaggeration, and lies. Last weekend, the president warned of ‘looming disaster’ for the system. That’s just not true. The official projections show the system solvent for about four more decades — and those projections themselves are made on the basis of economic and demographic projections that are implausibly, even irresponsibly, gloomy. At worst, the system faces easily manageable problems. With more plausible economic and demographic assumptions, it faces no problems at all.”
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Frank is a senior economist at the Poverty Institute at Rhode Island College. She said today: “President Bush is fond of saying that workers should be ‘allowed’ to save for retirement. But Americans are already allowed to save, are indeed encouraged to save through various tax-favored accounts. Yet most can’t save nearly enough to retire on. Today, the majority of elderly Americans depend on Social Security for most of their income. This will become increasingly true as younger workers begin retiring with no private pensions — nothing but their savings to fall back on. Social Security was intended to supplement individual savings and private pensions — Roosevelt’s three-legged stool. Turning Social Security into a savings plan is of benefit to absolutely no one but the financial firms who will manage all those individual accounts.”

For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167