September 28, 1999 | Commentary on Social Security
On Oct. 1, the first wave of Americans will be mailed "Your Social Security Statement" from the SSA. They'll see how much they've paid in Social Security taxes, what benefits they can expect, and whether Social Security has a correct record of their earnings (important to avoid unpleasant surprises come retirement time). The problem is what the SSA chooses to omit.
For starters, the statement doesn't tell the whole truth about Social Security's coming financial problems. Instead of frankly admitting that the program is going bankrupt, it masks the crisis behind such bland phrases as "changed in the past," "must do so again" and "we are working to resolve."
To get an idea of how bad the crisis is, consider my own example (I put in a special request for my statement earlier this year). I was told I can expect $1,105 per month in retirement benefits from Social Security. But the truth is that by 2034 the program will only bring in enough tax revenue to pay me $785. Overall, Social Security's deficit that year will come to almost $300 billion. If SSA were honest, its statement would include a disclaimer: "Starting in 2034, Social Security will only pay 71 cents for every dollar of promised benefits."
"Your Social Security Statement" also is deceptive about the program's "trust fund." Social Security Administrator Ken Apfel and President Clinton like to make it sound as though the trust fund has bundles of cash waiting to be used. That isn't the case. Even the president's budget for the current fiscal year has a carefully concealed paragraph that says, "These balances are available to finance future benefit payments ... only in a bookkeeping sense. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits, or other expenditures." In other words, the trust fund is merely a polite fiction, an IOU to be redeemed with higher taxes on our children's paychecks.
Finally, SSA's statement says nothing about how Social Security taxes compare to the benefits people will receive. Three-fourths of the American people pay more in Social Security taxes than they do in income taxes. In exchange, they get measly returns that will leave them far from secure during their retirement years. Paying Social Security payroll taxes is like putting money in a bank that pays interest rates of about 1 percent. But that comparison isn't fair to the banking industry-even a humble savings account pays about 3 percent.
If Americans in an average-income family were allowed to place their payroll taxes in simple, low-risk investments, they could retire with $525,000 more than Social Security will provide. In fact, Americans could get twice what Social Security offers simply by investing their taxes directly in safe Treasury bonds, without the government as a middleman. They would also be able to leave any remaining funds to their children-or the entire amount if they die before retiring-which Social Security doesn't allow them to do. Why does the SSA try to hide these facts? Shouldn't they be included in "Your Social Security Statement"?
Congress oversees SSA's actions, and could easily require the agency to tell the whole story about Social Security. Indeed, several lawmakers have already voiced support for giving Americans complete information about their retirement benefits and are drafting legislation to force SSA to provide it.
No one would deny that the federal government should tell Americans the full truth about Social Security, but the statements the SSA is about to mail to millions of Americans don't do that. They exclude key facts and cloak Social Security's problems in bureaucratic double-speak. Maybe the agency doesn't want to admit that what it's doing is deceptive, so let me suggest another bit of double-speak made famous by former Gen. Al Haig: "It is not a lie, it's a terminological inexactitude."
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