Myth: Social Security is going broke.

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a ‘T’). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever. After 2037, it’ll still be able to pay out 75% of scheduled benefits--and again, that’s without any changes. The program started preparing for the Baby Boomers retirement decades ago. Anyone who insists Social Security is broke probably wants to break it themselves.

This is simply false.  That surplus consists entirely of loans to the government itself (to be fair, they “address” this point later).  Now when a bank loans out money, those loans are considered assets.  They are usually backed by collateral and generate income to the bank from the outside world.  It is not the same with government because government has loaned this money to itself and spent it.  So to reclaim those assets—i.e., to tap the surplus—government then has to pay itself back.  That money has to come out of general revenues.

The social security trust fund has been and always will be a fraud.  It’s like saving money for college by filling your piggybank with pieces of paper that read, “I OWE U $20, LOVE, HAL_10000”.  Eventually, the money has to come from somewhere.

Even if we accept that the surplus really exists, the unfunded liability of Social Security is $20 trillion, not $4.6 trillion.  Moveon is using this point to argue against small decreases in benefits.  So they argue against small cuts today so that tomorrow’s retirees will get a 25% cut.  Very future-minded these guys.

Myth: We have to raise the retirement age because people are living longer.

Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago. What’s more, what gains there have been are distributed very unevenly--since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half. But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

I’ll let Cato take this one:

But the fact is that American longevity rates, as calculated by the National Center for Health Statistics, place life-expectancy at age 15 to be about 51 years in 1940 (through age 66).  Today (using 2006 life tables), it is 63.4 years (through age 78.4).  Combined with the fact that retirees beginning to collect Social Security benefits earlier (at age 62 rather than age 65), we have witnessed a very significant increase in retirement life spans.

There’s also the hard reality that retirees are supported by fewer workers than they once were.  So, long-lived or not, the mathematics of our age distribution are going to force people to retire later.

This also misses an important point about senior health.  I can’t find it right now, but the NYT ran a great story a few years ago about how much healthier today’s seniors are than yesterday’s.  People who lived into their 60’s and 70’s used to be in wheelchairs by the time they got there.  Today, thanks primarily to improved diet, better prenatal nutrition and childhood vaccinations, that is no longer the case.

I favor a incentivized approach in which SS benefits increase the longer you delay retirement.  But the idea that people aren’t living longer and healthier lives today is pure garbage.

Myth: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn’t need to be fixed. But if we want to strengthen it, here’s a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come. Right now, high earners only pay Social Security taxes on the first $106,000 of their income. But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.

Notice the verbal flim-flam: Social Security isn’t broken! .... but if it was broken—NOT THAT IT IS—here is how we fix it.

I’ve talked this one to death, so I’ll just be quick:

1) Raising the earning cap doesn’t make the rich “pay their fair share” unless Social Security is, in fact, a welfare system and not a retirement system.  Social Security benefits are capped for higher earners, so why shouldn’t contributions be?

2) Raising the earning cap will give the US one of the largest marginal income tax rates in the world, raising it some 15 points.  And please, don’t come at me with this “employer contribution” bullshit.  If my employer weren’t making his “contribution”, it would be going into my pocket.  If his contribution goes up, my pay goes down.  That’s a tax on me, no matter how loudly you pretend it’s a tax on my employer. (Soros, of course, being rich, would be able to protect of his income from social security taxes.  See Alex’s post on John Kerry’s tax avoidance.)

3) Raising taxes won’t really help, because the government will simply loan that money to itself again. See point (1).  Seen in that light, you realize that this is nothing but a back door tax hike.

Myth: The Social Security Trust Fund has been raided and is full of IOUs

Reality: Not even close to true. The Social Security Trust Fund isn’t full of IOUs, it’s full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States. The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market--which would have been disastrous--but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.

“The US has never missed an interest payment on its debts” is both meaningless—we’ve come close and have never had this much debt before—and stupid.  Stupid because social security is not being funded by interest payments.  It has to be funded by paying back those treasury bonds.  And the US has not paid back this much debt since Andrew Jackson was President.

This is like saying my metaphorical piggybank isn’t really filled with IOU’s, it’s filled with super-duper reliable IOU’s because they come from me and I’m just so darned reliable about mortgage payments.  No matter how reliable or trustworthy you think the government is—and I would argue it’s not very much of either—this is still a massive chunk of treasury bonds our seniors are going to be redeeming.

Really, this statement is one that Michael Moore would be proud of.  It’s literally true but functionally false.  Yes, technically the Trust Fund is full of bonds.  But those bond don’t magically pay themselves back.  They have to be paid out of general revenues, which leads to ...

Myth: Social Security adds to the deficit

Reality: It’s not just wrong—it’s impossible! By law, Social Security funds are separate from the budget, and it must pay its own way. That means that Social Security can’t add one penny to the deficit.

And yet ... every budget before now has counted money borrowed out of the Social Security trust fund against the deficit (this is why Clinton was only nominally running surpluses most years). And yet ... Social Security is starting to run a deficit now and that money will have to come out of the general fund as we pay back those pesky IOUs bonds.  So yes, Social Security is a separate budget item.  A separate budget filled of ... US treasury bonds ... that now have to be paid back ... out of the general fund ... increasing the deficit.

Do you see how it works now, Moveon?  Do you see it works now AFL-CIO, NOW and NAACP, who have been running with this piece?  You can’t make yourself rich by borrowing money from yourself.  You can’t pay off debts without spending money.  Seniors can not buy jet skis with treasury bonds.  We have a paper trust fund, an increasing senior populations and a decreasing tax base.  This is not some crisis ginned up by Rush Limbaugh.  This is a real problem.

How can these people so fucking dumb?

GENERAL MOTORS introduced America to the Chevrolet Volt at the 2007 Detroit Auto Show as a low-slung concept car that would someday be the future of motorized transportation. It would go 40 miles on battery power alone, promised G.M., after which it would create its own electricity with a gas engine. Three and a half years — and one government-assisted bankruptcy later — G.M. is bringing a Volt to market that makes good on those two promises. The problem is, well, everything else.

For starters, G.M.’s vision turned into a car that costs $41,000 before relevant tax breaks ... but after billions of dollars of government loans and grants for the Volt’s development and production. And instead of the sleek coupe of 2007, it looks suspiciously similar to a Toyota Prius. It also requires premium gasoline, seats only four people (the battery runs down the center of the car, preventing a rear bench) and has less head and leg room than the $17,000 Chevrolet Cruze, which is more or less the non-electric version of the Volt.

So this collectivist’s green dream car basically costs $41K and delivers for that hefty price tag nothing more than a $17K combustion engine car would? WTF? Maybe you should just go buy a Mercedes or some such other luxury car instead of this boondoggle. Talk about getting screwed twice. It is apparent that not only did we tax payers get reamed by these bastards, all so their union buddies could keep their gold plated bennies and jobs, but that they now expect people to pay an arm and a leg for something that’s not all that to begin with. Bravo NYT for coming clean on the obvious!

Of course, the NYT could not just point out the obvious inherent ideological failure caused by those that want to use the power of government to thwart the mechanics of real world, and leave it at that. Nope, they had to go make excuses about why this failure isn’t really the fault of the inherent stupidity in that ideology. Right after acknowledging that the Volt turned out to be exactly what we told you would end up happening, we get a mountain of excuses.

Unfortunately for this theory, G.M. was already committed to the Volt when it entered bankruptcy.

Well, DUH! Making stupid decisions like this one is PRECISELY why GM was on the verge of imploding. When you add on one dumb decision after another, you should go the way of the T-Rex. GM is the company that allowed its unions to negotiate those golden packages that were draining all their income. GM is the company that decided a car that costs $17K with a combustion engine would be a viable product that could make them money if they plopped in an expensive electric motor, only to then find out that at $41K, only stupid people or government agencies are going to ever buy this junk.

And the dumb doesn’t end there. There were some fun doozies like this one:

Nor did the government or G.M. decide to sell the Volt at a loss, which, paradoxically, might have been the best hope for making it profitable.

Forget the inherent flaw here that the financial loss that the NYT is pining for here will be incurred yet again by us tax payers. Is this dumb assertion based on that idiotic concept of selling something at a loss, and making the loss up on volume? I am intimately familiar with the concept that the “per unit cost” goes down with volume. But I find it laughable that there ever will be enough sales of this vehicle to make that the case. And want to see the thing that gave me the biggest laugh?

If G.M. were honest, it would market the car as a personal donation for, and vote of confidence in, the auto bailout. Unfortunately, that’s not the kind of cross-branding that will make the Volt a runaway success.

What’s honest about an attempt to pretend GM was pushing this piece of crap to consumers to thank them for a bailout at the tax payer’s expense? WTF? In fact, if GM was honest it would be admitting this boondoggle is what you get when you marry government with business. Pretzel much? And I have always expected the combination of “GM’s Volt” and “runaway success” in the same sentence to also include something like “no way in hell” or “here comes a lame joke”. This is sad, but don’t worry. GM’s next success will be an $80K electric car that can be bought with a combustion engine for $25K! That’s a step in the right direction.

UPDATE: I think the Volt, in a nut shell, is the perfect illustration of the green world the left so pines for: you will pay oodles more, get a lot less in return for it, making some government agency more powerful in the process, and think this was somehow a good thing. Basically it illustrates the whole concept of “failure is a great success” that seems to be the MO of the left, by applying it to the real world in a practical manner.

You can probably guess my opinion on the whole mosque thing, but it’s worth restating.  The community center—which includes a mosque among other things—is blocks away from ground zero and has no view of it.  There are a number of mosques in Manhattan, so why object to this one?  What is the minimum non-stabbing-in-the-heart distance for a mosque anyway?  The people of NYC—you know, the ones whose feelings should be the most raw—approved of this project almost unanimously and I find it somewhat presumptuous for people from Georgia and Alaska to tell the people of NYC how to feel about Ground Zero.  Many muslims were victims of 9/11 and the lead developer of this project was one of those lending a hand on 9/11.  The entire “anywhere but Ground Zero” rationale is somewhat undermined by the same people protesting mosques nowhere near Ground Zero.

The more I look at it, the more this looks like an issue designed to artificially enrage the Right Wing.  In short, to gain a temporary domestic political advantage, the anti-mosque guys are willing to trammel the religious freedom of millions of American muslims and deride hundreds of millions of muslims around the world who are on our side.  From rooftop protestors in Iran to militias in Afghanistan to reformers in Indonesia to American muslims who have died in Iraq, our effort to destroy radicalism and terrorism are critically dependent on having allies in the Islamic world.  This is typical of the short-range thinking that has characterized the GOP lately—emphasizing outrage over thought, short-term tactics over long-range strategy and ideological purity over discourse.

This controversy has managed to provoke an astonishing amount of stupidity from the Right Wing, probably because they are having trouble justifying their opposition.  Neal Boortz, for example, selectively notes that the Cordoba Mosque was a church converted after Muslim conquest and makes some ominous musing about sharia law descending on all of us.  He conveniently ignores that the same site had earlier been converted by Roman pagans, Visigoth christians and later re-conquered and converted into its current form—a Spanish catholic cathedral.  Then you have Sarah Palin inventing new words and comparing herself to Shakespeare.  And the crowning turd in the waterpipe had to be Newt Gingrich saying that we will allow the mosque when synagogues open in Mecca; as if fucking Saudi Arabia is the example we set for ourselves.  As Yglesis notes in the link above, is he going to demand the Vatican build synagogues before we build more cathedrals?

If a Christian terrorist blew up the Dome of the Rock, I would not support banning churches within Jerusalem.  If an environmental terrorist torched a Hummer dealership, I wouldn’t forbid the Sierra Club from opening an office nearby.  If a Right Wing terrorist blew up a building in Washington, I wouldn’t support a ban on Tea Party marches on the Mall.  This country is about freedom and sometimes freedom is ugly or hurts some people’s feelings.  Our commitment to freedom is determined by how much we are willing to grit our teeth and let people do what they are allowed to do.  These guys aren’t getting handouts or special dispensations.  I wouldn’t build a mosque there, but they’re not breaking the law.  Put some undercover FBI agents in it if you want, but let’s not go down this road of decreeing where certain religions can practice.

83 percent of all U.S. stocks are in the hands of 1 percent of the people.

In 1962, that figure was was 94%.  In 1983 it was 93%.  So this is actually improving.  And where did I get these numbers?  From the same chart they did.

61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.

Beware statistics without context.  It’s a recession.  Of course, more people are living from paycheck to paycheck than were two years ago.  What were they doing 10 years ago?  20?  30?  As it is with children, so it is with statistical manipulators—when they leave information out, it’s because they don’t want you to see it.

66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.

Possibly alarming, but poorly sourced and, like as not, a heavily biased number.  Such figures are often based on adjusted tax income or exclude benefits like healthcare and retirement contributions.

But there’s a bigger problem buried in that bullshit number—class immobility.  They intrinsically assume that that top 1% in 2007 is the same top 1% from 2000.  This is not the case.  In fact, class mobility is quite strong:

Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years.

...

Among those with the very highest incomes in 1996--the top 1/100 of one percent--only 25 percent remained in the group in 2005.  Moreover, the median real income of these taxpayers declined over the study period.

Median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.

In short, their view of wealth is static.  Once poor, always poor.  But that’s complete garbage.  Class mobility remains a powerful force in our society. Studies of groups don’t show this.  But longitudinal studies of individuals do.

When I was a graduate student, my income was low as was my wealth.  Now my income is a little better and my wealth is ... well, doing OK, I guess, considering the circumstances.  So what’s the deal?  Am I the oppressor or the oppressed?  Do I need to start chasing myself around the plasma TV with pitchforks and torches?

36 percent of Americans say that they don’t contribute anything to retirement savings.

A staggering 43 percent of Americans have less than $10,000 saved up for retirement.

Again, no context.  Is this up or down?  Is it getting better or worse?  Does this maybe something to do with defined benefit pensions?  And the lie of social security?

24 percent of American workers say that they have postponed their planned retirement age in the past year.

Meaningless.  That just means we’re in a recession.  I’d be concerned if more Americans weren’t delaying retirement when the value of the retirement nest egg drops.  Again, is this stat up or down?

Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.

First ... did I mention were in a recession?  I’m sure I must have done.  A few years of data during an economic crisis do not provide evidence for a supposed decades-long trend.

Second, bankruptcies were very low in the years following the overhaul of bankruptcy laws because of the stampede of people declaring bankruptcy before the new laws took effect.  So naturally, it’s rising rapidly as we return to normal.  In fact, maybe the authors should take a look at the graph that accompanies their manipulative article.  Bankruptcies are still lower than they were between 2000 and 2005 and have clearly simply risen back to their pre-reform level.  This is the rankest sort of statistical manipulation but something that works on many gullible people who would rather quote an article than think about it.

Third, why is this necessarily a problem?  The United States has some of the most generous bankruptcy laws in the world.  It allows people who are crushed by debt to reset their finances, a privilege that is not afford in many other countries.  Declaring bankruptcy is awful, but not being able to declare it is worse.  It’s one of the few mechanisms that can ease the pain of a recession.  Bankruptcy effectively transfers wealth from rich to poor, from creditors to debtors.

Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.

Notice the key word here --- “households”.  A lot of the statistics used to prove the middle class is being destroyed are based on measures per household.  But households have steadily shrunk in the last few decades due to declining birth-rates and high rates of divorce.  So when you measure household anything—it could be household handjobs—it’s going to be headed down.  There’s also been a steady rise in low-interest 30-year mortgages and government tax credits.  This tends to drive up the cost of housing but spread the pain over longer periods of time.

For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

See “We’re in a recession”.  And again, look at the article for the figure.  Housing prices have plunged, so people’s equity has shrunk below their debt.  This is a result of the housing crisis (one aided and abetted by some liberal policies) not some decades-long conspiracy.  There has not been a giant surge in bank evil; there’s been a plunge in housing prices.

Also, they do not make the point that this is necessarily hitting the middle class hardest.  It might be, but I’d prefer some data rather than a scary graph and some hand waving.

In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.

This is one of the few salient points buried in here.  I don’t like the growth in executive salaries.  Not because of any pie in the sky communist bullshit but simply because it indicates an american business sectors that has gotten increasingly stupid (and increasingly cosy in the circles of power within our ever-growing government).  I also suspect it’s a bit misleading, since the average worker gets $10,000 in benefits that don’t count toward this figure and many corporate perks were moved to income during the tax reform in the 1980’s.

As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets

This is mainly a restatement of the first point and, I suspect, suffers from the same problem of not looking at how this has changed with time.  Notice also the “liquid” word squeezed in there.  By using that, they can eliminate any wealth considered illiquid, such as houses.

The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

Again, getting better or worse?  See their first bogus stat.  It showed 0.3% of wealth in the bottom 40% in 1962; 1.8% by 2001.

Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

This tends to happen when you bail out wall street firms with no conditions and Democratic Congressmen like Chris Dodd protect big bonuses.

In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector

Holy shit, he actually said something interesting.  And even true!  As I’ve blogged before, the employees unions fight this statistical reality tooth and nail, insisting they are doing complicated jobs while all of us schlebs are breaking rocks into gravel.  It’s not true, as USA today conclusively showed.  And it’s actually worse than this, when you include benefits, which are typically several times those in the private sector.  Click here to see the latest outrage (RTFLC is not responsible for any strokes that occur as a result of reading that story).

The top 1 percent of U.S. households own nearly twice as much of America’s corporate wealth as they did just 15 years ago

First, this is a misrepresentation.  The report they link to is that the wealthiest 1% have a larger share of corporate income, not wealth. I can not find the original CBO report that this is based on but I suspect that a contributing factor is the changes in tax laws which makes it easier to declare wealth and get it taxed rather than shelter it.  In other words, the wealth may have always been there, just hidden.  I also need to see how retirement accounts are accounted for and see about that pesky “household” thing.

Given the first statistic in this article—that the share of stocks among the wealthiest 1% has actually fallen, I suspect this point is somewhat exaggerated.

In America today, the average time needed to find a job has risen to a record 35.2 weeks.

Recession, see.

More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.

Actually, service jobs pay, on average, about the same as manufacturing jobs, depending on how you define service jobs.  That 40% are not all working at Walmart, for fuck’s sake.

For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.

Again, we’re in a recession.  And the Feds have vastly expanded the eligibility for food stamps and have entire organs, such as Americorps, that go around encouraging people to get on food stamps.  40 million is close to the number of Americans living in poverty.  That absolute number is larger than ever because our population is larger, not because the rate has skyrocketed.

This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.

Because the future of America is in textiles.  Not computers or medicine or manufacturing.  Textiles.  Where are the Lowell mills when you need them?

Notice also what’s left out: “This is what the American consumer now gets: cheaper clothing and growing wealth in foreign countries that can then trade with us.”

Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.

Until relatively recently, that rate was falling or steady.  It rose sharply in the late 70’s, early 80’s, fell for the rest of the 80’s, jumped again in the early 90’s recession, fell for the rest of the decade and has risen slowly for the last few years.  This statistic is also complicated by shrinking households and changing definitions of income.

Any child poverty is too much, but it tends to be very sensitive to the economy.  Long-term, it’s been relatively flat.

Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.

Again, a relevant point.  That’s almost 10% accuracy in the entire article!

The top 10 percent of Americans now earn around 50 percent of our national income.

False. It’s 40%.  And complicated by the household issue again.  And implies something that is not true, which is that the middle class is losing ground.  Wealth has grown for the lower income brackets, just more slowly. (Source).  And see again the point I made about class mobility.

I understand the lower classes are being hit hardest in the recession.  But this uninformed whining has been going on for decades.  In The Progress Paradox, Gregg Eastebrook talks extensively about how the middle class has more free time, more disposable income and more opportunities than it ever has --- and all we do is complain.  We have an absurdly rose-tinted view of the past, thinking America was like Leave it to Beaver and ignoring the reality of what America actually was.  Previous generations were working longer weeks, taking fewer vacations, enjoying fewer consumer goods and experiencing less of life. These are simple facts.  Your parents weren’t taking a week off to tour Germany.  If they were lucky, they might get a weekend to make another mouth to feed.

The breakthrough realization for me occurred when my wife and I were on our honeymoon (hey, it can’t be sex and booze all the time).  We went on a cruise and one day had lunch with someone who was talking about how badly the middle class was being squeezed.  That is, they were complaining about their financial while on a luxury cruise.  They had multiple people looking after them, were eating food so rich you could gain weight just looking at it and were enjoying a lifestyle that, only decades ago, was the exclusive domain of the rich.

We are facing problems.  A growing government sector, an exploding government pension system and the increasing politicization of our economy, with concomitant empowerment of Big Business.  Massive and persistent unemployment; but unemployment that could fade if our economy gets moving again.  We’re hurting, no question.  But to argue that the middle class is being systematically wiped out is simply ignorant.  And to put up 22 cherry-picked and ignorant stats to back it up is mathematical malpractice.