By now we’re aware that The Washington Post supports serious changes in Social Security. In fact, the paper editorialized Friday that the word “thuggish” comes to mind when discussing ads from the AARP opposing Social Security cuts. “The crunch time for the congressional super committee has arrived, and with it comes a new round of self-centered, shortsighted intransigence on the part of AARP and its fellow don’t-touch-my benefits purists,” the Post opined. But editorials are one thing; news stories are another.
At the end of October, the Post published a lopsided special report that strayed pretty far into opinion territory. The article, titled “The debt fallout: How Social Security went ‘cash negative’ earlier than expected,” offered bits and pieces of information about the country’s most popular government program—but didn’t come close to telling the whole story. In fact, William Greider, who writes about Social Security for The Nation, wrote that the Post “committed what I call fact-filled mendacity—a pejorative mash of scary buzz words and opaque statistics that encourages readers to reach false conclusions.”
First, the story tackled the system’s finances. “Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone,” wrote Post reporter Lori Montgomery, asserting that the program went “cash negative” because the recession has “caused tax revenue to plummet” while “the cost of benefits outstripped tax collections for the first time since the early 1980s.”
This was misleading. In a letter to the editor, Janice Gregory, president of the National Academy of Social Insurance—a nonprofit, nonpartisan organization made up of the country’s leading experts on social insurance—wrote:
Social Security did not “go cash negative” in 2010. Such claims ignore the $118 billion that Social Security received in interest payments from the program’s $2.6 billion reserves, which are invested in US bonds. This interest is real cash and is legitimate income to the program, just as would be true of income on bonds held by you or me, China, a large bank, or any other entity.
Gregory, whose letter has not yet been published, told the paper that interest income had contributed to a $69 billion surplus in 2010, which was invested in more U.S. bonds.
Some revenue also comes from taxing a portion of recipients’ Social Security benefits, and that money goes into the trust fund as dedicated revenues. These revenue sources, along with payroll taxes, insure that full benefits can be paid until 2036. After that, the system will be able to pay seventy-five percent of expected benefits, a point the Post did make, albeit with a negative frame—“Benefits would have to be cut by about 25 percent across the board.” And supporters say small changes, like raising the amount of income subject to payroll taxes and subjecting some fringe benefits to the tax, are all that are needed to fix Social Security without cutting benefits.
“Social Security is sucking money out of the Treasury,” the Post warned, blaming the payroll tax holiday enacted last December as a way to boost the economy. “Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion,” the Post told readers. “If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits.”
Yes, the tax holiday law required that the Treasury replace the lost revenue to make sure seniors and disabled people still received their full benefits. But laying the blame on the tax holiday is a tad disingenuous, especially since the Post editorially supported the suspension of payroll taxes back in December as a “justified compromise.” And again in September it supported Obama’s call for extending and expanding the payroll tax cut, saying “it could encourage both spending and hiring.” To make the Social Security trust funds whole, there will need to be a transfer from the Treasury’s general fund, which would raise the deficit by the amount of the transfer. That could give ammunition to Social Security opponents who have implied the program contributes to deficits, which it does not.
Social Security defenders like Greider objected to the tax holiday because, as he wrote in his Nation piece, it “would undermine the long-term solvency of Social Security unless the government replaced the lost revenue.” The danger is that it may not be replaced over the long run, Nancy Altman of the progressive group Strengthen Social Security told CJR.
In its “to-be-sure” graph, the Post acknowledged “Social Security is hardly the biggest drain on the budget,” but said that “its finances would continue to deteriorate” as baby boomers claimed their benefits. That will happen as the country heads toward 2036, and the system’s supporters have acknowledged that some fixes must be made. But there are deep ideological differences about how the trust funds should be replenished. The story did not discuss the range of options for fixing the trust funds after 2036; nor did it explain who would be most affected by those changes. One oblique suggestion the Post made for fixing the finances was to change the way that cost of living increases are calculated, but it did not describe how a new method might work, or how it might affect those people who rely on their benefits keeping pace with inflation.
An explanation would have been useful.The change in the way COLA is calculated may indeed be modest for those in their early retirement years, but it would nevertheless amount to a cut. Those cuts compound, and pinch retirees in their later years, when other sources of income run out. They may not be modest for people who become disabled early in life and need to rely on Social Security for a long time. Social Security’s chief actuary Steve Goss estimates that changes in the CPI would amount to about a seven percent benefit cut for someone turning eighty-five in 2035. Older women would be hurt the most. The National Women’s Law Center calculates that a woman with an initial benefit of $1,100 would lose more than $6,300 by age eighty and more than $15,000 by age ninety—the equivalent of more than a year’s worth of benefits.
The Post’s story offered a brief Social Security history lesson, but it omitted a crucial piece—the backstory of the drive to change the program. In 1983, the Cato Journal, a Cato Institute publication, laid out a game plan to undermine confidence in the system and to eventually make fundamental changes in Social Security that would transform it from social insurance into a system of privatized accounts. Written by Stuart Butler, now at the Heritage Foundation, and Peter Germanis, the paper discussed a strategy that has been unfolding for three decades. “We must press for modest changes in the laws and regulations designed to make private pension options more attractive, and we must expand the fundamental flaws and contradictions in the existing system,” they wrote. “In so doing, we will strengthen the coalition for privatizing Social Security and we will weaken the coalition for retaining or expanding the current system.”
The paper detailed how the public could be brought along to accept a privatized model and how the opposition could be neutralized by “calming existing beneficiaries,” “educating the public,” and enlisting help from the banking industry and other business groups that can benefit from a private plan. “We must be prepared for a long campaign,” they advised. Butler and Germanis argued that a main element of their reform strategy “involves what one might crudely call guerrilla warfare against both the current Social Security system and the coalition that supports it. An economic education campaign, assisted by modest changes in the law—must be undertaken to demonstrate the weaknesses of the existing system.”
The Post story ended with comments from Illinois senator Dick Durbin, a Democrat, reporting that Durbin had long allied himself with those who want to preserve Social Security’s benefit structure. But Durbin’s stance is different now. He supported cuts to Social Security and tax increases as a member of the polarizing Simpson-Bowles deficit commission. He told the Post his friends assured him that regular people would accept ideas such as gradually raising the retirement age. “As I looked at this, I thought small changes made today will give 50 years or more solvency to Social Security,” Durbin explained.
Is raising the age for benefit eligibility one of the modest changes the authors contemplated? Does Durbin’s position show that the coalition supporting the program is cracking according to the Cato authors’ prescription? Is the strategy outlined in the Cato paper moving into place? As good journalists know, context is everything.