We have commented many times on the apparent unfamiliarity of New York Times reporters and editors with basic facts about science, history, literature and mathematics. (Search our site for “New York Times corrections” and you’ll see what I mean.) Today’s paper has two such corrections, one of which is amusing, while the second bears directly on a key public policy issue.
Here is the first:
A book review last Sunday about “Catastrophe: Risk and Response,” by Richard A. Posner, referred imprecisely to an arithmetical procedure to derive a figure that cost-benefit analysts call the “expected cost” of a future event. The expected cost is equal to the cost of the event multiplied by the probability that it will happen – not divided by that probability. Thus, as the review correctly calculated, if A offers B a dollar to predict the toss of a coin correctly, the expected cost to A is 50 cents ($1 times 0.5).
Send that reporter back to high school, and his editor, too. Note also the weaselly claim that the Times article “referred imprecisely” to the correct mathematical procedure. The Times wasn’t “imprecise,” it was wrong: multiplying is the opposite of dividing.
The second correction is more sinister:
The Economic View column last Sunday, about the Bush administration’s economic proposals, misstated a projection by the Congressional Budget Office about Social Security benefits. Under current law, a median-income worker who retires today can expect an annual benefit of $14,900, not $26,000.
In pure numerical terms, this is obviously a large discrepancy. But what the Times doesn’t tell you is that the correction destroys the point of its earlier article, as it relates to Social Security. The article, by Edmund Andrews, appeared one week ago and was titled “The Meek Shall Inherit the Bill”. It offered a critical assessment of the Bush administration’s policies in two areas, Social Security and taxes. Here is the conclusion of Andrews’ discussion of the administration’s anticipated Social Security plan:
The burden on future generations would arise from the second and less-discussed component of most proposals: a steep reduction in future benefits, well beyond the amount being put into private accounts. The most frequently posited way to pare future benefits is to change the formula for calculating them. Instead of indexing a person’s initial benefit amount to the growth in wages, the formula would index benefits just to consumer prices.
That sounds tame, but it could be profound. According to the Congressional Budget Office, a median-income worker who retires today can expect Social Security benefits of about $26,000 a year, equal to about 42 percent of his or her preretirement income. If the benefit were indexed to prices rather than wages, the Congressional Budget Office says, a person retiring in 2065 would get only 21.7 percent of his or her preretirement income – even including benefits expected from private accounts. In today’s dollars, that would be about $14,000 a year.
“It’s the same old game,” said Laurence J. Kotlikoff, an economist at Boston University who has closely examined how financial burdens are shifted from one generation to another. “Every generation of old people tries to put the burden on the next generation of older people. That’s what they always do, and that’s what they’re doing now.”
That raises basic questions of fairness, but also of practicality. The risk is that people will glide along for the next several decades, but then rebel when growing numbers of them experience a huge drop in their standard of living as soon as they retire. They might then use their political power to reverse the cuts.
The Times’ entire argument–that there will be a steep reduction in benefits; that the Bush administration is playing “the same old game;” that the Bush plan “raises basic questions of fairness” as well as practicality; that future generations may “rebel” when they “experience a huge drop in their standard of living as soon as they retire”–every bit of this harshly critical assessment is based on a single statistic. That statistic is the comparison between benefits for those who retire today ($26,000) and those who will retire 61 years from now ($14,000). And that statistic was wrong.
The reporter apparently got the CBO data from that agency’s web site; scroll down 3/4 of the page to Table 2. Table 2 describes “First-Year Annual Benefits for the Median Retired Worker If Benefits Are Claimed at Age 65, by Birth Cohort and Earnings Level.” This is the relevant portion of the table; click to enlarge:
It appears that the Times reporter misunderstood this table. He wrote that “a median-income worker who retires today can expect Social Security benefits of about $26,000 a year,” apparently taking that figure from the “2000” column at the bottom of the table. But as the table clearly indicates, that column identifies the “10-year birth cohort” starting in that year. Thus, the 26,400 number is for babies who are now being born, under current Social Security projections.
The column that shows scheduled benefits for people who are retiring today is opposite the cohort who were born beginning in 1940; that figure is $14,900. If we compare that figure to what is projected under this version of the Bush plan (in constant 2004 dollars) for workers now being born, there is virtually no difference: that figure is $14,600. And the worker gets the benefit of owning his own account, and passing it on to his family when he dies.
The CBO table contains further information that the Times chose not to mention. For lower-income workers, the benefit projected under the Bush plan is nearly 20% higher than what is currently being paid, in constant dollars. And the CBO chart also shows that the $26,400 “scheduled” for workers now being born cannot be financed within the current Social Security framework.
The bottom line is that the “cuts” in Social Security benefits complained of by Bush’s critics are just like the “cuts” in other government programs that increase every year. The only “cut” is in relation to projected growth that the current Social Security system is incapable of financing in any event.