[Vision2020] 'Bush lying' About Crisis, Economist Charges

[Tom Hansen]

>From today's (February 8, 2005) Spokesman Review.

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'Bush lying' about crisis, economist charges
 
Pensions-sytems expert alleges Social Security talk full of myths

Jim Camden
Staff writer

February 8, 2005

The Bush administration is perpetuating myths about Social Security going
broke in an effort to convince the public the system needs major changes, an
Eastern Washington University economics professor said Monday.

Doug Orr, an economist who has studied and written extensively about pension
systems, urged a Spokane Democratic group to fight back by writing to
members of Congress and pointing out the myths when Social Security comes up
in conversations. The administration has reduced a complicated debate to
talking points, and opponents should do the same, he added.
 
"Start telling people 'Bush is lying,' " Orr told about 80 people gathered
for the Warren G. Magnuson Democratic Club luncheon.

In his State of the Union speech last week, the president called for
Congress to consider all options except a tax increase to save Social
Security. Bush said he supports allowing younger workers to privately invest
a portion of the money they now pay into the system.

One of the myths, Orr contends, is that the Social Security Trust Fund, from
which retirees' benefits are paid, will be "bankrupt" by the year 2042.

That is the year when its trustees project the fund will be out of money, he
said. But the trustees are required by law to use extremely conservative
assumptions on everything from wages and economic growth to immigration
rates.

For example, Orr said, the trustees project the fund will go to zero in 2042
if the economy only grows 1.8 percent per year.

But annual economic growth has averaged more than 1.8 percent per year in
any 15-year period in U.S. history, Orr said. Even during the Great
Depression, it averaged 2 percent, and for the 20th century, it averaged 3.5
percent.

"Last year it was 4.4 percent," Orr said. "If it averages half of that, the
trust fund never goes to zero - in fact in 2042 it will have three times the
money it needs to pay (beneficiaries)."

Even if the trust fund is at zero, it doesn't mean Social Security is
bankrupt, he added. It merely means that the payroll taxes of current
workers will be used to pay the benefits of current beneficiaries, which was
the way the system worked before 1983.

While it's true the ratio of workers to retirees has dropped dramatically in
50 years, it's a myth that those numbers represent a startling problem, Orr
contends. In 1950, there were 16 workers to every retiree, now there are
slightly over three workers per retiree, and by 2042 it could be about two
to one.

But the drop from 1950 to today was accompanied by huge increases in
productivity, so the system actually has more money coming in, even though
it has few workers. 

Productivity will continue to rise, and the drop from three workers to two
won't be dramatic, he said.

Another myth is that the Social Security Trust Fund isn't a real trust fund
and is full of worthless IOUs, Orr said.

The federal government does borrow from the trust fund, by issuing Treasury
Bonds.

"That's one of the safest investment vehicles anyone can hold, anywhere in
the world," he said.

"In the history of the United States, the federal government has not
defaulted on one penny of its obligations," he added.

It's also a myth that private investment accounts can solve the problems
being projected for the trust fund, he said.

The administration is projecting a 6 percent growth in the stock market for
the investment accounts. But the market is linked with the economy - so if
the economy truly grows at 1.8 percent as the projections say, there's no
way for the market to grow at 6 percent.

"It is mathematically impossible to see the return Bush is promising," he
said.

It is true that more people in their 20s believe in UFOs than in the
possibility of receiving Social Security when they retire, Orr said. That's
not a myth but a statement of their belief.

"But why do they believe that? Because the government's been telling them
that for 20 years," he said.

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Take care, Moscow.

Tom Hansen


"What is objectionable, what is dangerous, about extremists is not that they
are extreme, but that they are intolerant. The evil is not what they say
about their cause, but what they say about their opponents."

-- Robert F. Kennedy