Social Security: separating facts from rhetoric
Aug. 12, 2012
What was your biggest surprise in reporting on Social Security?
My biggest surprise was finding out that most people working today will pay more in taxes than they will receive in lifetime benefits. I started out trying to compare the returns from paying Social Security taxes to the returns someone could get from private retirement plans. I didn’t expect to discover negative returns for Social Security.
My next biggest surprise was when I found a table buried in the Social Security trustee’s annual report that showed the difference between projected tax revenues and scheduled benefits for each of the next 75 years. I added up all the years and the shortfall was $134 trillion. That’s not a typo, and I’ve never seen that number before. That number, of course needs context because $134 trillion won’t buy as much in 2086 as it would today. But even when the shortfalls are adjusted for inflation, they’re enormous: a total of $29.5 trillion in 2012 dollars.
Social Security seems a puzzle of conflicting numbers and dueling experts. What were the challenges in reporting this series?
The biggest challenge is separating facts from rhetoric. Americans have emotional ties to Social Security. Nearly every one of us will be affected by the program in some way, either by paying taxes, collecting benefits or both. The math, however, is complicated and easy to misrepresent. Social Security has trust funds containing $2.7 trillion in special Treasury bonds. However, the federal government did what it always does when people buy Treasury bonds -- it spent the money. So, do the trust funds really exist? Ask that question to enough people and you will get a lot of different answers.
Why write a series about Social Security?
Social Security touches nearly every American. It is the federal government’s largest program, with more than 56 million people getting benefits and about 159 million people paying Social Security taxes. Social Security has long-term financial problems but the solutions are well-known and have been debated for years. Unlike Medicare and Medicaid -- two other big programs that are facing financial problems -- you don’t have to figure out how to control health care costs to fix it. That makes Social Security a prime issue to be addressed by Congress as it grapples with the nation’s long-term financial problems. Nevertheless, the issue has been rarely discussed during the presidential and congressional campaigns.
The first story in the series focuses on the difference between the Social Security taxes paid throughout workers’ careers and the lifetime benefits they receive after they retire. How were you able to calculate lifetime taxes and benefits so they could be compared among workers from different generations?
I got the data from two studies, one by the Urban Institute and one by the Social Security Administration. Both used similar methodologies and came to similar conclusions. They projected benefits for people with average life spans. For example, men who turn 65 this year are projected to live, on average, almost 18 more years. Women who turn 65 this year are projected to live 20 more years.
Both the Urban Institute and the Social Security Administration use the present value of lifetime taxes and lifetime benefits when they do their comparisons. It’s based on the time value of money – a dollar in taxes paid 35 years ago is not the same as a dollar in benefits being received today. The Urban Institute expresses the figures in 2011 dollars. The adjustments enable researchers – and journalists – to compare taxes and benefits over time.
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