A Response To: Social Security In Modern Times

By Cal Thomas
Fox News, After Hours

Link to Column: Here

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My Response:

Your statement that no one doubts WHAT must be done is false on its face.

First, the FACT is that the PROBLEM of Social Security has yet to be completely defined; much less the solution - God knows President Bush hasn't given us his plan...because he hasn't got one. Therefore, the WHAT, is still ill-defined.

Right now the only DEFINABLE problem with Social Security as it stands now is that given current PROJECTIONS of future economic conditions combined with PROJECTED payouts to PROJECTED recipients at CURRENT benefit levels, the system as it stands today would not be able to meet PROJECTED payouts to ALL recipients somewhere between 2042 and 2052. Even after that, it would be able to pay about 70%. Given the pessimistic PROJECTIONS used to make these calculations of the future, it is most likely 2052. So, we have somewhere close to 50 years to find a solution to the problem as it can be DEFINED at this time.

Secondly, the numbers used by the administration in attempt to create a "crisis" in hopes of inflaming passions enough to allow them to sidestep the lack of any viable plan need to be put into context. The $10 Trillion dollar figure seems large and scary, but its based on some dubious mathematical assumptions. The Present Value calculation used current benefits paid out in perpetuity...that means forever. So, projecting costs out until the end of time would cost us $10 Trillion dollars. Using this same calculation on other expenditures and costs would yield some context:

- Medicare Costs Based on Last Bill Passed: $12 Trillion Dollars
- Cost to Revenue of Tax Cuts Passed in Last Four Years: $20 Trillion Dollars

Also, the percentage of GDP of $10 Trillion dollars over the projected period of time, that's forever, is about 1.8%. I suggest you look at this number against the percentage of GDP spent on the military using the same calculation - and I'm a soldier.

Given all of the above, HOW we fix this "problem" is definitely up for debate.

The HOW can be split into two categories:

- ADJUST the current system now to cover the PROJECTED future gap in benefit payments.
- CHANGE the entire system AND find a way to cover the same gap not addressed by wholesale change as well as the loss of revenue into the system caused by the diversion of funds into "private" accounts.

So, the HOW, as presented by this administration, is between FIXING the "problem" or CHANGING the system. Given what we KNOW right now, it's clear this administration is using the "problem" to create a false crisis in order to promote the idea of CHANGE as opposed to simple REPAIR. Utilizing the false crisis allows the administration to frame the debate to meet the end they wish to obtain without actually addressing the original problem. However, critical thinkers and those who wish to solve problems follow the following formula:

- Define the problem (which has been done, but is being distorted for political reasons - reasons OPPOSITE of what you mentioned in your column)
- Define the constraints and assumptions
- Define and measure risks
- Define cost
- Develop a plan with consideration to the above
- Implement Plan

That's how people who use critical thinking as opposed to hope and belief solve problems. The bigger the problem, the more in depth this process should be.

Given the above, the "problem" as defined today can be solved with the least risk and least cost by the following:

- Change the indexing of benefits back to inflation as opposed to wages
- Removing the cap on Social Security taxes

These two simple changes that would affect both recipients and the wealthy would SOLVE THE PROBLEM for the next 100 years. Furthermore, finding a way to apply Social Security taxes to income from sources other than job income would also contribute to fixing the problem - although would be a pretty tough sell.

But, if CHANGE is what one wants to accomplish, then simply say so. If one BELIEVES that the system would be better off changed to free the government of the burden of management, which it doesn't in whole, and provides a better benefit to the people, at a much greater risk, than make that you goal and plan accordingly. But, DON'T try to dress it up as a solution to the defined problem, because it's not. In fact, changing the system doesn't even solve the short-term problem - IT MAKES IT WORSE! Just WHAT is the Present Value calculation on the amount of money that will have to be borrowed to make up the difference between the KNOWN shortfall and the NEW shortfall caused by the diversion of funds? Run the CHANGE "plan" through the process described above and you will see that the constraints are many, the assumptions are dubious. the risks are great and the costs are, well, a lot.

THIS is what you should be talking about. THIS is what you should be investigating. On THIS is what NEWS PROFESSIONALS should be concentrating.

Instead, you act as cheerleaders for a BELIEF in a greater payout and, frankly, a larger BELIEF that the free market is always better and cures everything - a VERY dubious assumption when dealing with human beings and the vagaries of the free market.

If you want to SOLVE the "problem" as we know it, than do that and discuss the ways to do that. If you want to CHANGE the system, be man enough to say it and smart enough to make your case without creating a false crisis and without selectively using only the numbers that make your case while ignoring others, many others, that don't.

If one is to make an informed decision, especially the populous at large, than they should be given ALL the information they need. That means all the constraints (taxes, deficits, cost of borrowing, reduction of benefits, etc), all the assumptions (economy will perform as planned, borrowing money to pay difference will be cost effective, the premise of social security will be better served by privatization, etc), risks (deficits will slow and damage economy, market will crash or dip when benefits are to be paid, "problem" will not be solved by change, taxes will have to be raised anyway, etc), and costs (2 TRILLION NOW, not in the far future, to make up gap, fees paid to fund managers, cost of making up difference during market dip, etc). Give the public THAT and then let them decide.

See, you and I both know that without the false crisis and bumper-sticker sloganeering, the CHANGE plan is a non-starter. The constraints are numerous, the assumptions are many and dubious, the risks are great and the costs are enormous both now and potentially in the future. In short, the above costs do NOT outweigh the "potential" benefits. If they did, this would be a "slam dunk" case and clearly it's not.

The 6 basic questions you should be asking yourself and your audience are the following:

1. What is the intended purpose of the Social Security program?

2. Is the program in immediate trouble?

3. How will the transition to private accounts, expected to cost 2 Trillion Dollars, be funded? I'm looking for a DEFINITE plan, not some pie-in-the-sky sound bite or guess that a rising stock market will cover the costs. Given the fact that the President PLANS to cut the deficit in half and make tax cuts permanent, from where is the money going to come? Hope is NOT a planning tool.

4. What is the expected fee for management of these funds by private companies and will it be limited and who will pay it? I don't think that I should have to pay the usual fees for management of a fund to which I am forced to contribute. Who is supposed to gain from this, me or the fund management companies?

5. Social Security was never meant to replace a pension or a retirement fund, what happens if the stock market dips or even crashes during one's retirement years? Is the government going to cover the losses and if so, how? Will there be a minimum return imposed? The idea of social security was that it was a fall-back that was kept safe from the vagaries of the business cycle and free market. It was a safety net, not a retirement income or investment. If the government has to make up the difference, are we not back where we started?

6. How does privatized social security solve the original problem of a shortfall in paying for what is owed in the coming years? Isn't this SUPPOSED to be the goal or objective of social security reform?

Please, please, please work to be a good journalist and not just a cheerleader. News should NOT be about opinion, especially the opinions of the host. News should be about the facts so, indeed, the people can decide for themselves. I ask you, are you providing the facts or are you just cheerleading?

You said you've invited Democrats on to your show and none would come. Well, I'm a Democrat and I'll come...for free...well, you would have to fly me out there and put me up for the night.