Social Security Will Be There When Today’s Young People Retire

Republicans have been gunning for Social Security for decades. This is understandable, as an ideological matter, because Social Security’s very existence undermines the anti-government mythology on which the modern conservative movement thrives. The nation’s public retirement system stands as living proof that large government programs can be successful, popular, and extremely efficient.

What can conservative ideologues do when faced with such inconvenient facts? One possibility would be to adapt to reality and move on to a different fight. Instead, Republicans have chosen the path of obfuscation and distortion. Sadly, their long-term disinformation campaign has successfully confused today’s young people, who might actually become so cynical that they could end up agreeing to changes to Social Security that would harm their own interests. In addition, Republicans have succeeded in confusing the press, which now reflexively repeats conservative talking points as if they were facts.

The simple facts are these:

• Social Security is NOT going bankrupt
• Social Security will continue to exist in perpetuity (unless Republicans succeed in repealing or undermining it)
• Social Security will continue to provide a modest but essential retirement income for all Americans, long after Baby Boomers have met their maker
• The path of the economy will determine the size of future Social Security benefits, and finally
• Any of the alternatives to Social Security would be worse for young people than keeping the current system.

Before describing some recent examples of Republicans’ dishonest attacks on Social Security, and the press’s uncritical acceptance of those attacks, it is essential to understand exactly what we know about the future of Social Security. In particular, we need to debunk certain hoary myths about the Social Security trust fund.

Social Security Basics: Future Benefits for Today’s Younger Workers

The key source of information about Social Security’s finances is the annual report from the trustees of the Social Security system. That annual report (the most recent version of which is available here) includes hundreds of pages of accounting information and economic forecasts. Because the report is so long and so technical, it is easy for political players to distort its content, knowing that neither the press nor the public is likely to check the original source.

In order to understand what the trustees’ forecasts mean for younger Americans, it is helpful to think about a prototypical 25-year-old worker, whom I will call Chelsea. She is a couple of years out of college (although her level of education has nothing to do with the determination of her benefits) and just began working a new job at a salary of $40,000 per year, which is approximately the median salary for people in Chelsea’s age range.

Chelsea, who was born in 1991, will be eligible for full retirement benefits when she is 67 years old (which is the retirement age for everyone born from 1960 onward, notwithstanding the persistent belief that the retirement age is still 65). This means that, unless she opts for early or late retirement, Chelsea will receive retirement benefits starting in 2058. How much will she receive?

Even assuming that Chelsea never receives a raise during her entire career—which is extremely unlikely for someone so young—her retirement benefit will be somewhere between $1,117 and $1,573 per month, in inflation-adjusted dollars. These are hardly luxurious benefit levels, but receiving such benefits can mean the difference between comfort and starvation in retirement. (If she receives only a one percent raise each year, ending her working life with a salary slightly over $60,000, Chelsea’s Social Security monthly benefit would be between $1,512 and $2,130.)

Why is there a range of possible benefits, and what will determine the actual level of benefits that people will receive? The trustees provide forecasts based on three different sets of economic assumptions. The least favorable assumptions—which are so bad that they imply Depression-level economic outcomes for the next seventy-five years—result in the lower estimate for Chelsea’s benefits, $1,117 per month. Under the trustees’ middle-range assumptions—which are still quite conservative, showing decades of unnecessarily slow growth—Chelsea will receive $1,243 per month. And under relatively realistic assumptions that are somewhat more optimistic than the other two scenarios, Chelsea will receive the full $1,573 benefit.

Where did I get these numbers? On their website, Social Security’s trustees provide a few helpful calculators, which allow anyone to see what their benefits would be under different assumptions about future earnings, retirement dates, and so on. The estimated benefits that the calculators provide are the “full benefit” amounts. According to the 2015 annual report, the benefit under the middle scenario will be 79 percent of the full amount, or 71 percent under the most pessimistic scenario.

Obviously, anyone would prefer to receive the higher amount, but it is essential to understand that even the very worst case has Chelsea receiving over $1,100 per month during her retirement. Even if she ultimately receives higher benefits, she will still want to save on her own for retirement through IRAs and 401(k) accounts, but Social Security will—at the very minimum—provide an $1,117 per month cushion for her retirement. As the saying goes, that ain’t nothin’!

But Isn’t the System Going Bankrupt? No, It Isn’t.

Anyone who has been following the political discussion in recent years is likely to object that Social Security will not be there at all when younger Americans retire. If one were to believe what one hears from Republicans, not only will Chelsea not receive $1,573 per month, but she will not even receive $1,117 per month. She will, under this nightmare scenario, receive nothing at all. This, however, is false—not as a matter of opinion or political belief, but as a matter of arithmetic and accounting.

Even so, people have come to believe that Social Security will completely disappear, because Republicans and journalists tell them so. For example, in his last debate before dropping out of the Republican presidential primaries (transcript available here), Senator Marco Rubio asserted: “Social Security will go bankrupt and it will bankrupt the country with it.” How is it possible that Social Security could go “bankrupt” yet still, as the Social Security trustees tell us, provide at least $1,117 to someone who earns an average of $40,000 per year over her career?

Rubio misled his listeners by using the word “bankrupt” not to describe a situation in which Social Security has no money and must shut down, but one in which the Social Security trust fund reaches a balance of zero. But a balance of zero in the trust fund is nothing like bankruptcy. (Rubio’s claim that Social Security’s supposed bankruptcy will then lead to national bankruptcy is so absurd as to require a separate column, which I expect to publish here on Verdict within the next few months.) Even with a zero balance in the trust fund, the system could still pay benefits equal to incoming revenues, which would be (as I noted above) at least 71 percent of the maximum benefit level, even in a long-term depressed economy.

According to the trustees, the trust fund could reach a zero balance as early as 2028 in such a depressed economy, or in 2034 in the middle-range scenario (which is the estimate most often reported by news organizations as unquestioned fact). If the economy returns to something like normal health, however, the trust fund would not be depleted during the entire 75-year range of the forecast (through 2090, when Chelsea will be 99 years old).

The trust fund allows the system to pay a higher level of benefits for a longer period. But if there were no trust fund at all, the system would still be collecting tax revenues every year and thus could pay benefits every year. The system would not be bankrupt but would, instead, simply pay the lower level of benefits required by law if the trust fund reaches a zero balance.

Perhaps it is unfair to pick on poor Marco Rubio. After all, he uttered this claim in the last days of a disastrously failed presidential campaign, having been exposed as the emptiest of empty suits. Maybe more knowledgeable and sophisticated Republicans know not to make such uninformed remarks.

Would that it were so. Although House Speaker Paul Ryan is himself an empty suit, Republicans universally hail him as their leading intellectual light, especially on budgetary matters. And in a recent interview, Ryan said that both Social Security and Medicare are “not going to be there for my generation when we retire. You have to change these benefits to prevent them from going bankrupt.” Ryan is more than twenty years older than Chelsea, yet he loudly proclaims that Social Security will “not be there” for him or anyone who follows.

If anything, therefore, Rubio was simply repeating (and, as was his wont, repeating and repeating) Ryan’s party line about Social Security. This was, in other words, not a glitch. Rubio was faithfully repeating a fallacy to try to get younger people to agree to change the Social Security system. If you can convince younger people that they will get nothing from a system, then you can get them to agree to vote against their actual interests.

The Media Is Complicit in Spreading Untruths About Social Security

It is not, moreover, merely partisan Republicans who are making these claims. The moderator of that presidential debate, CNN’s Dana Bash, began a follow-up question by stating as fact that “Social Security is projected to run out of money within 20 years.” Again, the trust fund might be depleted in the future, but that does not mean that Social Security will “run out of money.” It simply would mean that the benefit levels would change.

Even left-leaning commentators have often become confused. Gail Collins, an op-ed columnist for The New York Times, criticized Rubio’s claims about Social Security by saying that “[t]here will be a gap. Most of which would be bridged if Congress eliminated the rule saying that people can stop paying the payroll tax on any income over $118,500. Nobody mentioned that factoid.” As I described above, however, there may or may not be a “gap” (by which Collins means that the trust fund would reach a zero balance, requiring that benefits be reduced from the higher level). One of the trustees’ own forecasts shows that such a gap might never come into existence. Saying that “there will be a gap” is simply not a statement of fact.

Even so, Collins is much better informed than most people who feel no compunction about sharing their ignorance regarding Social Security. And she certainly deserves credit for saying that Rubio’s claim that “[a]nyone who tells you that Social Security can stay the way it is, is lying” is a lie (or a misrepresentation).

Leaving Social Security Alone Is Better Than the Republicans’ Alternatives

In that same debate on CNN, Ohio Governor John Kasich repeated the well known polling result that “there are more 18-year-olds who believe they have a better chance of seeing a UFO than a Social Security check and we have a lot of seniors who are very nervous.” Gee, I wonder how that happened! With most of the press having been confused into believing the nonsense about Social Security going bankrupt, younger Americans can certainly be forgiven for believing that Social Security will not be there for them.

Yet it is rather disingenuous for Kasich to make such a remark as a reason to change Social Security. After all, it is Kasich and his Republican colleagues who have assiduously nurtured the myths about Social Security that now have younger Americans so confused and scared. Telling kids ghost stories and then noting excitedly that they all believe is ghosts is hardly a basis for making serious policy choices. The better path is simply to be honest with younger people, and to tell them that the levels of future benefits will depend on the path of future wages and salaries.

Kasich has, however, made another statement about Social Security that is particularly revealing. Last October, in a campaign appearance in New Hampshire, Kasich told his audience that benefits will have to be reduced in the future. When someone objected, Kasich said, “Well, you’d get over it, and you’re going to have to get over it.”

In a sense, that is right. But most young people today do not know what their future benefits might be. They are worried because people like Ryan and Rubio have convinced them that the system will be bankrupt long before they reach retirement age. In their minds, the issue is not whether they will receive $1,573 or $1,117 per month, or somewhere in between. They are worried that they will receive nothing at all.

Kasich’s “get over it” statement, however, is actually interesting, because it accidentally captures the idea that benefit levels decades in the future are not truly fixed quantities but must necessarily change in response to long-term economic trends. If it turns out that benefits for a person who earns $40,000 per year are, say, $1300 (better than the worst case, but not as good as they might be), then people like Chelsea will indeed “have to get over” the fact that her benefit will not be $1,573.

That is not, however, a reason to give up on Social Security, nor is it a reason for younger Americans to agree in advance to make cuts that will simply worsen the best-case scenario. The Republicans’ proposed changes to retirement ages and possible cuts to benefits, or even the increases in payroll taxes along the lines that Gail Collins described, will fall on younger Americans, not on older people like me.

There are plenty of ways to improve the retirement prospects for younger Americans. Most importantly, we should enact policies to reverse decades of wage and salary stagnation, because doing so would not only allow Social Security to pay the highest levels of benefits under current law, but it would also allow us to enhance Social Security to give today’s younger workers even higher benefits. Meanwhile, those younger workers could use some of their enhanced incomes to build up their own savings to supplement their Social Security benefits.

All of this means that we should stop believing in the trickle-down policies that have so spectacularly failed ordinary Americans over the last three or four decades. If we cannot do that, however, at the very least we should stop trying to scare younger people and instead reassure them that Social Security will be there for them, so long as we all remain committed to it.