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Social Security: scary truths, or hoary scare tactics?

House Minority Leader John Boehner (R-Ohio) has taken some heat over supposed comments about raising the age for Social Security in order to fund the war. A quick search shows the Dems and GOP may be playing tit for tat (although Boehner did introduce legislation that would have hacked VA funding--but the three proposals were withdrawn at the last minute). One thing is certain, though: in the national debate about the soundness of Social Security, confusion reigns.  It's important to understand the arguments and get accurate information because although each program has separate funding, the general Social Security retirement benefits, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI) are all administered by the Social Security Administration. In fact, some of the confusion over retirement benefits may have come about due to a recent discouraging report about SSDI from the Congressional Budget Office (more in Part 2). Dividing the debate into two camps, we have on one end of the spectrum the Sky-is-Falling group, who maintain Social Security is doomed without drastic intervention; the other side we might label as the Hogwash group, who maintain not only is the general Social Security fund in good shape but also that Sky Fallers are blowing things out of proportion in an attempt to scare people into accepting fewer benefits. This is from (July 27), an example of the Falling Sky position:
"A recent congressional report paints a bleak picture, indeed. It says Social Security could run out of money in about 17 years, as the program now pays out more money in benefits than it collects in payroll taxes. It faces a staggering $5.3 trillion shortfall over the next 75 years, unless changes are made. No wonder a recent USA Today/Gallup Poll showed that public confidence in the system is waning. "The solvency of Social Security affects everyone. The program, the main source of income for millions of retirees, is financed by a 6.2 percent payroll tax on wages below $106,800. The tax is paid by workers and matched by employers. Currently, 53 million Americans get Social Security benefits averaging $1,067 a month."
The Hogwashers say that's baloney, designed to get you riled up then despondent enough to accept less--eventually. For instance, here's an edited version of the  Top Five Social Security Myths from (read there for the full text, including footnotes and citations):

Myth: Social Security is going broke.

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.1 After 2037, it'll still be able to pay out 75% of scheduled benefits--and again, that's without any changes. The program started preparing for the Baby Boomers retirement decades ago.2 Anyone who insists Social Security is broke probably wants to break it themselves.

Myth: We have to raise the retirement age because people are living longer.

Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago.3 What's more, what gains there have been are distributed very unevenly--since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

Myth: The Social Security Trust Fund has been raided and is full of IOUs.

Reality: Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.7 The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts.

Myth: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come.5 Right now, high earners only pay Social Security taxes on the first $106,000 of their income.6

Myth: Social Security adds to the deficit

Reality: It's not just wrong -- it's impossible! By law, Social Security funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.1

Perhaps there is a mid-position, though. A July 30 "Your Money" column in The New York Times takes the stance that even though the long-terms threats will have to be dealt with, Social Security in the near-term is in good shape. The column takes a look at worst-case scenarios for a test-case couple and makes suggestions about increased savings. We'll examine that and the very real problem facing SSDI in Part 2.