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  • The Economist Publishes a Monstrous Lie

    Posted by TM Lutas on September 13th, 2011 (All posts by )

    Gov. Rick Perry has famously called Social Security a ponzi scheme, a monstrous lie. The Economist magazine, in covering the story has now told its own monstrous lie. It is lying via a graph it included with the story.

    Deceptive Social Security finance graph from the Economist

    SS fantasy finances, Economist version


    The legally mandated 2011 Social Security Trustee Report lays out the actual fund exhaustion date as 2023 on page 3 of the report. So, 2023, 2037, what’s the difference? Electorally, it’s a very big deal. If you’re a current beneficiary today at age 66, you would be 78 in 2023, right at the edge of your life expectancy but more likely than not you would be alive. You would be 92 in 2037 and more than likely dead. If a senior is going to be alive when the big Social Security benefit cut kicks in, it is within their planning window and consequently the chances that they will be a Perry voter go up. Up to now, attempts at reforming Social Security were done so early that the crisis was only going to affect somebody else. Now, every senior who grasps when the crisis will hit knows it will hit them when they are going to be older, weaker, and even more unemployable than they are now. By putting out a pretty, lying graph, the Economist gives ammunition to the left-leaning mass media to write their own stories that also minimize the number of seniors who grasp the truth.

    In short, the Economist is putting false numbers out there, ones that will have an effect of lulling seniors into a poorer financial state right when they will be old and frail and unable to do anything about it. What happened to their editors, their fact checkers, their sense of decency? Is everybody to be sacrificed for the electoral convenience of US Democrats in the 2012?

     

    12 Responses to “The Economist Publishes a Monstrous Lie”

    1. tomw Says:

      I don’t know how the “2011 Social Security Trustee Report” can be so accurate so far out into the future. They thought [predicted?] that there would be a net surplus of funds coming into the trust over funds being paid out. History was not kind to their prospectus. The fund started paying out more than it took in last year{this year?} instead of years out into the future.
      I took the Economist article as a ‘good’ thing because it points out that, contrary to Democrat claims, Social Security is NOT sound ‘for years into the future’ as Senator Reid declared.
      It is broken, I knew that in 1966 when I first understood what it was and how it was funded.
      So, what difference does it make because anyone who plans on having income from SocSec is perhaps ‘wishing upon a star…’, and if you care about your younger siblings, or descendants, you will realize that it needs to be modified ASAP.
      tom

    2. John Wolfsberger, Jr. Says:

      “Is everybody to be sacrificed for the electoral convenience of US Democrats in the 2012?”

      This is a rhetorical question, right?

    3. TM Lutas Says:

      Tomw – You go with what you’ve got. This is why the Congress demanded that the trustees keep publishing one of these reports every year.

      But there’s a trend to the Trust Fund report mistakes. They have been consistently too optimistic about revenues. We were originally supposed to stay cash flow positive up to 2017. The reality is that we went negative in 2010. That’s seven years earlier. Now they say that we’re going to go bust in 2023 but the extension of the payroll tax cut is likely to render the 2023 date inaccurate too.

      To resurrect a political saying from the Nixon administration, the Economist article is a “modified, limited hangout”. In other words, it’s the least possible truth that the tellers think that they can get away with. I agree that in contrast with Reid’s statement it is an improvement. But that’s a far cry from being “good” in my book.

      John Wolfsberger, Jr. – What will we do for a second party when the Democrats have entirely exhausted their credibility?

    4. John Wolfsberger, Jr. Says:

      TM,

      “What will we do for a second party when the Democrats have entirely exhausted their credibility?”

      You mean they still have some?!

      In all seriousness, after the Democrats reduce themselves to a tiny rump party (that will linger on as a cautionary reminder like a case of genital herpes), I strongly suspect that Conservatism will fracture into two major parties, one representing/embodying the Traditional inclination of Conservatism, and the other representing/embodying the Libertarian inclination. The actual process will likely revolve around a massive fight on policy within the Republican Party. Whichever side wins will keep the Republican brand, the other will create a new party (Republican Libertarian? Traditional Republican?). I’ll also predict that the split will occur as a result of something no one will see coming (e.g., not an issue like abortion, limiting government or fiscal responsibility), and that it will most likely involve foreign policy (e.g. a foreign intervention).

    5. Andrew_M_Garland Says:

      There is nothing real in the Social Security “trust fund” (or in any US government “trust fund”). There is only a political promise to find the money somewhere that was paid in and already spent. The shortfall in Social Security is about $15 trillion in today’s dollars, about equal to the entire yearly income of everyone in the US. That shortfall is above future collections of Social Security tax at current rates. That promise is much more than what is recorded in the trust fund, which is itself only an unfunded promise.

      US Treasury Trust Funds are only an accounting record of what was collected and then immediately spent for things other than Social Security.

      The Congressional Budget Office (CB0) in 2003:
      === ===
      Trust fund holdings are not assets of the government and do not represent money owed to program recipients individually. Payments to Social Security recipients (like other social insurance programs) are based on rules set by law unrelated to trust fund holdings.
      === ===

      Ponzy Schemes Like Social Security

      Social Security is a direct-pay program. Amounts collected this year are all paid out, either to recipients or to government programs. Social Security is already in deficit; it is collecting less than it pays out, and the remainder comes from general tax reveue or from current borrowing.

      Here is an XTraNormal video (2:12) which presents the facts about the Social Security Trust Fund:
      Government Accounting

    6. TM Lutas Says:

      Andrew_M_Garland – You are almost correct but for one thing. Under current law, when the notional trust fund runs to zero, the payouts are reduced to the program’s income. There is no other provision under current law, so far as I know, that reduces payments without requiring any further legislative action. In that sense, the sums recorded as being “in” the trust fund do have a real world meaning and value.

    7. Andrew_M_Garland Says:

      To TM Lutas,

      Yes, the trust fund amount is a pre-authorized spending authority. Congress has agreed to pay SSec claims in excess of FICA tax revenues, up to the cumulative amount of the trust fund total. And, that spending is already included within the debt limit, so it is entirely on automatic.

      Congress can change this at any time, regardless of the trust fund total. If there is a US debt crisis (no more borrowing) then the only source for maintaining SSec payments will be a doubling of SSec taxes, or of course, taxing the rich.

    8. Alan K. Henderson Says:

      “Is everybody to be sacrificed for the electoral convenience of US Democrats in the 2012?”

      I sure hope Obama isn’t a secret Aztec.

    9. ErisGuy Says:

      Okay, this is where punctuation helps:

      Does “Gov. Rick Perry has famously called Social Security a ponzi scheme, a monstrous lie” mean Perry has told a monstrous lie (huh?) or the social security is a monstrous lie (true).

    10. TMLutas Says:

      ErisGuy – I apologize. I was too lazy to confirm that he said it was “a ponzi scheme, a monstrous lie” though that’s how I remember it being said. When that happens, I usually just drop the quotes, leading to the ambiguity you point out. If you’re more industrious, I’d be glad to rework it with the proper quote in the lead sentence.

    11. ErisGuy Says:

      No changes necessary. You assumed your readers would be familiar with the latest debates. I might have been had I not been travelling, so I was confused. Thanks.

    12. Helen Says:

      Two interesting things about the Economist. One is that it is far more highly regarded outside Britain than in the country. Now, that could be the usual one about prophets not being prophets in their own country; or it could be that we have a clearer idea about it.

      The second point is that on the few occasions I have read it I found that any article about any subject I knew about was completely wrong and misleading. The assumption has to be that the same applies to articles on subjects I do not know much about.