Monday, February 07, 2005

A Phrase Reporters Should Stop Using

Frequently in reporting on Social Security, reporters put in, without any basis or sourcing or justification, a phrase like "in theory the higher returns in private accounts would offset any benefit cuts."

NO. This is not even true in theory let alone in fact. Right now the closest thing to an actual Bush plan is "Model 2" from the "President's Commission to Strengthen Social Security" According to the scoring of the Graham version of the plan (which is essesntially Model 2 pushed forward in time a bit with an addon feature which doesn't affect the numbers here), a median income worker retiring in 2050, 2070 will have his/her total retirement income, including private account annuity, in half relative to promised benefits and by a third relative to benefits projected to be payable under pessimistic and internally contradictory trustee projections by the CBO.

It's absolutely stunning that the plan could be "this bad," but it really is. CBPP explains why:

It may seem surprising that the benefit reductions would be larger under the Graham plan than if no action were taken to shore up Social Security’s finances. This is the case for a basic reason. As explained below, the diversion of funds from Social Security to private accounts would enlarge Social Security’s deficit by about 50 percent over the next 75 years, necessitating much deeper benefit reductions to bring the system into balance. These deeper benefit reductions would not be fully offset by income from the private accounts.