Tuesday, April 05, 2005


About that Editorial...

One of the repeated arguments one hears on changing Social Security is the big price of doing nothing. One hears quotes like "Every year that we do nothing, the cost of fixing Social Security goes up by $600B." On this subject, I have been silent to date largely because I agreed in principle but didn't really know where the number comes from. On March 24th (I'm a little slow in my reading) the Editor of the New York Times published an editorial entitled "About that number" containing the following statement:

"Compounding the subterfuge is that the difference between this year's $11 trillion eyepopper and last year's number - $600 billion - is being used as evidence of a scary deterioration in Social Security's finances. That's just wrong. The two monster numbers are actually the same quantity - different ways of expressing an unchanging level of debt at two different points in time."

I would like to agree -- to an extent. The NYT is correct in saying that the Bush administration is misusing this number. Unfortunately, so is the Times. What would it mean that the two numbers are the same number at 2 points in time? That, by some valid measure of inflation or increase, $10.4B should turn into $11B. That rate of increase would be 5.8%, given that these two numbers came out about 1 year apart.

What has actually increased by 5.8% over the past year? Our estimate of future benefits on this infinite horizon. Our ability to pay for those benefits hasn't gone up nearly so much. Salaries have only gone up by a little over 2% in the same time period and we actually only use limited salaries (limited to $90,000) to pay for these benefits, so those have gone up even less.

So the NYT is correct in saying that $600B is an inflated estimate of the increasing cost of doing nothing to fix the system. However, the true number is probably still more than $300B.

Hey, a couple $100B hear, a couple $100B there and before you know it, you're talking about real money.

As always, thanks for reading.

I still don't pretend to understand this issue. The monetary numbers are tossed around so much, none of it feels real. For some reason, I've "always known" that SS wasn't going to be around when I was old, long before the current administration. Where I got that, I have no idea...probably from the same source that said all us Gen-Xers are slackers (meaning the vague media seep into the subconscious).

All that said, instead of a well-grounded question, I ask you to take on anything in the http://www.thereisnocrisis.com/ site that seems completely off. The question of the day seems to favor maths.
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