BCT Editorial – 1/24/05

This page was last updated on February 6, 2005.

Wrong crisis; Editorial; Beaver County Times; January 24, 2005.

Below is a detailed critique of the subject editorial.

“In the coming weeks and months, in the midst of all the hype and headlines, please keep the following in mind - there is no Social Security crisis.

“That is not the same as saying that the system is not in need of reform. Some changes do need to be made to keep the system viable and fair.

“So why the Chicken Little approach that is being taken by the Bush White House? Because it can only achieve its goal of creating individual investment accounts by scaring people, a tactic Americans have seen before.”

[RWC] As it did with Iraq, the Times editorial board wants you to forget that in 1998, Democrats themselves claimed Socialist Security was in crisis. See the references at the bottom of this page. Remember then-President Clinton repeating, “save Social Security first” when there were budget “surpluses?” Given that nothing has been done with Socialist Security during the intervening years, were Democrats lying in 1998 or are they lying now? I would ask the same question of the editorial board, but I don’t know if it took a position on this issue in 1998.

“Please understand that ideology and politics are driving both sides on this issue. Therefore, be very leery about the arguments that are being tossed out by both sides.”

[RWC] Nice try. The editorial wants you to believe the Times editorial board itself is objective and has not taken a position based on “ideology and politics.” The “arguments to discount” below demonstrate the editorial board’s own “ideology and politics.”

“Here are some arguments to discount from the start:

“* Social Security will not be there for many workers. It will be. However, without any changes, recipients decades from now will receive about two-thirds to three-fourths of what has been promised them.”

[RWC] Conceding Socialist Security will be able to pay only 67¢ to 75¢ on the dollar, the editorial just described the conditions for bankruptcy. It’s bankruptcy when you can’t meet your obligations, and the editorial admitted Socialist Security won’t be able to meet its obligations.

I’m sorry, but if you don’t get what you are promised, it isn’t there. For example, if you pay premiums for $1 million of insurance, but you receive only $667,000 for a legitimate claim, the insurance company broke the deal. Two-thirds to three-quarters is a pretty broad range, and even this isn’t guaranteed. The fact that we don’t know how much to expect from a key component of our retirement portfolio appears to be no problem for the editorial. Regardless of the benefit, we need to know how much it will be to do responsible retirement planning. Do you think the Times would understand if you decided to pay only two-thirds to three-quarters of your Times subscription invoice?

At what reduction in benefits would the Times concede Socialist Security effectively wouldn’t be there? We know the editorial board appears to have no problem with a 33% cut. What about 50%? What about 67%? What about 75%?

“* Private accounts will bring a bigger return on investment. Nobody knows how the market will perform, and in the market, timing is everything.”

[RWC] There are no guarantees in anything. That said, wise investments in the stock market consistently and significantly outperform “safe” investments like bonds and interest bearing accounts. Using the editorial’s logic, 401(k) programs and IRAs should not allow workers to invest in stock market mutual funds. Do the members of the editorial board keep all their money under their mattresses, the relative equivalent of Socialist Security’s return? What about all that pension money in the hands of labor union management? Anyone who claims that investing a portion of your retirement savings in stocks, bonds, et cetera is displaying blind partisanship, is an idiot, or both.

When the editorial states “timing is everything,” it’s ignoring the fact that personal accounts would be long term investments. It’s not like you’re going to invest today and take it out tomorrow. Over the life of a personal account, which could be over 45 years for those just joining the workforce, broad based investment strategies consistently perform well. As you get closer to retirement, you adjust your portfolio mix to provide more guaranteed returns.

“* Major changes are needed. Actually relatively minor tweaking - hiking the ceiling on income, raising the age for eligibility, means testing benefits, basing Social Security benefits on inflation instead of wages, eliminating automatic cost-of-living adjustments - would have a huge impact on the bottom line.”

[RWC] In case you missed it, the editorial’s “relatively minor tweaking” consists of increasing taxes and reducing benefits. In other words, everyone loses. Changes like these were made in 1984 and they only postponed the inevitable for a little bit longer.

The kind of “minor tweaking” mentioned by the editorial has been going on for a long time. The original Socialist Security tax rate was 2%; it is now 12.4%. In other words, the tax rate is 6.2 times what it was at Socialist Security’s birth. On top of the rate increase, the maximum amount of tax earnings has also been steadily increasing. The max started out at $3,000/year in 1937. By 1987, the max was $43,800. 18 years later, in 2005, the max has more than doubled to $90,000. Likewise, “raising the age for eligibility” (a way to reduce benefits) has already been done. If you were born after 1942, you don’t qualify for full benefits until you are at least 66 years old. It’s 67 if you were born in 1960 or later.

Even after nearly 70 years of the kind of “minor tweaking” advocated by the Times, Socialist Security remains in trouble. Unless you have your head buried in the sand, you have to concede Socialist Security’s funding approach is structurally flawed.

“Our fears are that the fighting over Bush’s individual investment accounts will cripple the chances of even tweaking the system, and that the administration’s fear-mongering on Social Security will take the focus away from the real crisis that is looming for Medicare.”

[RWC] “Bush’s individual investment accounts?” The editorial board has either a selective or a short memory. One of the first proponents of private accounts was former Sen. Daniel Patrick Moynihan (D-NY), Sen. Hillary Clinton’s predecessor. No one at all familiar with current events can question the late Mr. Moynihan’s liberal credentials. The Americans for Democratic Action – a liberal advocacy group – gave Mr. Moynihan an 83% lifetime “Liberal Quotient” based on his votes for liberal issues. His average LQ for the 1990s was 90%. All but two years of the 1990s his LQ ranged from 90% to 100%. Mr. Moynihan first proposed private accounts in 1998.

The editorial failed to note the contents of private accounts could be passed onto your heirs when you die. That’s not the case for Socialist Security as it exists today.

“Social Security will be solvent for decades to come while Medicare’s so-called trust fund will go bust ‘by 2019, more than 20 years before Social Security’s forecast slides into the red,’ the Los Angeles Times reports. ‘The day of reckoning could come even sooner, because Medicare’s condition has been going from bad to worse.’”

[RWC] “Social Security will be solvent for decades to come?” Didn’t the editorial board concede above that’s true only if benefits are cut by 25% to 33 1/3%? Using the benefit cutting approach, I can make Socialist Security solvent forever.

I don’t know if the cited figures are correct or not, but if it comes from the Los Angeles Times it might as well come from a liberal web site. That said, I have no doubt Medicare is screwed up because it uses the same funding model as Socialist Security. Both programs are Ponzi schemes.

Regarding the editorial’s comment about “Medicare’s so-called trust fund,” there are no “trust funds” for Socialist Security and Medicare and there never were. This is liberal propaganda we’ve heard since Socialist Security’s birth in 1935. From day one the taxes collected by these schemes went into the general fund. In return, these schemes received IOUs.

“Which raises the question, why is the president so willing to use his political capital on a program that is not in immediate danger instead of using it on the impending Medicare implosion?”

[RWC] Hypothetically, let’s assume President Bush believed Medicare was in need of attention more than Socialist Security. How much do you want to bet the editorial board would be criticizing President Bush for giving Medicare a higher priority? When you are doggedly partisan, your motives are transparent.

1. Who Will Rescue Social Security?; David S. Broder; The Washington Post; November 29, 1998.

2. “Save Social Security First”?; Byron York; National Review; January 14, 2005.