Listen up, boys and girls, moms and ... dads grandmas and grandpas: It's time for yet another installment of "Why Social Security is Not Going Bankrupt."
This restatement of basic facts is necessary because so much of the media once again have misinterpreted last week's annual report by the Social Security Trust Fund, complete with scary headlines about how the system is going broke and won't be there when today's young people retire.
It's happened again even though, as one reporter from Reuters recounted, Social Security Commissioner Michael Astrue seemed "ready to get down on his hands and knees" to "publicly beg" reporters to not repeat their usual mistakes.
An analysis by the Columbia Journalism Review found that, while recent reporting has improved somewhat, the headlines that most people read or heard last week were wrong. In the past, CJR has attributed the widespread inaccuracies to the success of conservative and libertarian think tanks in changing the media's narrative: Instead of referring to Social Security as self-sustaining "social insurance," as it was known for its first four decades, the media now often portray it as a poorly performing investment that won't return enough to those now paying into it. So, the story usually goes, it would be better to partly privatize it and let people directly invest their own money in the stock market (where, of course, it would be perfectly safe. And for which Wall Street would take a fee for its services.)
Here's the real story: Last week, the trustees projected that, if nothing at all is done, Social Security will be able to pay full benefits — currently $14,780 a year on average — to recipients until 2033. After that, Social Security will be able to pay out 75 percent of current benefits.
This year's projection had full benefits ending three years earlier than was projected last year — due to the recession, lower wages, reduced taxes and an increase in the cost of living from higher gas prices. This is not unusual: the target year fluctuates, both up and down, with nearly every trustees report because of inflation, wages, productivity, and immigration.
But the Social Security Trust Fund has a surplus of $2.7 trillion in Treasury bonds, which is expected to grow to $3.7 trillion in 10 years. The program may not borrow money, so it does not and cannot contribute to the federal deficit.
As for ways to guarantee that the fund can pay full benefits for the rest of the century, you can reduce those benefits (by raising the retirement age, for example) or raise revenues. It is much smarter to do the latter, and here's why: Two-thirds of retirees rely on Social Security for half their incomes or more, so cuts would constitute serious hardships for millions of people, reducing their buying power, and that would translate into a weaker economy.
Raising payroll taxes gradually and in tiny amounts or lifting the payroll-tax cap that now exempts income more than $110,100 a year would be more effective.