What is the cost to individuals of doing nothing when it comes to Social Security? Despite all the smoke and fury being directed toward the President's plan by reform opponents, the truth is that Social Security retirement benefits will be drastically reduced in the future even if reform opponents get their way and no reform occurs. The question for future recipients: How much will they lose?
The left-wing Economic Policy Institute (EPI) published the following chart on their web site several weeks ago (HT: WILLisms, from whom this smaller copy was lifted):
Source: Economic Policy Institute
Somewhat Misleading
The chart is misleading in that it suggests that nothing is wrong with the system prior to 2042, when Social Security's Old Age and Survivor's Insurance (OASI) Trust Fund will be fully depleted. In reality, this sudden drop in the benefits that Social Security can provide does not happen overnight. The following chart shows a linear approximation of the level of benefits that the program can provide based upon its cash flow after 2017, when the revenues coming into Social Security from taxes will equal the benefits promised to be paid out, in addition to the level of benefits that may be paid out by tapping the program's trust fund:
Click image for a larger version.
The chart also underscores the increasing degree to which Social Security's retirement benefit trust fund will be tapped to support retirement benefits at their currently promised level. Without reform, the benefit cuts will be across the board, affecting all recipients, rich and poor alike. For low lifetime income earners, the looming cuts will be particularly harsh as many rely upon Social Security for a significant portion of their income in retirement. The following calculator may be used to approximate the level of retirement benefits that Social Security may provide based solely upon its cash flow as well as the combination of cash flow and trust fund for a given year.
Who Really Cares?
As noted by New York Times' op-ed columnist John Tierney in his April 30, 2005 column "Bush as Robin Hood," the President's proposed actuarial reform of progressively indexing benefits for middle and upper income earners while keeping Social Security benefits at their promised levels for low income earners has called the bluff of reform opponents:
By proposing to shore up the system while protecting low-income workers, Mr. Bush raised a supremely awkward question for Democrats: which party really cares about the poor?
It's certainly not as if they don't know that the poor will bear the greatest burden in having their future Social Security benefits cut - the data published by EPI clearly shows that reform opponents know what will happen. Their rhetoric also indicates they know fully well which income group will be hurt the most. Tierney concludes his comments with the following statement about the reform opponents:
They know that Social Security doesn't even have the money to sustain a program that leaves millions of elderly people in poverty. But it's their system, and they're sticking to it.
They just don't care. They might have once, but I believe their growing reliance upon special interests and billionaires with special interests for funding (see this chart from the Center for Public Integrity's 2004 report on U.S. party campaign fundraising) has left any real compassion on their part for the poor on the wayside.
Labels: social security, tool
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