To put this Social Security calculator on your blog, simply copy and paste this single line of code into your entry.

Previous:
Moving the Ball Downfield
Public Opinion 101
Social Security: More vs. Less
Dems/MSM Lose Social Security Debate in a Flash
60% of Americans Support Personal Accounts
Personal Accounts: Victory is in Reach
Debunking Reid's Social Security "Calculator"
The Bush Social Security Calculator
An Evil, Hidden Agenda

Through more than four years in the White House, the signature of Bush's leadership has been that he does not panic in the face of bad poll numbers. Yet many Republicans on Capitol Hill and in the lobbyist corridor of K Street worry about a season of drift and complain that the White House has not listened to their concerns. In recent meetings, House Republicans have discussed putting more pressure on the White House to move beyond Social Security and talk up different issues, such as health care and tax reform, according to Republican officials who asked not to be named to avoid angering Bush's team. …

Many experienced Washington hands believe that Bush has the opportunity to reestablish his clout if he focuses his efforts. "Every president goes through patches like this," Newt Gingrich, the Republican former House speaker, said in an interview. "[President Ronald] Reagan had a difficult patch in August '81, but he came back and was strongly successful. Clinton, if you'll remember, in June or July of '95 looked like he couldn't get anything done and then won reelection. These things come and go."

Without examining the client lists of said K Street Republicans, it's almost impossible to tell where they're coming from. But there's something to what Newt is saying here – many of the victories of this Administration, and indeed previous ones, seemed impossible just before they were won. And knowing that we tend to do better during frenetic periods of action, and knowing also that Congress has yet to take up Social Security in earnest, it's easy for highly speculative stories like this to get written – just before getting proven wrong.

I still stand by my previous analysis that once we build up enough momentum for doing something about Social Security in Congress, then personal accounts are going to start looking like a better deal politically. Fundamentally, Congress is in the business of creating new benefits for its constituents – and personal accounts are a new benefit in a land of curtailing pie-in-the-sky future "benefits." Better yet, they're a zero-cost benefit that actually build individual ownership and undermine the case for big government.

Social Security is and has for a number of years been the Big Kahuna of the domestic policy debate, and its prominence speaks to President Bush's refusal to get bogged down in flash-in-the-pan minutae that will be forgotten thirty years hence. Strategically, it makes little sense to focus our fire elsewhere since no other issue has the potential for bringing about lasting generational change. It turns a staple of the New Deal into a bulwark of enterprise Republicanism. Just how significant are we talking here? Think Souter and Stevens resigning tomorrow, and being replaced by Luttig and McConnell.

By comparison, any Supreme Court fight this summer will be about defending our home turf, not moving the ball downfield.

WASHINGTON, May 4 /U.S. Newswire/ -- House Democratic Leader Nancy Pelosi released the following statement today on President Bush's misleading Social Security plan, which will slash benefits for Americans with disabilities:

"President Bush's Social Security plan just doesn't add up for Americans with disabilities. The plan appears to drastically cut the benefits of Americans' with disabilities, even though the President says it won't. Mr. President, which is it: a huge benefit cut for Americans with disabilities or a misleading plan that does nothing to solve the long-term solvency of Social Security?

"Americans with disabilities and the middle-class have earned their Social Security benefits. The President and Republicans in Congress should not turn these guaranteed benefits into a guaranteed gamble.

"Democrats stand ready to work with Republicans to strengthen Social Security so that all Americans get the guaranteed benefits they have earned. Democrats will not support proposals that gut benefits for disabled Americas and middle-class families and that place retirees at the mercy of the stock market."

Appears to cut? Is this the best she can do? You know, it's one thing if Democrats want to challenge the numbers, but pulling claims out of thin air is not the tactic of a side that is confident it is winning the argument.

As President Bush has stated on repeated occasions (here, here, and here, among other places), Social Security reform does not include the disability portion of the program.

Perhaps it's Ms. Pelosi who needs to explain herself.

Far too often, we are too reluctant to admit that the impolitic reality is often none of the above. On lofty questions of policy, perhaps it isn't that the American people are for or against – but that they just don't care. Americans care more about Michael Jackson than judicial filibusters. They are more concerned with Paula Abdul than with the Pozen proposal for progressive indexing. And that is as it should be.

Currently, how it works is that if your side is losing 64% to 29% in a capriciously worded poll question, you're dead in the water. But what pollsters rarely ever ask is how much people care about the question they just answered. How relevant is it to their lives? Did they discuss something similar at the dinner table last night? When it comes to most policy issues, the organic level of interest outside the Beltway approaches zero. And guess what? An "overwhelming majority" of zero is still zero.

This routine misuse of polls and public opinion is creating severe distortions in assessing where we stand on issues like judicial nominations or Social Security. And it leads to a more provocative question: even on a big issue like Social Security, why should public opinion even matter? Especially when it doesn't tell us anything we didn't already know.

"Poll: Support lags for Social Security plan" screams a headline on CNN.com. On the question of personal accounts, where the element of personal choice isn't even mentioned, support for the account narrowly "lags" 44 to 52 percent. Ask people if they would simply like the choice of a personal account, which is what the President is proposing, and a whopping 79 percent are in favor, 84 percent under the age of 55. This prompts headlines like "Most Are 'Pro-Choice' on Social Security." On the core question of whether or not Americans think voluntary personal accounts are a good idea, an earlier Fox poll found 60 percent in favor.

This muddled picture of Social Security opinion is enough for lazy reporters to cherry-pick the bad numbers and argue that it's all gloom and doom for the Bush plan, while noting in the "choice" numbers in the twelfth graf down. To a student of polling, this situation suggests that there is tremendous potential in framing personal accounts as a matter of choice, and selling them hard on the merits. But it also suggests that Americans are not committed one way or the other, and when it comes to changes that are well into the future, the depth of public opinion is not very strong.

The wildly divergent numbers alone suggest this. If you'd framed the choice in one of last year's polls one as between a baby-eating, Baal-worshipping Kerry and the defender of all that is good and virtuous Bush, I doubt the numbers would have moved more than five points. That's the hallmark of a stable, intensely committed electorate. An environment in which poll wording can sway the answer almost any which way suggests highly malleable public opinion.

In the current environment, only the Terri Schiavo issue approached that high level of intensity. Whereas I could probably count the number of under-55 American families who discussed Social Security at the dinner table on my two hands, that number of Terri was likely in the millions. Because it was so personal and immediate, and smack dab in the middle of the culture war issues that spark extemporaneous hourlong debates the moment someone says a word about them, the impact of that issue in terms of public opinion was far greater than anything that could be done with Social Security. The Schiavo case coincided with a conspicuous dip in the President's approval rating, which has since rebounded. In contrast, the media constantly like to portray support for Social Security reform as being in the throes of a death spiral, and yet the President's approval rating remains stable as he pushes hard for reform. Coincidence? I strongly suspect that the media is shooting blanks here, and they secretly know there is little outspoken public resistance to what the President is proposing.

The inability to galvanize Social Security opinion on either side is not a failure in persuading the public. Politicians think too much of themselves if they think they can move public opinion on a matter of dollars and cents, particularly on an issue that's not perceived as being in the here and now. This is not a problem. It is an opportunity.

If we free ourselves of this media contrivance that the public doesn't support Social Security reform, and recognize that's it's really indifference that can yet be turned positive, then imagine the freedom of action that gives to wavering Republican Senators and Representatives. Imagine if we freed ourselves of the fictitious notion that this will hurt us in the 2006 elections (the only way it could do that is we put it off till 2006 rather than dealing with it now), or this self-important notion harbored by some conservatives that we need to win a fourth consecutive election in order to be able to advance the ball. Getting Social Security done might boil down to getting some Republicans to realize that the world doesn't revolve around Congress, and yes, we have some discretion with the public in terms of the legislation we pass.

(Not to mention the fact that the real political benefits come not with passing Social Security, but with creating personal accounts as a fact on the ground – a Republican idea that voters will not want to be taken away. The same poll numbers we are seeing on Social Security we saw on tax cuts in 2001, but now that they have them, middle class voters are reluctant to give them back.)

On Social Security and judges – where we see a similar split in question wording – conservatives might need to do a bit more channeling of their patron saint, Edmund Burke. In a Jacko and Idol and runaway bride-obsessed America, the public has little desire or inclination to lead the way in crafting public policy, and they often give conflicting signals. It is left to our political leaders to be temporary custodians of the public trust, and to lead in accordance with the will of the people in the last election – and enduring values like individual choice.

This is no time to go wobbly based on bad reporting on conflicting polls. Screw it. It's game time. Let's go.

To put this Social Security calculator on your blog, simply copy and paste this single line of code into your entry.

But that probably isn't what you read in the morning papers. How does mainstream media react when it sees a conservative President pursuing a progressive, permanent fix for Social Security? Repeat the Big Lie:

"I believe the reformed system should protect those who depend on Social Security the most," he said in a nationally televised news conference. "So I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off." This is the first time Bush has backed a specific plan to reduce future benefits for tens of millions of Americans.

"Reduce future benefits for tens of millions of Americans." But those "future benefits" don't exist and under current law, can't be paid. Unlike a discretionary budget, where Congress has the ability to spend pretty much whatever it wants, Social Security cannot fund future benefits outside the Trust Fund, and by 2041, that Trust Fund will be able to pay 74% of "promised" benefits – a guaranteed benefit cut that is enshrined in current law.

Any reporter or politician who does not recognize these reduced benefits as the baseline for analyzing any and all changes to Social Security is simply being dishonest.

Even by Democrat standards, this Big Lie doesn't hold water. It used to be a cut when spending increases were held below inflation. But now it's a cut when Social Security benefits grow in real terms, and benefits for the poor grow even faster.

Welcome to the bizarre world of the Harry Reid's office and the Washington Post newsroom.

For a party that claims to support tax cuts only for the middle class, opposing Progressive Social Security is just strange. Democrats have ruled out personal accounts. By ruling out Progressive Social Security, they're endorsing the only options left: tax increases, or a train wreck that would forever undermine the Social Security system.

And if Democrats don't like how fast the benefits would grow with Progressive Social Security, here's their answer: personal accounts. It's the only proposal on the table that would actually increase benefits above the pie-in-the-sky "guaranteed" benefit the Democrats talk about.

This Big Lie from the left-leaning, conflict-obsessed MSM is spurring the rerelease of the Bush Social Security Calculator, an unabashedly reality-based tool that tells you how much Social Security can actually pay you, and how much your benefits would go up under Bush's personal accounts. Watch for that this weekend.

For more Social Security action, spread this Flash that tells the truth about public support for voluntary personal accounts.

Michelle Malkin also has a great post on this.

The Heritage Foundation had jumped into the fray with a calculator simulating the Bush plan. The estimates are a bit conservative if you ask me -- but better to underestimate than overpromise. Now, all they have to do is give bloggers the opportunity to cut and paste the code so they can post the calculator on their blog and drive traffic to result pages hosted on Heritage.org. When I posted my Social Security flash for bloggers to post, it was viewed by over 20,000 people and over 1,000 clicked through to the calculator; and those that didn't saw a rich narrative message about media deceptiveness on the issue -- much more than could be communicated via a small link button. Also how about this: generate a customized graphic for each user showing how much more they'd get under "privatization" that they can post to their blog or e-mail to their friends.

Meanwhile, FactCheck.org gets around to giving the Reid MisCalculator the b*tchslapping it so richly deserves:

Democrats have been using a web-based "calculator" to generate individualized answers to the question, "How much will you lose under Bush privatization plan?" For young, low-wage workers it projects cuts of up to 50% in benefits. And a $1-million TV advertising campaign is amplifying the claim, saying, "Look below the surface (of Bush's plan) and you'll find benefit checks cut almost in half."

In fact, the calculator is rigged. We find it is based on a number of false assumptions and deceptive comparisons. For one thing, it assumes that stocks will yield average returns of only 3 percent per year above inflation. The historical average is close to 7 percent.

The calculator's authors claim that they use the same assumption used by the Congressional Budget Office. Actually, CBO projects a 6.8 percent gain.

There's more. Read the whole thing.

To show you just how rigged it is, I did some poking around in their source code. While the calculations behind my calculator are all available in source code, the Democrats' formulas are almost completely opaque, except for this nice little array of negative coefficients that fixes the outcome no matter what the user enters:

[-0.029233431,-0.034841181,-0.028286705,-0.023371234,1], [-0.035210586,-0.041555354,-0.034461176,-0.028406998,1], [-0.041585086,-0.048484216,-0.041120262,-0.033837853,1], [-0.048302163,-0.056008603,-0.048295077,-0.0396915,1], [-0.055473101,-0.063803405,-0.055939334,-0.046062177,1], [-0.063847036,-0.073063941,-0.064689618,-0.053521336,1], [-0.07240408,-0.082533172,-0.073646122,-0.061380234,1], [-0.081680717,-0.092910784,-0.083484775,-0.070026961,1], [-0.091319396,-0.10378808,-0.093540326,-0.079180287,1], [-0.10133469,-0.115071656,-0.104261122,-0.0889462,1], [-0.111500306,-0.126815562,-0.115179957,-0.099138794,1], [-0.120842287,-0.13778726,-0.125591334,-0.108874827,1], [-0.130197286,-0.148871727,-0.136135129,-0.118936016,1], [-0.139485677,-0.160256658,-0.146963374,-0.129325683,1], [-0.148779795,-0.171951384,-0.158148711,-0.140192921,1], [-0.158528425,-0.184145287,-0.169928521,-0.151676556,1], [-0.158422441,-0.189617026,-0.176873201,-0.159361062,1],

Nope... no risk of folks getting the "wrong" answer with numbers like these!

Here's a Flash that communicates the poll's findings and the current state of the Social Security debate. To say the least, the Social Security debate is not as dire as some in mainstream media would have us believe. Watch, and see for yourself who's winning the argument:

To put this Flash on your blog, simply copy and paste the following code into your entry.

30. Do you favor or oppose 
giving  individuals the choice to invest a 
portion of their Social Security 
contributions in stocks or mutual funds?

               Favor    Oppose  Not Sure

29-30 Mar 05   60%      28       12

Age under 30   76%      16        9

30-45          65%      24       10

46-55          54%      33       13

Age under 55   64%      26       11

Over age 55    56%      31       14 

Social Security choice wins when it's framed as a freedom issue (giving individuals the choice), the results are remarkable given that "stocks and bonds" are explicitly mentioned. The general public favors the idea by more than 2-to-1. Amongst the under-30 demographic, it's nearly 5-to-1. Over 55, the idea is favored by a whopping 25 points.

What's wrong with how other polls ask the question? Their results are skewed because they go out of the way to mention a cut in guaranteed benefits -- which is interpreted as a cut in benefits. In fact, what's happening is a change in how a portion of your payroll taxes is invested, switching from a 1.6% rate of return to a 5-6% rate of return. In what way is that a cut?

The same twisted logic could be applied to someone moving from welfare to work in the pre-welfare reform days. Using liberal pollster-think, the person giving up the guaranteed welfare benefit would be worse off moving to productive employment from which they could conceivably be fired.

Democrats might want to re-cork that champagne. Because they ain't seen nothing yet.

UPDATE: A similar question was asked by Rasmussen at the outset of this debate:

3) A proposal has been made that 
would allow workers to invest Social 
Security payroll taxes into personal 
accounts so that they could help provide 
for their own retirement needs. Do you 
favor or oppose this proposal?
53%/Favor
36%/Oppose
11%/Not sure

An admittedly more generous wording of this pegs support for personal accounts at 65% to 23% opposed. So we've got three data points. The low is 53%, the midpoint is 60% and the high is 65%. It looks like support for personal accounts has stayed quite stable, and -- contrary to media reports -- quite popular too.

If this holds up, I don't think "fraud" is too strong a word for the fast one the Democrats and the media have been trying to pull on the American people -- trying to manufacture opinion through bad poll questions.

Somehow, I don't think we'll see the headline, "Public Favors Personal Accounts" on the front page of the Post any time soon.

If their prediction is true, it tempers the urgency to overhaul the federal retirement program, as higher economic growth results in increased wages and more workers, with more tax revenue going into the pension system.

``This low estimate ignores the potentials for immigration growth, an increase in the retirement age and significant productivity growth stemming from technology enhancements,'' says Ernest Goss, an economist at Creighton University in Omaha, Nebraska, and former scholar-in-residence at the Congressional Budget Office.

They miss the point almost entirely. The fact is that the solvency of Social Security, unlike almost every other projection of government revenue, has very little to do with economic growth. Even if we had 4 percent growth as far as they eye could see, there would still be in this mess. We cannot grow our way out of the Social Security problem.

Why, you ask? Because Social Security benefits are tied to wage growth, which is tied closely with economic growth. No matter how much workers' wages grow, the Social Security system won't be able to keep up because all of the revenue increase will immediately go out the door as COLA increases. Sadly, and unlike virtually every other area of public finance, economic growth does nothing to solve the underlying solvency equation, which is driven more and more by the declining ratio of workers to retirees.

As Dr. Goss intimates, the only solution would be to create more workers, suggesting more immigration as a solution. But as favorable as I am to legal immigration, this still remains a Catch-22: today's worker is tomorrow's retiree, and if the configuration of workers to retirees isn't just right by the time this bulge of immigrants retires, then the system will have to endure even greater strain.

Pollyannish excuse-making stories like this expose the simple truth of the their Democrats' position: it is they who want to take a big risk with Social Security, not Republicans. They're gambling that Social Security doesn't have a problem, and doubling down that the economy will just fix everything.

Just which side gives us the biggest risk here? What if the Republicans are wrong? Well, they just solved a problem that wasn't quite as urgent as thought -- and in the process gave millions the freedom to invest and earn returns far greater than the present Social Security system. What if the Democrats are wrong? Well, Social Security goes broke.

Call me crazy. But, for me, it isn't hard to tell who's playing it safe with Social Security, and who's gambling our retirement away.

The Democrats need to be very careful about expressing willingness to cut a deal with Bush on Social Security as long as privatization is off the table. There's no need to do anything about Social Security in the near term, and setting up the an air of inevitability regarding "something sort of social seucrity reform will pass this year" will create pressure for them to rubber stamp whatever nonsense comes out of DeLay's conference committee, or they'll find themselves having to object to it in ways which are a net negative, politically. I know useful idiots like Joe Klein and the rest of the analstocracy demand that they make concilliatory and compromising noises, but those people should all be ignored. Or, preferably, locked away.

The Democrats' problem is that they don't have any territory left to defend. Their position won't brook any changes in Social Security at all. Once they emerge from this reactionary crimp, and start talking about their "minor changes" -- benefit cuts, tax increases, pushing back the retirement age -- personal accounts are going to start looking better and better as a counterbalance, because it's the only item on the table that actually adds value to your Social Security dollar.

Not even Ted Kennedy is singing off the same songsheet. And the White House is just gettting started.

There's handwringing galore as WaPo indulges in two consecutive days of the D.C. art form it has perfected: collecting blind quotes from Congressional and K Street operatives describing one of twelve potential courses of action, and then presenting it as Holy Writ.

WaPo needs to go to school on the dynamics of public opinion on Social Security. Start with the core question: Is Social Security a problem? Does it need to be fixed?

Well, according to a Gallup poll in February, the answer is a resounding yes. 72% believe Social Security is in a "crisis" or is facing "major problems." 64% think the program will be bankrupt by 2042.

And Newsweek finds that 65% of Americans believe Social Security is in a "funding crisis." Looks like the Left picked the wrong talking point.

Now, the second question is: How to fix it? If you've ever been to a town hall meeting, you know that it's easier to get people riled up against a problem than to get them to agree on a constructive solution. That's human nature. On Social Security, you may have seen it reported that support for private accounts is less overwhelming than support for the notion that there's a problem that we need to fix.

Instead of asking the yes/no question on personal accounts, a question like this would capture the existing debate and nicely reframe the bile you're reading in the newspapers:

"Which of the following would you like to see as part of the Social Security reform currently being debated in Congress?"

a. Tax increases
b. Allowing workers under 55 to invest in personal retirement accounts
c. Benefit cuts
d. Raising the retirement age
e. None of the above.

Paging McInturff, Rasmussen, Goeas, McLaughlin and Luntz.

Let's see how personal accounts compare against the more draconian alternatives. The 40% level of support for PRAs is universally derided as an albatross. That would be true if there were one or two solutions on the table; but with multiple options on the table, 40% support for one of them is sitting pretty.

AP/Ipsos came fairly close to asking this. Personal retirement accounts was the second most popular solution (at 39%/45% depending on the question was asked) -- after raising the $90,000 cap on earnings* (74%). The green-eyeshades options fared much worse: Increasing the retirement age at 32% support, raising payroll taxes at 30%, cutting future retirement benefits at 11%, cutting current retirement benefits at 7%. If Americans had to choose a balanced, two-part menu for fixing Social Security, today the consensus choice would be raising the payroll tax cap plus personal accounts.

This gives me hope that current support for personal accounts is closer to the floor than the ceiling. When a half-sample was asked whether they personally would do better or worse with personal accounts, the split was just 39-35. When asked how other Americans would fare, it was 35-41.

That's misinformation pure and simple. In all their sophistry on this issue, Democrats have never denied that the rate of return on investment would exceed the rate of return on Social Security taxes. Talking optimistically about the value added by personal accounts needs to be Job One for Social Security reformers. This educational process is the last barrier to getting outright majority support for PRAs. Start by forwarding the Social Security calculator to your friends.

Then there's the question of political reality, which I could go on and on about, and which is separate from public opinion. Politically, all you should need to do in order to get private accounts is create a juggernaut behind the idea of addressing Social Security's actuarial problems. Thinking it over some more, it's clear why the Dems have latched on to "there is no crisis" rather than Enron as their biggest talking point. They know that once people accept the notion that things have to change, and start dealing with how to make that change possible, it's going to be extremely difficult to resist a value-added sweetener like personal accounts to offset the tough medicine of limiting benefit increases or lifting the payroll cap. People on the Hill must know that the green-eyeshades solutions tried in isolation would be political suicide. And the paralysis prescribed by the Post -- an overwhelming desire to address the problem combined with the lack of resolve to actually implement a fix -- would be the worst outcome politically as well as in policy terms. In the end, a solution including personal accounts will be the only politically palatable option left.

* Unlike Beltway grasstips conservatives, I'm open to the idea of lifting the payroll cap -- particularly when combined with personal accounts. It would allow substantially more funds to be vested in personal accounts than is currently envisioned, further entrenching support for the idea. Thinking strategically, such a move would increase the appetite for tax reform and AMT relief; broadly, I see the need for this kind of safety valve when the uber-progressive income tax is looked at. And making both payroll and income taxes flatter makes it A LOT easier to enact tax cuts across the board.

As a ex-teenager getting shouted down by a room full of senior citizens because I had the temerity to denounce socialized medicine at a Congressional town hall meeting, I can sympathize.

The next time your Congressman holds a town meeting, please stop by -- and bring your kids with you.

No group of Americans would be affected more by President Bush's Social Security plan than those earning the least. Just ask 46-year-old Brent Allen.

Allen, who recently lost his job at a Massachusetts paper mill, faces a retirement financed exclusively by the money he has been paying into the Social Security system for the better part of 30 years. Like nearly half the U.S. population, he has no pension or savings to speak of. And his brief flirtations with the stock market have largely flopped.

So Allen, who lives on less than $15,000 a year in disability payments from Social Security and income from his live-in girlfriend, is distrustful of Bush's plan to allow workers to divert a portion of their payroll taxes into personal investment accounts.

Regardless of income, it's misleading to suggest that a 46-year old with 30 years of payments into the system would be the pivotal group most affected by reform. Since the accounts start in 2009, Allen would have at most 17 years to accumulate retirement income in a PRA; traditional Social Security would still provide the bulk of his income upon retirement (providing of course that the actuarial problems that could cause a benefit cut of 25% or more are fixed). It's funny, you'd think that the Post would hone in on the sudden benefit cuts that will become necessary if the system isn't fixed as the greater threat to low-income recipients. But they don't. Welcome to the warped liberal worldview where only wealth-creating private markets could possibly cause poverty.

The real scandal here is that a retirement system you pay into with 10.6% of your income your whole life (and less if you're wealthy, since payroll taxes are regressive) can only provide you with a meager benefit of $922 a month -- and this is for Social Security at its zenith, before the baby boomers retire. That's not a safety net. In a $10 trillion economy, that's a massive, gaping hole in the safety net.

Thankfully, most people have other income to supplement their Social Security. But not the lower middle class recipients that are the Post's chief concern; that $922 is their only income -- if Social Security goes belly up, they're the ones who'll feel it first. Risk is what we'll have if we do nothing.

PRAs have the potential of being the great equalizer in our society; poorer workers whose investments fare better could catch up to the retirement income earned by middle class workers. Shouldn't it be our goal for poor workers to have the opportunity to actually do well, and not just subsist just above the poverty line -- the modus operandi of the Great Society Democratic machine?

So how’d they do it?

• Absurdly Inflated “Promised” Benefits. The Reid calculator projects your “promised” Social Security benefit. What they don’t tell you is that it’s a promise that there is absolutely no way we can pay for under the current system. The Reid “calculator” doesn’t acknowledge what happens when your benefits get slashed by around 25% when the trust fund is exhausted – or the effect of phasing in these cuts earlier. Political Calculations explains why Social Security’s real rate of return will continue on its inexorable path down to zero, and then turn negative, a fact that acknowledged by the far more sophisticated calculator you see posted below.
• Wage Indexation. The Reid calculator simply assumes that the wage indexation of benefits will be done away with by inflation indexing. But that’s just one option on the table. Given the wild leap of faith implicit in this assumption, you would think the Reid calculator would be up-front about the specific dollar effect of turning wage indexing on or off. But they aren’t. I wonder why.
• Pessimistic Rates of Return. About the only thing the calculator is transparent about is the projected real rate of return on personal retirement accounts – just 3%. But the last time the government examined this question in detail – before the late ‘90s boom – it found the real return on stocks to be 7%. I assume a conservative 4.5% real rate of return on PRAs. By going with 3%, the Reid calculator artificially depresses your PRA-added benefit by 15%, a good chunk of your putative “losses.”
• Fuzzy Math? Ironman, who devised the calculator, e-mails with another point of interest:

  If someone born in 1975 and someone else born in 2005 have lifetime average annual salaries of $30,000, and the "Promised" Social Security annual benefits are adjusted to 2005 dollars to eliminate the effects of inflation, how come the dollar values of their "promised" benefits are different?

• 2 + 2 = -17.5! Assume average real wage gains of 2% (the theoretical, best-case rate of return in Social Security -- which will be unsustainable by 2010 based on the program cash-flow) and real rates of return on PRAs of 4.5%. Under Bush’s plan, 37.7% (4 of 10.6 points) of your retirement payroll taxes are set aside for PRAs. What happens when you substitute a 4.5% investment for a 2% investment on the PRA side, and take a 2% investment down to 0% on the remaining 62.3% (to account for wage indexing). Your gains from PRAs outweigh your losses from inflation indexing by about 3 to 2. Even under Reid’s concocted, cherry-picked scenario, his numbers don’t add up.

Methodology, Assumptions, and Related Tools

• Political Calculations' post
• Best and worst case investment returns
• FAQ: How can Social Security's rate of returns be negative?
• The future value of an investment