Fiscally Imperiled Social Security?
Political fantasy, anyone? Such fantasizing is a strange brew that can involve the daily press when it comes to the finances of Social Security. President George W. Bush aims to work next year with Democrats to fix the "fiscally imperiled Social Security system," the Washington Post reported December 20.
The 2004 Social Security Trustees Report projects a shortfall in the program’s trust fund in 2042. Yes, that is 38 years down the road for the program’s trust fund, currently running a surplus as it was designed to do during the reign of President Ronald Reagan for the baby boomers’ retirements.
During the 1980s the annual growth of the U.S. gross domestic product (the output of all goods and services) was 2.7 percent. The 2042 depletion date for the Social Security trust fund is based on the trustees’ intermediate projection of 1.8 percent annual growth of GDP.
With a 1.8 percent annual growth of GDP between 2004 and 2042, Social Security would be the least of the nation’s problems. Think about it. With 38 years of 1.8 percent growth, private investment in new hires and equipment would basically slow to a crawl.
We can see a hint of such slow growth in the recent shrinking of the national housing bubble. U.S. growth of 2.6 percent in the second quarter fell to 2.2 percent in the third quarter of 2006. Spurring this drop in growth was the double-digit fall of investment in the building of new homes.
This means less employment for those who earn their wages in home construction. One immediate outcome is that they have less income to spend on goods and services. This means economic contraction.
Formerly employed construction workers spend less at retail businesses. These firms experience sluggish sales. Weakened consumer demand spreads to other sectors of the economy.
Sales slow. Investment weakens further. Now picture the U.S. with 36 years of a slowdown in GDP to an annual rate of 1.8 percent!
Back to Social Security and the 49 million Americans who receive their regular checks from the popular program. The Post and the president, apparently, are trying to convince the U.S. public that the finances of Social Security are imperiled and require a political solution. On that note for the new Democratic majority in Congress, there is no need for the party to find solutions to problems that do not exist.
There are plenty of domestic and foreign policy problems that do in fact require urgent attention from both parties. The financial solvency of Social Security is not one of them. The Washington Post is fantasizing about the future demise of Social Security.
Where is the journalistic balance? Where are the alternate news and views on the future solvency of Social Security? Why give readers political fantasy dressed up as news?