Tuesday, August 31, 2010

"How to fix Social Security in one graph"

That's how Ezra Klein describes the graph over there, which he gets from the Center on Budget and Policy Priorities.

The CBPP explains, based on an August 2010 report by the Social Security Board of Trustees:

The 75-year Social Security shortfall is about the same size as the cost, over that period, of extending the 2001 and 2003 tax cuts for the richest 2 percent of Americans (those with incomes above $250,000 a year). Members of Congress cannot simultaneously claim that the tax cuts for people at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat.
Here are a few more points from the report, again summarized by the CBPP:
• The trustees continue to estimate that the trust funds will be exhausted in 2037— the same date that they forecast in last year’s report.

• Even after 2037, Social Security could pay more than three-fourths of scheduled benefits using its annual tax income. Those who fear that Social Security won’t be around when today’s young workers retire misunderstand the trustees’ projections.

• The program’s shortfall is relatively modest, amounting to 0.7 percent of Gross Domestic Product (GDP) over the next 75 years (and 1.4 percent of GDP in 2084). A mix of tax increases and benefit modifications — carefully crafted to shield recipients of limited means, potentially make benefits more adequate for the neediest beneficiaries, and give ample notice to all participants — could put the program on a sound footing indefinitely.


Jason (the commenter) said...

Megan McArdle has already shot that down.

Another program that was going to pay for itself.

John Althouse Cohen said...

A commenter on McArdle's post explains:

The argument is not that we can "pay for" the Social Security shortfall by letting the tax cuts expire. In fact, we don't gain any money at all by letting the tax cuts expire, because they are already expiring, and current revenue projections assume that they will expire. Rather, if we choose to extend the tax cuts it will cost money.

The point is simply that the two numbers are of a similar order of magnitude. If you're the type of person who thinks the size of the Social Security shortfall is a big problem, then you shouldn't be sanguine about the cost of extending the tax cuts for the rich. That's the point. The agenda is to remind people that extending those tax cuts for upper-income taxpayers is not just some trivial act of charity.

On a separate note, I think I'm missing the point of your statement: "For starters, the 0.7% of GDP that it covers only matches the shortfall for a brief period, at least according to the Social Security Trustees report. " The "brief period" appears to be 75 years.

Jason (the commenter) said...

Nice comment Steve M, but it doesn't fit with the title of JAC or Ezra Klein's posts at all.