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Fact-checking Bush on Social Security
CBS Market Watch
By Rex Nutting
Last Update: 4:20 PM ET Jan. 11, 2005

WASHINGTON (CBS.MW) - President Bush made several factual errors Tuesday about Social Security's long-term financing problems at a photo op event designed to educate the public about the retirement system.

Bush is expected to offer a plan in the next few weeks to cut future benefits and to divert about one-third of Social Security's tax revenues into individual private savings accounts in order to "save Social Security." See full story.

Before a specific plan is unveiled, the White House is holding a series of events to convince the public that the system must be radically altered to prevent a crisis.

According to the Social Security Administration and the Congressional Budget Office, the retirement system faces long-term funding problems, amounting to about 0.7 percent of gross domestic product over the next 75 years, or $3.7 trillion.

The SSA says the system's trust fund, financed by payroll taxes and interest payments, will probably be exhausted in 2042, requiring the government to reduce benefits by about a fourth or a third. The CBO says the fund will be exhausted by 2052.

Bush vs. facts

Bush: "As a matter of fact, by the time today's workers who are in their mid-20s begin to retire, the system will be bankrupt. So if you're 20 years old, in your mid-20s, and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now."

The facts: The Social Security system cannot go "bankrupt," for it has no creditors. By law, the trustees will continue to pay reduced benefits even if the trust fund is exhausted. Payroll taxes will continue to come in and benefits will continue to be paid.

According to the trustees' intermediate economic forecast (neither doom nor boom), the trust fund will be able to pay about 73 percent of scheduled benefits in 2042 and about 68 percent of scheduled benefits in 2078.

Future presidents and Congresses could also choose to fully fund scheduled retirement benefits from general tax revenue.

Bush: "Most younger people in America think they'll never see a dime."

The facts: Social Security says younger people will see a lot more than a dime. Their retirement benefits - even under a "flat-bust" system -- will be significantly higher than today's benefits in real terms.

For low-income Americans, currently scheduled benefits for those who retire in 2080 are $19,906 per year in 2004 dollars. If Social Security can pay only 68 percent of those benefits, that would be $13,536 per year, compared with benefits of $8,804 for low-income retirees who retired last year.

For the highest earners, Social Security is currently promising $53,411 per year for those who retire in 2080 (or $36,319 per year if Social Security can pay only 68 percent). Current maximum benefits are $21,891 per year for those who retired last year.

Bush: "In the year 2018, in order to take care of baby boomers like me and -- (laughter) -- some others I see out there -- (laughter) -- the money going out is going to exceed the money coming in."

The facts: According to the SSA, costs are projected to exceed income, including tax revenues and interest income from the trust funds' bonds, starting in 2028, not 2018. The 2018 date is when tax revenues alone no longer meet costs; workers have been paying extra taxes since 1983 to build up the trust funds' assets for just this eventuality.

Bush: "The problem is, is that times have changed since 1935. Then, most women did not work outside the house, and the average life expectancy was about 60 years old -- which for a guy 58 years old, must have been a little discouraging. Today, Americans, fortunately, are living longer and longer. I mean, we're living way beyond 60 years old, and most women are working outside the house. Things have shifted."

The facts: According to the SSA, the life expectancy for a 65-year-old man in 1940 was 76.9 years. Today, a man aged 65 can be expected to live to 81. Most of the increase in life expectancy in the past half century has been for infants, not for the elderly.

The increase in the percentage of women working outside the home has boosted Social Security's resources, rather than depleted them. Today, many women who worked receive a widow's pension rather than their own earned benefits. All the payroll taxes they paid are funding someone else's retirement.

Rex Nutting is Washington bureau chief of CBS.MarketWatch.com.

We couldn't trust Bush's numbers when it came to projected surpluses and we couldn't trust his intelligence to go to war. Now we can't trust his hype and lies surrounding Social Security. The media remains seriously dysfunctional. While some news outlets put the truth on the websites, most push the Party line without question or analysis.

When the money runs out and Social Security is bankrupted, no one can complain. Bush is giving us our Social Security retirement now in the form of tax cuts. If you're spending the tax cut and not saving it you're screwed.