George W. Bush has announced that Social Security privatization will be one of the top priorities in his second term. Luckily for him, much of the media have already bought into the key premise on which his policy is based: the erroneous notion that Social Security is about to go bust.
Scaring the public about the solvency of Social Security has been a major goal of Wall Street financial services companies and their conservative think-tank allies, both of whom favor privatizing the system. A few years ago, William Shipman, a privatization advocate at State Street Global Advisors—one of the leading Wall Street companies that stand to benefit from the policy—described the difficult process of changing public opinion on Social Security (The Nation, 2/8/99):
First we had the question of whether or not the system is in serious trouble. That took a while. Then it was, should Social Security rely on the markets? That took a while, but there was an extraordinary shift about two years ago, and now everyone is talking about investing in the markets for Social Security.
Despite the dot-com crash of 2000, which should have made people more wary of entrusting Social Security to the stock market, recent coverage shows that Shipman had good reason to celebrate his success. Journalist after journalist has accepted the spurious idea that Social Security faces a crisis:
A recent New York Times article (11/28/04) claimed that the program is "about to come under intense financial strain from the aging of the Baby Boom generation and the increase in life expectancies."
USA Today (11/24/04), in explaining Bush’s rationale for privatization, referred unquestioningly to "Social Security's impending insolvency."
The Washington Post (11/5/04) asserted that the program's financial situation "will force future tax rates up alarmingly unless preparations are made now."
"No one would deny that Social Security is headed for a major crisis," declared NPR's Scott Simon (Weekend Edition, 12/4/04). "The crash in a sense has already begun because thanks to the Baby Boom, there are fewer Americans paying into the system."
All of these claims are simply wrong. The Social Security Administration predicts the program will be able to fully pay all promised benefits through 2042, when most Baby Boomers will be dead—even using pessimistic assumptions about future economic growth. Annual productivity growth is forecast by SSA at only 1.6 percent through 2078; in the years 1913-1990 (including the Great Depression), it grew by about 2.3 percent, a rate that would more than wipe out any future shortfall (2004 Social Security Trustees' Report; The World Economy, OECD, 2001).
Even if the economy grows as slowly as these pessimistic predictions suggest, Social Security will still be able to pay higher inflation-adjusted benefits after 2042 than at present, since future retirees are scheduled to receive much higher benefits than those of current recipients. And retaining full promised benefits—again, under pessimistic assumptions—would require a payroll-tax increase, decades from now, of less than 2 percentage points—a smaller increase than similar ones enacted in the 1950s, '60s and '80s ("Basic Facts on Social Security," Center for Economic and Policy Research, 11/04).
Even if Social Security did face a "crisis" that threatened to reduce benefits, Bush's plan doesn't represent a "fix" for that problem. While Bush pointedly promises no cuts only for retirees or near-retirees, his plan will result in a 30 percent cut in guaranteed benefits for today's 25-year-old workers—and private accounts would likely make up less than half the loss, according to calculations by the Center for Economic and Policy Research ("Basic Facts on Social Security," 11/04).
Yet journalists have repeatedly asserted that Bush's plan is intended to fix the projected benefit shortfall—even though it doesn't even claim to do that—and credited Bush with political bravery for proposing this non-solution to a non-problem. "Social Security has enough money now," said CNN's Kathleen Hays (11/4/04), "but if nothing changes, the government will start cutting benefits by 2042. That's why President Bush is charging ahead to touch what has long been known as the third rail of politics."
Likewise, Time’s Daniel Kadlec wrote (11/22/04): "In a bold admission, Bush warned that 'there are going to be costs.' No other president or candidate for the office has been willing to say it so plainly and then tackle the issue head on—even though Social Security's looming insolvency has been apparent for decades."
Conservatives have been pushing for Social Security privatization ever since the program was created. In 1964, Barry Goldwater proposed "that Social Security be made voluntary"—even though no one perceived a "crisis" in the system then (Perlstein, Before the Storm). Today, Bush has settled on a political strategy of claiming there is a Social Security "crisis" for which there is no evidence, and that his plan is the solution—even though it would endanger rather than secure workers' financial futures.