There are not many good things to say about the blizzard of terrible things that has become a depressingly permanent part of our lives. Democracy is ending in the United States, women’s reproductive rights are under assault, Republicans are hypocritically blaming Joe Biden for the tragedy of Afghanistan, climate change is killing more and more people, and the COVID-19 pandemic is again overwhelming our lives. And that is only a partial list.
All of those things are of course horrifying and tragic, but as a very faint silver lining, I can point out that some bad political ideas that have for years been promoted by the media and American politicians are no longer receiving political oxygen. All the items that now dominate the news are far worse, but at least—and again, I am describing this only as the most minimal of upsides—some bad ideas are apparently off the to-do list. Small miracles are still miracles.
One of those bad ideas, which has been relentlessly promoted by anti-government ideologues for decades, is to harm future retirees by cutting Social Security benefits. As long-time readers of Verdict might recall, one of my long-term projects has been to write columns (e.g., here) debunking sky-is-falling panicky reporting about the imagined demise of our nearly-universal retirement system. Once the Trump circus began to overtake the news cycles starting in 2016, I no longer had to write about Social Security annually, only occasionally responding to uniquely bad ideas coming from Trump and other Republicans.
Today’s column is triggered by an article in The New York Times last week, in which two reporters slogged through some very stale fear-mongering about Social Security. I have not checked, but I have no reason to doubt that other major news sources went through the same motions, writing predictably misleading articles in response to the release of the Social Security Trustees’ 2021 annual report.
The two-step occasioned by these annual exercises in stoking panic among the public is always the same: The Trustees issue an extensive statistical analysis and 75-year forecast of the finances of Social Security and Medicare, which includes an ominous summary written to grab the attention of politicians and the press, and reporters then dutifully relay that ominous message through their megaphones: We’re all doomed!
We are not doomed, at least not when it comes to Social Security and Medicare, which is why I am describing it as a good thing that this misleading and manipulative disinformation is not making front-page news anymore. It is sad that it is still out there at all, but it seems unlikely to make any difference, not when Republicans would rather stoke the culture wars.
But lest anyone see the latest coverage and think that, “Gee, it sure is a shame that politicians don’t have time to deal with Social Security, because something oughta be done about it,” I have good news: This is a situation in which we—and this very much includes the young people who are being lied to about Social Security’s supposedly imminent demise, as part of selling them on the idea of harming their own retirements unnecessarily—should be happy that Congress is not going to do anything about Social Security.
(Note: I am focusing for the remainder of this column on Social Security alone, because understanding Medicare’s situation would require a separate column. I might write that column soon, but for now, Social Security is the topic of the day.)
Young people should understand that anything that Congress might do over the next decade or so in response to a nonexistent Social Security crisis will make matters worse, especially for young people themselves. Moreover, waiting to address any problems that might arise will not only not make matters worse but will significantly increase the likelihood that we will save the system for the benefit of today’s young people. I do understand that this is quite counterintuitive, but the reasoning is (once we get past some annoying accounting details) in fact quite straightforward.
The Predictable Tropes of Reporting About Social Security, Part 1: Reporting Good News as Bad News
By focusing on The Times’s article about the Trustees’ report, I do not intend to single out the two reporters on the byline for especially harsh treatment. Both are in general fine journalists, and it is not their fault that they were given the task of writing an unnecessary article about a topic that no one currently cares about. Yes, their article is sloppy and misleading; but that is par for the course when it comes to American media’s discussions about Social Security, even in quality news outlets.
The front-and-center “fact” that such articles focus on after the release of each year’s Trustees’ report is the date when the Social Security Trust Fund is forecast to reach a zero balance. This year’s report guesstimates that this will happen in 2033, which is one year earlier than was forecast in last year’s report.
Before explaining why this focus on the “depletion date” is seriously misleading, we should consider that even if we were right to worry about that date, it is in fact good news—on the borderline of great news—that this year’s predicted depletion date is only one year earlier than last year’s forecast’s date. Think of what happened to the U.S. economy since the previous year’s report was issued in April 2020. The pandemic caused a near-total shutdown of the economy for several months, creating massive increases in unemployment, followed by a painfully slow recovery. With Social Security’s revenues coming from a tax on wages, and with wages having been so severely depressed, we should be dancing in the streets that the Trustees’ estimates did not show a much bigger change.
In addition, although The Times’s article made sure to point out (echoing the Trustees’ ominous executive summary) that the depletion date had been moved from 2034 to 2033 in this year’s report, they did not bother to note that the forecast of the depletion date was also 2033 seven years ago (in the 2014 report) and that the date has been bumped up and down by a year on a regular basis. This is not a micro-precise exercise, and movement by a year or two is simply not meaningful. But one would never know that from the report itself or from The Times.
Note also that every year’s report includes three forecast scenarios, and although the Trustees always say that their “best estimate” is the intermediate forecast, we can learn a lot from the other two. This year, the supposed worst-case scenario has the trust fund being depleted in 2031, which is only two years before the “preferred” intermediate scenario.
On the other hand, the least pessimistic scenario predicts that the trust fund will be “depleted in 2061, but the trust funds would have sufficient income by the end of 2092 to permit full payment of scheduled benefits thereafter and also to pay in arrears the temporary shortfalls between 2061 and 2092” (p. 19). That is quite a swing, adding three decades to the worst-case scenario and making clear that the very long-term finances of the system would balance out.
I am not saying that we should expect that the best-case scenario will surely happen, but it is depressingly clear that the press’s unquestioning treatment of the dates that these future economic events are supposed to happen is rather naïve and unhelpful.
The Predictable Tropes of Reporting About Social Security, Part 2: When “Insolvency” Does Not Mean What People Think It Means
The headline for the article in The Times, “Social Security is projected to be insolvent a year earlier than previously forecast,” is reflected in the article’s statement that, in 2033, “the trust fund will run out of reserves and the program will be insolvent, with new tax revenues failing to cover scheduled payments.” This reflects the reporters’ stenographic and unquestioning repetition of the Trustees’ use of the word “solvency” in their summaries that are released to the press.
But the typical person reads the word “insolvent” and thinks “belly up,” or “bankrupt,” or “liquidated.” This is why so many young people think that Social Security will be gone before they are old enough to collect benefits, even though there is every reason to think that it will still be going strong (unless we mess with it unnecessarily now). People hear “insolvent,” and perhaps they also hear that the trust fund will be “depleted,” and they assume the worst.
The Trustees, however, define solvency as meaning that “the [trust] funds can pay scheduled benefits in full on a timely basis” (p. 41). And as the reporters for The Times accurately state: “The report estimated that 76 percent of scheduled benefits will be able to be paid out unless Congress changes the rules to allow full payouts.”
There are two key points there. First, one can forgive a young person (or anyone) from being confused, first having been told that Social Security will be insolvent but then immediately being told that it will continue to pay out 76 percent of promised benefits. A 24 percent reduction from some future hypothetical total sounds bad, of course, but what the Trustees are in fact saying is that, even if things turn out in the way that they are forecasting, Social Security will continue to pay all retirees in perpetuity, at reduced but still meaningful levels. Again, that is good news, but it is being reported as “insolvency.”
Second, the qualification “unless Congress changes the rules to allow full payouts” requires some clarification. Although the Trustees’ forecast claims that the government would have to enforce a 24 percent cut starting in 2033 if this year’s intermediate forecast turns out to be true, it is no sure thing that benefits would in fact be cut. We could expect a massive lawsuit challenging any attempt to reduce benefits at that time, a suit that would pit the promises that Congress has made to workers over the decades against the possible abrogation of those promises—supposedly due to “not having enough money,” even though we could certainly raise enough money, if we chose to do so.
What Would Happen If the Trust Fund Were Ever Depleted?
How would that work? If the courts ordered Congress to make good on 100 percent of all promised Social Security benefits, Congress could raise the extra money by increasing revenues from other sources, by diverting money from other programs (duplicative military hardware, for example), or by borrowing it.
As an initial matter, then, Congress might not have to change the rules to allow full payouts. If the courts decide that promises made by Social Security must be honored—that is, that the existing rules must be obeyed—then Congress will have to come up with the money. Do I think that the courts will do so? I honestly have no way of knowing, nor does anyone else.
But whether or not the courts step in, one might look at the last of those three funding sources listed above and say, “Wait, borrowing? But isn’t that deficit spending? We can’t start borrowing money to fund Social Security!” The fact is, however, that we have been borrowing to top up funds for Social Security for the past decade—as has been the plan ever since 1983, for reasons too obscure to discuss here—and we will continue to do so.
In fact, if the courts allowed Social Security benefits to be reduced by 24 percent starting in 2033, that would represent a sudden and precipitous fiscal drag on the economy, because it would in a single stroke take away a quarter of retirees’ spending on goods and services, from which businesses earn profits and pay workers. That would threaten a depression-level economic cataclysm.
And this brings us back to my argument that young people should hope that Congress will kick the proverbial can down the road when it comes to Social Security. If no action is taken in the meantime, at some point between now and 2061, the trust fund might be depleted. If that does happen, Congress at that time will feel it necessary to guarantee that there will be no cuts in payments, at least in the immediate term, in order to avoid such a cataclysm. At that point, Congress can decide either to fund full Social Security benefits in perpetuity out of some additional source (taxes, repurposed spending, or ongoing borrowing) or, at worst, to make the necessary Social Security benefit cuts slowly over time.
If Congress listens to the doomsayers today, however, they will enact some combination of cuts to future benefits or an increase in the retirement age (which is very much a cut in benefits, hitting the poor and unhealthy especially hard). This would essentially guarantee that today’s young people would be harmed, even if the Trustees’ forecasts turn out to be wrong. That is a bad bet for young people, even if the wait-and-see approach in the worst-case scenario requires some stretching out of the cost over future decades.
Having recently announced that my writing on Verdict and elsewhere will henceforth be informed by the fact that the United States is a “Dead Democracy Walking,” I should also note that Social Security is a policy area where all bets are off when the Republicans install their one-party autocracy in this country. Much of that party has long wanted to privatize Social Security, but Donald Trump understood that his aging White voting base wanted to protect their retirement and medical benefits. We have no way of knowing how much worse the Republicans will become over the next few decades, so we cannot predict whether Social Security will quickly be axed or instead preserved for today’s workers when they retire.
But this is all the more reason to want today’s Congress to do nothing about Social Security. If I am wrong about the end of American democracy, then in that happy future we can work out the details of funding Social Security—perhaps even affirmatively improving it, rather than fighting off cuts to the most successful social program in U.S. history.
If I am right, however, young people living in that future political dystopia should at least want the default retirement policy to be the Social Security system in its current form. Republicans will either reluctantly keep it in its current minimal form, or they will gut it. If I were a young person, I would not want Democrats to be doing the Republicans’ dirty work for them in advance.
