May 31, 2005
More Social Security spin
From this morning’s Rose Garden press conference:
Q: Mr. President, you talked on your re-election about having political capital. You have a Republican Congress. How, then, do you explain not being able to push through more of your agenda, especially when it comes to Social Security reform, which the public does not seem to be accepting and your own party is split on?
THE PRESIDENT: Well, first of all, I think the public does accept the fact that Social Security is a problem. You might remember a couple of months ago around this town people were saying, it’s not a problem, what’s he bringing it up for? Nobody sees it as a problem except for him. And then all of a sudden, people began to look at the facts and realize that in 2017, Social Security – the pay-as-you-go system will be in the red, and in 2042, it’s going to be bankrupt. And people then took a good, hard look at the numbers and realized that Social Security is a problem.
As Jason Furman of the Center on Budget and Policy Priorities has repeatedly pointed out, the system won’t be “in the red” after 2017. The Social Security actuaries forecast that by 2018 the trust fund will in fact hold $5.3 trillion in U.S. Treasury bonds. However:
Starting that year, Social Security payroll tax collections will not be sufficient to cover the cost of all Social Security benefits, so the Social Security system will start to use a portion of the interest the trust fund earns on its bonds to cover the remaining benefit costs. The rest of the interest the trust fund earns will be reinvested in the trust fund. The actuaries project that as a result of these interest earnings, the trust fund’s assets will increase by another $1 trillion in the decade after 2018 and reach $6.6 trillion by 2028.
So not even a pale shade of red.
Bush also used today’s conference to re-pitch private accounts:
As we permanently solve the Social Security problem, we need to make Social Security a better deal for younger workers by allowing them to take some of their own money and invest it in a voluntary personal savings account. A voluntary personal savings account is very similar to the personal savings account members of Congress can do. See, my attitude is if a personal savings account – a voluntary personal savings account is good enough for a member of the United States Congress, or a member of the United States Senate – in other words, they felt that was a good enough deal for them so they could get a better rate of return – it surely seems like it’s good enough for workers across the country.
What Bush didn’t mention is that his plan makes matters worse for the trust fund. The original Pozen plan for sliding-scale benefit reductions would, by itself, push back the fund’s exhaustion from 2041 to 2047, and make very little difference to the date Social Security benefits first exceed receipts (i.e., after 2017). But Bush’s plan—Pozen plus private accounts—changes the math dramatically: the fund would be exhausted by 2030, and benefits would exceed receipts by 2011.
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