Social Security is looming as a major campaign issue—should it be cut or expanded? And that, of course, calls for reporters who understand what the system does and how various proposals would change it, and who can clearly explain what’s at stake for both current and future retirees. I asked Teresa Ghilarducci—an economics professor who heads the Schwartz Center for Economic Policy Analysis at The New School and co-author of a new study, “Are U.S. Workers Ready for Retirement?”—about how the media can better report on the emerging Social Security debate.
What’s different about this year’s Social Security discussion? For the first time in 25 years, there’s talk about expanding benefits. The Great Recession eroded all hope that home equity and 401(k)s will secure retirement. More people are going to be old and predictions are that the poverty rate among the elderly will go up. That means tens of thousands of people over 65 will be poor, and we will reverse the gains we made when Social Security was passed.
Do the media recognize this? The media are incoherent about retirement policy. There are two worlds here. One is the personal finance and upbeat reporters who write about what people should do—-how to avoid taxes, how to save more. There seems to be an endless appetite for stories about securing your retirement. The other world is the national reporters who write about government policy. Here I’m often asked to discuss if Social Security is affordable and what would happen if Americans had to work until their late 60s and early 70s.
What does this renewed interest in Social Security as a campaign issue mean for press coverage? Reporters need to understand and explain in their stories how Social Security is financed. It’s financed by a regressive tax, but the benefits are very progressive so that on balance the effect on income distribution is neutral. If they understand that, it will give them a framework for understanding different proposals to raise or cut benefits—-the income effects of the proposals, how they raise revenue and how to pay for them.
Is there anything else they should understand but don’t? Yes. They need to understand the system is self-financed and self-contained. If the program runs out of revenue, benefits are cut. Benefits are not paid for by cuts to education or the defense budget. Social Security never contributes to the federal deficit. One more thing that needs to be understood—the wage cap. Reporters and the public don’t understand that people in the top income bracket stop paying Social Security taxes in January. There is a huge amount of revenue beyond the capped amount that is not taxed for Social Security purposes. The system is set up so that many people effectively get a raise sometime during the year when they finish paying their taxes.
Most don’t realize that about one quarter of all benefits go to people under age 65, and they go especially to minority families. Latinos and African Americans are much more likely to receive children’s benefits, survivors benefits, and disability payments under the system.
How should reporters connect the dots from this basic information to proposals to expand or cut benefits? To understand proposals to expand benefits, they need to understand how to pay for them, and lifting the cap is one way. As for cutting benefits, proposals are usually framed as an affordability issue. It goes like this: We can’t afford to maintain benefits much less expand them. Raising revenue to support the system would cause a decline in economic growth, job creation or take spending away from programs to help the young. It’s important to note that by far most economists agree raising revenue within the system won’t hurt economic growth.
How has the press historically covered Social Security? Reporters have always had a hard time reporting on this. This is not a new phenomenon. We had problems with the press understanding the Greenspan Commission that put the program on a sustainable path in 1983. Recently the media have covered it as bankrupt, ill-conceived, or out-of-date. Bankrupt because politicians promised more than they can pay for, ill-conceived because perfectly healthy people can retire, and out-of-date because a person age 65 today is much healthier than in 1935.
Should reporters still be thinking about Social Security as part of a three-legged stool for retirement? It was never meant as a sole source of retirement income, but something to build on with private pensions and personal savings. But for most people that hasn’t happened. Also it is wage insurance. It was set up to insure events that could not be easily avoided like death of a breadwinner or loss of income in old age. Social Security was never meant to bring high rates of return on your money, and it shouldn’t be judged that way.
Why hasn’t the press been very interested in reporting on Social Security? Reporters are a lot like everyone else. It’s about old people, and it’s not sexy. They also don’t understand the system. They don’t think about retirement until it’s time to leave the workforce. To get reporters interested in covering this, I sometimes start talking to them about their own plans. But they often don’t understand a 401(k) plan does not substitute for Social Security. Those plans complement it.
What else makes it difficult to interest them? There’s no news hook. That’s why it’s easier for reporters to do stories about Social Security running out of money. The Social Security actuary report comes out every year, and there’s always a date at which 100 percent of benefits won’t be paid. It never seems to lessen the panic that the actuary’s reports are merely illustrating scenarios, and they’ve been doing that since 1937. There’s no story a reporter can do on any given day that will make the retirement crisis better or worse.
How do we make the story of a future impoverished retiree a current story? Reporters do best when they get gregarious older people to talk about their physically difficult jobs. They are flipping burgers or dumping garbage, and it’s visual and charming. The person is usually indomitable in some way and much healthier than an isolated, fragile elderly person who is scratching their budget by skipping lunch. I would find an elderly person the month that Social Security checks get a COLA increase [in January]. Or interview someone collecting a benefit at 62 because they’ve lost a job, had their hours cut, been demoted, or have health problems. [If they wait until age 70 their monthly benefit would be a full 57 percent higher.]
Does language matter when we write about Social Security? Yes, and the reporting on the chained CPI a few years ago is a good example. It was a difficult concept to explain but basically it would result in a benefit cut to retirees. Then someone used the term “cat food CPI” to explain that when goods and services got too expensive people would compensate for lower COLA benefits by buying cheaper products like cat food. All of a sudden, reporters realized that the chained CPI meant a reduction in living standards for older people. It was cattchy because people didn’t want their grandma eating oily, smelly cat food.
In writing about cuts, what should reporters be aware of? They will come in three ways. There will be pressure to raise the age of eligibility for Medicare from 65 to 67. And we’ll see proposals to raise the early retirement age from 62 to 67. The idea will be to eliminate early retirement benefits altogether. Most reporters don’t realize that you get maximum benefits at age 70 and every year you collect before that, you take a cut. There will also be proposals to cut benefits by changing the way COLA increases are calculated.
How would benefits be expanded? Expansion would most likely come by increasing the minimum benefit so that all beneficiaries would get payments that at least get them to the poverty line.
How can we get real live people into our stories? Go to the Social Security waiting room. Hang out at McDonalds in the morning to talk to elderly men. Ask a visiting nurse or a social worker about her clients. Ask an adult daughter who takes care of her mother-in-law.
What were the major take-aways from your recent study? There’s a generation of near-retirees, age 55 to 64, who will be worse off than their parents or grandparents in terms of maintaining their standard of living in retirement. Sources of income are more limited and less secure because they are financialized—-they are attached to stock and bond markets. The innovations in finance unfortunately let people use their house and pension plans like an ATM for current spending when they should have used it for retirement security. Today, 38 percent of people entering retirement have a mortgage on their house; 30 years ago it was less than 20 percent. Student loans are also contributing. Mothers are more likely to use their savings to help their children pay off college debt. Our study showed that households without financial assets and those with IRAs and 401(k)s are equally likely to be poor or near poor older adults.
Why haven’t the media connected those dots? Retirement is not a current story. It’s a long-term problem that will eventually have catastrophic consequences. Solving the problem has a cost now. An increase in the savings rate may mean a decline in consumption; there may be tax increases and political problems politicians face like challenges from the banking industry. Unless you have an event to tie these events together, it’s not a story.
When will this really become a story? When the baby boomers get poor, then elder poverty will be big news—in about five years.