Department of "HUH!?!?"

Why oh why can't we have a better press corps? The innumeracy at the New York Times... The stupidity... It burns! IT BURNS!!

And Now, a Word From Chile ... - New York Times: [American] Social Security does need some changes to protect it over the long term.... [A] combination of modest benefit cuts and modest tax increases, which could be phased in gradually over decades and could guarantee a government benefit that replaces about 30 percent of preretirement income on average, compared with a replacement rate of about 35 percent today.... As long as tax increases are off the table, severe benefit cuts become unavoidable. If the gap in Social Security's finances were closed through benefit cuts only, the average worker's payout would equal only about 10 percent of preretirement earnings...

So the New York Times says that current Social Security taxes--roughly 10.5% of taxable payroll--would only allow for Social Security benefits to equal 10% of average preretirement earnings.

And the New York Times says that with "modest" tax increases Social Security benefits could equal 30% of average preretirement earnings.

There's this thing called arithmetic.

It says that 1+1+1=3.

If you want to get three times the benefit replacement rate, you need to have three times the taxes. Money that flows out equals money that flows in.

God knows where the New York Times got that 10% number, or what they think it is, or what it really is, or why nobody on the New York Times editorial page staff can add, or even perform a simple consistency check, or... or... or... IT BURNS!!!

Comments

[Jake in NYC]

Knowing the NY Times ... they probably asked an economist! Just kidding. But the math certainly does makes you say "Hmmmm...".

Maybe what's most important is more that the NY Times is identifying the need to raise taxes to support social security. Also unpopular but probably necessary is raising the retirement age. People live much longer and more productive lives than they did when the program was first envisioned, no?

[ilsm]

There is the kind of stuff you get from National Review On line.

[Ken Houghton]

Actually, the 10% is straight out of CATO, which recognized that SSDI has that DI at the end, and declared (presumably with data) that approx. 20% of the 12.4% goes to disability, which they leave intact when arguing what to do with the other 10%.

Of course, to assume that 10% = 10% you have to BOTH (1) ignore the current accruals and overfunding of the accounts [easy for the NYT to do] AND (2) assume that workers of the future will make 1/2 of what present-day workers do [since there will be at least two workers for every recipient].

And THAT would be treated SSDI as strictly funded by current payments, which is one of the those scenarios Bruce Webb can destroy in less than 30 seconds, if he takes 25 to warm up.

[Denis Drew]

CBO estimates that Social Security outgo will rise from 4% of GDP today (now paying in 5+% already) to 6-7% by 2045 -- and holding forever. By 2045 our GDP per person should double. What's the problem? Europe pays 70% replacement today (may have to drop to 60% because of negative population growth) -- America should drop 30% as it grows twice as rich?!

[Michael Cain]

"CBO estimates that Social Security outgo will rise from 4% of GDP today (now paying in 5+% already) to 6-7% by 2045 -- and holding forever."

Indeed. Not just the CBO, but also the SSA and even the folks at Cato. The SS "crisis", with forecasts of ever increasing deficits as a portion of GDP, is the result of forecasts that say the tax base is an ever shrinking portion of national income. Just one of the reasons that increasing inequality matters.

[Barkley Rosser]

Jake in NYC and Dr. Chester Schneider,

Guess you guys are late to the show around here. This is one of Brad's good days, when he is dinging dumb people who are declaring that something _must_ be done about social security based on bad math.

Go look at the SSA Trustees report. The assumptions in the mid-range forecast that give us that fund deficit starting in 2017 and that "bankruptcy" in 2041 are simply wildly pessimistic, a halving of the long term growth rate of the US economy and a crash to near zero soon of immigration.

The low-cost scenario, which projects current figures more or less, says that the surplus will last forever. Even a decline of the growth rate to 2.2% and a substantial decline in immigration will give this result of a surplus forever without doing a thing.

So, let us wait and see. If in a decade the growth rate of the economy has fallen to 1.8% and immigration has crashed to near zero, there will still be plenty of time as the fund gets near to running a deficit, which the medicare fund is doing right now, btw, to do something. Nothing should or needs to be done now, and anybody urging that something needs to be done needs to be told to go read the reports, just as I am telling you to do so right now.

J. Barkley Rosser, Jr., Ph.D.
Professor of Economics and Kirby L. Kramer, Jr. Professor of Business Administration
Editor, Journal of Economic Behavior and Organization
James Madison University

[bhall]

Concerning a minor point about Social Security, Dr. Schneider says that two income households get a "single family benefit" when they retire. If he's talking about the SSA retirement benefit you and your spouse receive, this statement may not be entirely correct or may give the wrong impression. Generally speaking, if you and your spouse would each be entitled to an SSA retirement benefit because of your individual earnings records, each of you is entitled to receive an SSA retirement check based that earnings record. This is true even if that amount is higher than the amount you would be entitled to as a spouse based on your spouse's earnings record. SSA will pay you the higher of the amount you would be entitled to as a spouse or the amount you would be entitled to based on your own earnings record.

[bakho]

Why don't they write about a real problem like health care?

[wkwillis]

If immigration crashes to zero, wage income in the bottom 80% of American that is subject to social security taxes will go up, not down.