Feb 17, 2005
Shays & Bush: Falsely Claiming Social Security Going “Bankrupt”
Feb 17, 2005
Shays & Bush: Falsely Claiming Social Security Going "Bankrupt"
In a recent letter to the editor, Republican Rep. Chris Shays recited the same false claim that Social Security is going "bankrupt" put forth by President Bush in his State of the Union speech. Shays made the claim to justify his support for privatizing Social Security. Here is an excerpt from the Shays' letter and Bush's SOTU:
"...Social Security is on a collision course with financial ruin. According to the Social Security trustees report, by 2018 we will pay out more money in benefits than we will receive in income. And in less than four decades, Social Security will go bankrupt. [Rep. Chris Shays, Stamford Advocate, 2/9/05]
"By the year 2042, the entire system would be exhausted and bankrupt." [President Bush, www.whitehouse.gov, 2/2/05]
"Rep. Shays shouldn't scare Connecticut residents who rely on Social Security by saying something that just isn't true. Rep. Shays has joined with President Bush and Republican leaders in falsely claiming that Social Security is going 'bankrupt' to justify their plan to privatize it," said DCCC Chairman Rahm Emanuel. "The fact is Rep. Shays' privatization plan adds to Social Security's financial burden while cutting guaranteed benefits."
The Facts: Social Security not going "bankrupt"
According to the Social Security trustees report, the standard basis for analyzing Social Security, the program can pay all benefits through the year 2042, with no changes whatsoever. Even after 2042 the program would always be able to pay retirees a higher benefit (in today's dollars) than what current retirees receive. In fact, the Congressional Budget Office estimates that full benefits would be paid even longer-through 2052. [CEPR, "Basic Facts on Social Security and Proposed Benefit Cuts/Privatization, " 11/16/04; CBPP, 6/14/04]
Ugly details of Shays/Bush plan:
Guaranteed Benefits Cut Up to 46 Percent
Although Shays says his goal is to "ensure current and near-term beneficiaries receive the benefits they are expecting, " this is not the case under the Shays/Bush plan. According to the Washington Post, if the formula proposed by the Bush Adminisitration is adopted, future retirees will see benefit cuts that reach up to 46 percent. [Washington Post, 1/4/05]
Shays/Bush Plan Adds $4.5 Trillion to National Debt in First 20 Years
While White House estimates falsely skew the cost of the plan, the actual cost would be much higher than estimated and would add more than $4.9 trillion to the debt over its first 20 years. Over the first ten years that the plan was in effect (2009-18), it would add about $1.4 trillion to the debt. Over the next ten years (2019- 28), it would add about $3.5 trillion more to the debt. All told, the plan would add $4.9 trillion (14 percent of GDP in 2028) to the debt over its first 20 years. [CBPP, "An Overview of Issues Raised by the Administration's Social Security Plan, 2/7/05]
Shays/Bush Plan Does Nothing to Extend Long-Term Solvency of S.S.
Even White House officials acknowledge that the Bush plan will do nothing to restore solvency to Social Security. According to the LA Times, "In a significant shift in his rationale for the accounts, Bush dropped his claim that they would help solve Social Security's fiscal problems - a link he sometimes made during last year's presidential campaign. [LA Times, 2/3/05]
What Would Happen to Those Who Get Social Security for Disabilities Under Shays/Bush Plan?
Republicans have recommended barring access to the accounts prior to retirement age under the Shays/Bush plan. This means that if a worker who becomes disabled and is unable to work, they will be unable to benefit from their contributions to the individual account. It will be difficult for retirees to make up the cut in benefits with their private accounts. A twenty-year-old worker today has a 30 percent chance of becoming disabled before reaching retirement age. [Consortium for Citizens with Disabilities Congressional Testimony, Hearing on Social Security Disability and Survivors' Benefits, House Budget Committee Task Force on Social Security, 6/22/99]