May 1 1999

TV on Social Security: It’s Broke, Fix It

A 13-month survey of network news coverage

If you’ve been watching the network news over the last year or two, you know that Social Security’s going broke and the only choices facing us are to cut benefits, raise taxes, push back the retirement age, or throw the system onto the mercies of the stock market. An Extra! review of more than a year’s worth of transcripts from the three major network’s nightly newscasts shows a remarkable unity of views on this issue, with the possibility that the system isn’t going broke never being entertained.

The message of this remarkably one-dimensional coverage is that “historic action,” to quote ABC‘s John Cochran (World News Tonight, 1/19/99), is both urgent and inevitable. In this context, “historic action” typically means benefit cuts or privatization. A month earlier, Cochran asked himself (12/8/98), “Can the country stop Social Security from going broke? Sure, but it will mean inflicting pain or taking risks.” Packaged that way, the stock market looks like the soft option.

One of the professional hazards of doing media criticism is that you (and your readers) can’t be sure that the article or report you pick to analyze is representative of the whole species. With Social Security, though, almost any randomly chosen network news report on the topic would be representative. Here, for example, is how Peter Jennings distilled the conventional wisdom (World News Tonight, 12/8/98): “The challenge for the government is to see that Social Security doesn’t run out of money before the baby boom generation qualifies. And unless something is done to replenish the trust fund, they tell us it will begin to run out by 2032.” The only part of this utterance that has a basis in fact is the phrase “they tell us.”

The first boomer was born in 1946, and will reach what’s officially called the “normal retirement age” of 66 in 2012. (Starting with people born in 1938, the retirement age is gradually being raised every year from 65, eventually topping out at 67 for people born in 1960 and later.) The last boomer was born in 1964, and will reach the normal retirement age of 67 in 2031. So “before the baby boom generation qualifies” is flat-out wrong, even if you believe the official forecasts of doom come 2032.

Unscrutinized assumptions

And who is this “they,” and what exactly are they telling us? In this case, they are the Trustees of the Social Security System, who put out an annual report on the system’s recent operations and its prospects for the future. (Recent reports are available at These are the ultimate source of all the forecasts of the system’s inevitable bankruptcy.

Those forecasts deserve close scrutiny–which admittedly isn’t a specialty of the network news, whose anchors can’t even do basic date arithmetic. Most importantly, the system’s actuaries are projecting an economic growth rate over the next 75 years of 1.4 percent a year, which is less than half the average of the last 75, and below the average of the 1930s. The implied per capita growth rate of 1.0 percent (1.4 percent less a projected population growth rate of 0.4 percent) is well below that of the European Union this decade, and the EU’s stagnation is generally regarded by the American opinion-making class as the stuff of crisis.

Those official growth projections have been trending down for almost 20 years. As is typically the case with official projections, there are three scenarios–a gloomy one, an optimistic one, and an official, moderate one. In 1981, the Trustees projected a long-term growth rate of 3.1 percent in their middle scenario and 2.1 percent in their gloomy one. In 1986, the numbers were 2.5 percent and 1.4 percent. And in 1998, they were 1.4 percent and 0.6 percent. The Trustees’ optimistic prediction for last year–2.1 percent–matches their gloomiest forecast from 1981. (As the imaginary economy entered this slump, the real economy chugged along at a 2.8 percent rate.)

But there’s a gloomy assumption at every turn of the Trustee’s projections. Their long-term population growth rate is about half of what the Census Bureau is projecting–important, since slow population growth means fewer young workers supporting future retirees. And not only is the growth of the working-age population projected to slow to a crawl, the share of that population at work (the employment/population ratio) is also projected to decline, a violation of all historical precedent. The history of capitalism has been one of drawing an ever-larger share of the population into paid work, but the Trustees are assuming a fairly stunning reversal of a multi-century trend.

Rerun the projections with more reasonable–though still conservative–projections, and the “crisis” largely or fully disappears. If the employment/population ratio for those aged 20-64 remains constant, a third of the projected shortfall for 2020 disappears; if it rises–because the share of women employed continues to approach that of men–then two-thirds of the projected deficit disappears. If the economy grows at a modest 2.5 percent rate, the system will have plenty of money to afford Generations X, Y and probably even Z.

Wall Street dreams

The ultimate lure of privatization is the dream of effortless returns in the stock market. Stocks are often presented as the self-reliant thing to do–“I think pretty much everybody realizes now that they need to be making investments and plans to take care of themselves,” said one unidentified Atlantan to NBC Nightly News (5/19/98). But how is the market so self-reliant? For prices to rise, millions of new investors must keep buying and old investors add to their positions; it’s a complex system with many layers at which there’s always someone taking a cut. Just how is this more self-reliant than paying taxes today for a government pension tomorrow?

But let’s take the 1.4 percent economic growth projection the Trustees use and apply it to the stock market, that cornucopia of wealth that’s supposed to replace the public pension system. Privatizers typically assume an average real stock market return of 7 percent a year, from the combined increase in prices and the cash dividends. How the stock market is supposed to grow five times as fast as the economy is a mystery that’s rarely noted, much less investigated. To achieve those stock returns, the ratio of stock prices to underlying corporate profits–price/earnings (P/E) ratios, a fundamental measure of whether stocks are “expensive” or “cheap” which goes out of fashion at enthusiastic times like these–would have to rise to astronomic levels.

The stock of all U.S. corporations is worth roughly 26 times their collective profits–the highest price/earnings ratio since 1945, and twice the historical average, meaning that stocks are very expensive by stodgy old measures. But today’s P/Es would be nothing compared to tomorrow’s, if stocks truly were to return that 7 percent for the next 77 years (4 percent in price appreciation and 3 percent in cash dividends) while the economy was growing at 1.4 percent. If profits grew in line with GDP while the stock market were growing at five times that pace, P/E ratios would rise to 71 by 2040 and 178 by 2075.

But wait! Dividends can’t grow any faster than the economy, can they? Constraining those to the 1.4 percent assumption too means that stock prices will have to rise even faster to compensate for the lower growth in dividends over time. That would give us a P/E of 138 by 2040 and 764 by 2075. When you work for the Cato Institute, you’re never called upon to defend your preposterous reasoning.

Privatization to the rescue

There are several major proposals afoot to “reform” or “rescue” Social Security. Bill Clinton has proposed leaving the current system of taxation and benefits largely unchanged, but putting a portion of the system’s assets into the stock market. Congressional Republicans, and conservatives in general, recoil at the idea of putting federal funds into stocks, fearing the “politicization” of investment. Instead, they prefer either the partial or total privatization of the system, with individuals free to manage their own accounts.

Federal Reserve chair Alan Greenspan got heavy play after his testimony opposing Clinton’s plan–a segment Dan Rather introduced on CBS (1/20/99) with a little rhyme: “The head of the Fed and what he said.” That same day ABC‘s John Cochran characterized Greenspan as saying that “even if independent trustees manage Social Security investment, those decisions would be affected by politics. For example, pressure to help an industry in trouble or to create jobs for certain kinds of voters.”

The implication is, of course, that there’s nothing political about the stock market now–that the decision by a firm to lay off thousands of workers, or to relocate a plant to a state or country with low wages and loose regulations, or to pollute, is just “objective.” But, as the dictionary says, one meaning of politics is “the often internally conflicting interrelationships among people in a society.” What Cochran and Greenspan mean by invoking fears of “politicizing” the stock market is that those conflicts, at least in the economic sphere, should be managed by stockholders and senior executives, immune to popular scrutiny or influence.

Privatization schemes more extreme than Clinton’s have gotten wide and generally favorable play on the evening news. The tireless Cochran touted the privatization of the public pension funds in Chile and Britain (ABC World News Tonight, 12/8/98). Chile’s system, a product of a dictatorship, is largely useless for the poorer half of the labor force, is tremendously expensive (thanks to marketing, brokerage and management fees), and hasn’t been enough to prevent a sharp decline in the Chilean stock market over the last several years. The first decade of the British privatization experience was a “disaster,” wrote Steve Stecklow and Sara Calian of the Wall Street Journal (8/10/98), a tale of hard sell, high fees and bad deals that will take years to straighten out. Evidently it was beyond ABC‘s powers to send a reporter to Britain or Chile to look into the matter.

Closer to home, two networks did stories on the privatized system used by county workers in Galveston, Texas (NBC Nightly News, 1/28/99; CBS Evening News, 1/27/98). In 1981, they dropped out of the Social Security system and contracted for a fixed-income annuity at an average annual rate of 8.6 percent. But there’s no way the U.S. economy could live with interest rates that high over the long term; Galveston’s example can’t be generalized to the entire nation.

And in their rush to celebrate the Galveston experience, neither network looked at the distributional consequences of this local privatization experiment. According to a General Accounting Office study (GAO/HHES-99-31, 2/99), only upper-income workers would be better off under a Galveston-style plan than under Social Security; low-income workers would lose, and while middle-income workers would start out with higher benefits, their edge would soon erode with inflation. (Unlike Social Security, Galveston benefits aren’t adjusted for cost of living increases.) Since you’d never expect networks to do their own research, despite the oodles of money available to them, they do have the excuse of not having the GAO report in front of them when they did their January stories. But neither network reported on the GAO report when it was released.

Anti-Social sources

With no expertise of their own, TV reporters turn to outside savants. For expert commentary on Social Security (and other economic issues), the networks routinely turn to Wall Street and to centrist and right-wing think-tankers. In over a year of broadcasts, not a single expert who didn’t accept the premise of Social Security’s crisis appeared. Among the network favorites were Richard Thau of Third Millennium, Stephen Moore and Michael Tanner of the Cato Institute and Pete Peterson of Wall Street. All are firmly in the alarmist camp.

Though professedly nonpartisan, Third Millennium’s founding manifesto denounces an alleged culture of dependence and declares war on middle-class “entitlements” like Social Security. Its board includes Melissa Hieger, whose day job is with State Street Global Advisors, a finance house that is one of Wall Street’s most prominent privatization advocates.

NBC Nightly News (6/7/98) identified Third Millennium by citing its famous 1994 poll showing that “more young adults believe UFOs exist than believe Social Security will exist by the time they retire.” This poll was done by Frank Luntz, who was censured by the American Association for Public Opinion Research for his failure to disclose his techniques in his Contract With America polling for the Republican party–polling that was deceptively worded and reported (Seattle Times, 11/12/95). Luntz didn’t bother to ask whether young people wanted Social Security to be there, but other polls have found that most do–88 percent in one survey (Extra!, 3-4/97; 2030 Center press release,

Cato’s been at the forefront of Social Security privatization for years; they house Jose Pinera, the former labor minister who supervised Gen. Pinochet’s privatization of the Chilean public pension system. Investment banker Peterson has been funding privatization front groups, including Third Millennium, for years, and lending his name to books on the subject too.

And the reporters’ and anchors’ narratives framing the slanted expert testimony were full of images of imminent threat–Robert Krulwich’s “for millions and millions of baby boomers, winter is getting closer” (ABC World News Tonight, 12/8/98) was typical–even though the problem isn’t due for 33 years even in conventional scenarios. Ditto the vox pop segments: “By the time I get there, there may be a large sucking sound,” said a 46-year-old dentist (NBC News at Sunrise, 1/29/99). But he’ll hit retirement age 13 years before the well is supposed run dry; only a political decision would turn off the flow, not economic necessity.

Winners and (mostly) losers

Privatization would be a bad deal for virtually every demographic group and every kind of worker. This was proved most rigorously in a study published in March by the National Committee to Preserve Social Security and Medicare (“Winners and Losers From ‘Privatizing’ Social Security”). It was done by economist John Mueller, a political conservative and former adviser to Jack Kemp, who came to the issue favoring privatization, but changed his mind when confronted with the evidence. You’d think that Mueller’s change of heart might arouse the interest of network news producers, even if his results didn’t. But none of the networks breathed a word.

Privatization would be particularly hard on women, who earn less than men, are often out of the labor force for years at a time, and live longer than men (and so have to stretch their lower savings over many more years). But an October 26, 1998 NBC Nightly News focus on women and retirement mainly emphasized the system’s shortcomings for women. Instead of addressing those, reporter Ann Thompson quoted “experts” as recommending that women pay more attention to their 401(k)s and try to save more, as hard as that is.

Everyone is always urged to save more. Andrea Mitchell, who in private life is married to Alan Greenspan, touted a couple who came out of retirement and opened a toy store (NBC Nightly News, 4/6/98). If they take Social Security away, you can just start a business!

Reports almost never mentioned the disability and survivors’ benefits that Social Security offers; no doubt privatizers would rather have people buy private insurance. An exception was a CBS Evening News report (12/7/98) by Jonathan Freed, but Freed conclude4d his report by saying: The next election is still far enough away that lawmakers can make the tough decisions without worrying as much about what impact it will have at the ballot box.” In other words, the process should be as undemocratic as possible, a remarkable sentiment to pass without controversy on a news program.

Another CBS segment (12/8/98) was one of the few that questioned whether most people were up to managing their own retirement portfolios. Certified financial planner David Bergmann, who’s apparently spent too much time with numbers to master the language, said, “The average individual is not educated well enough, I don’t believe, to understand the intricacies and the emotionalities and the psychologies that are involved with investing.”

Reading 13 months’ worth of network TV news transcripts is a depressing exercise: You’re reminded with force how superficial and uncritical it is. Things billed as special or in-depth reports run under 600 words, or about three-quarters the length of a newspaper column. The anchor sets up the reporter who introduces the story, a few experts are quoted for a sentence or two, a few folks in the street offer a soundbite to add pseudo-concreteness and the reporter closes with a homily.

With Social Security, the crisis was established, the need to do something confirmed by experts (many of them Wall Streeters with a financial interest in the outcome), the people were shown or quoted professing anxiety or desperately trying to cope, and then politicians reminded their historic duty. But even more depressing than reading the transcripts is realizing that this is where most people get their news.