Hark! That awful, sucking sound… the indescribable shape looming towards us through the gloom… that gagsome stench… What could it be? (Melvin?) —No, it’s the January Surprise: the plans to abolish Social Security, as prophesied, are beginning, slowly, to coalesce...
Social Security Formula Weighed: In informal briefings on Capitol Hill, White House aides have told lawmakers and aides that Bush will propose the change in the benefits formula…. Currently, initial benefits are set by… adjust[ing] those earnings… based on wage growth…. Under the commission plan, the adjustment would be based instead on the rise of consumer prices…. [A] middle-class worker retiring in 2022 would see guaranteed benefits cut by 9.9 percent. By 2042, average monthly benefits for middle- and high-income workers would fall by more than a quarter. A retiree in 2075 would receive 54 percent of the benefit now promised….
Ads Push the Factual Envelope: John F. Kerry is denouncing deep Social Security cutbacks that President Bush has not proposed…. A Kerry ad, based on a private comment Bush is reported to have made on wanting to privatize Social Security, says: “Now Bush has a plan that cuts Social Security benefits by 30 to 45 percent.” But the president, while favoring allowing younger workers to put part of their benefits in private accounts, has never put forth a plan—and has vowed that any change would not affect current retirees…
But that’s not the funny bit; that’s not the funny bit by half. For the funny bit, you have to dig into the numbers a little, and figure out what you ought to be making, what you’ll probably be making if we do nothing, and what you’ll end up making if the Republicans carry the day. Max points out the CBO study which does the math, and you really ought to listen:
In Table 2 of this study, we get estimates of benefits resulting from this approach. Since it’s all about the kids, we should start with the impact on what’s called the “10-year birth cohort starting in year 2000.” Kids born after January 1, 2000. We focus on the middle of the middle, as far as income distribution goes (“median in middle household earnings quintile”).
If Little Nell is this type of person, in retirement she would be due $26,400 a year in benefits annually under current law. This would require some kind of infusion into the Trust Fund after 2052 (when CBO says it runs a shortfall). With no such infusion, alas Little Nell can only be paid $19,900 (everything here is constant 2004 dollars). (The same type of person retiring today—“the 1940 birth cohort”—gets $14,900.)
Let’s chew on that for a second. With no transfer of revenue into the Trust Fund after 2052 (as opposed to redemptions of its assets with general revenue), Little Nell still does quite a bit better than a retiree today.
This is a crisis? Surely we can do better. What about the excellent reform envisioned by G. Bush?
When you include the returns to the individual accounts and “price indexing” of benefits, Little Nell’s benefit is . . . $14,600. SHE DOES WORSE THAN UNDER THE “BANKRUPT” TRUST FUND! Way worse! Can you hear me now? She even does worse than a current retiree.
And Matt’s right: there’s nothing ideological about this, the delusions of Grover Norquist notwithstanding. The financial industry has more money than any one of us does. So we lose. Simple as that. Our future’s been pwned.
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