The New York Times headlines an article by Eduardo Porter: “An Aging Society Changes the Story on Poverty for Retirees.” The American Interest hails the article as evidence that the Times is finally acknowledging reality with regard to public retirement benefits:
In this story, NYT is facing what everybody knows: The retirement systems of the 20th century won’t work in the 21st. U.S. retirees will see declining social security payments after 2035, according to the story, and the private retirement system isn’t working for many people. Additionally, citizens of developed countries continue to do two things that make it hard for retirement systems to work effectively: live longer and have fewer kids. …
It is a good sign that even a deep blue news source like the NYT acknowledges the retirement problem.
Perhaps. But is the Times even now giving its readers the straight story? I don’t think so. Porter writes:
A typical American worker in the middle rung of the earnings ladder — whose career pay averaged out at about $46,000 a year in today’s money — could retire this year at age 65 with a Social Security benefit worth 39 percent of the career average.
But unless something is done to replenish Social Security’s shrinking trust funds, by 2035 the first pension check for such a worker might amount to as little as 27.5 percent of her career wage, according to calculations published last year by the chief actuary of the Social Security Administration.
Social Security doesn’t have a trust fund. A trust fund contains valuable assets. An entity’s promise to pay itself, which is what the Social Security “trust fund” consists of, is not a valuable asset. The fund’s supposed depletion as of around 2035 is nothing but an accounting fiction. It is significant only because under current law, once the “trust fund” is exhausted, benefits paid must be limited to dollars received in Social Security contributions. At that point, roughly 18 to 20 years from now, Congress will face a choice: either raise taxes or leave current law in place, meaning that benefits will be cut.
I think most people understand that there is no Social Security trust fund in any meaningful sense, yet the Times continues to peddle the myth.
Of course, there isn’t any doubt about what the Times wants to do to “replenish Social Security’s shrinking trust funds”: raise taxes.
A plausible strategy would be to increase the resources of public pension systems. In the United States, in fact, modest increases in payroll taxes, targeted on higher-income workers, could prevent the depletion of Social Security’s trust funds.
The current Social Security cash flow deficit, according to the program’s trustees, is $74 billion. By 2024, the Congressional Budget Office predicts a deficit of $166 billion. You can do the math, based on how many workers you want to classify as “higher-income.” Bear in mind that these same “higher-income” workers will be counted on to make up the shortfall in Medicare financing, too, which is much larger.
That poses challenges for most European countries, where taxes are relatively high, and seems politically dead on arrival in Washington — even though the tax burden is much lower in the United States — as long as tax-averse Republicans control Congress.
The idea that the United States has a low tax burden is an article of faith among liberals. It is hard to find comparative data that include all taxes, federal state and local. But in fact, at the federal level, upper-income Americans–the ones Porter wants to shoulder the entire burden of rescuing Social Security–already pay more personal taxes, in proportion to their incomes and in proportion to total taxes collected, than those in any other developed country.
The liberal solution to every problem is the same–raise taxes and spend more money. That solution is attractive whether it works or not, I guess, if the money is someone else’s. But the idea that the New York Times has finally gotten serious about the looming entitlement crisis is much too optimistic.