Social Security in crisis? Hardly.

Despite doomsayers' predictions, the program is solvent, effective, and highly likely to continue that way.

By David R. Francis | columnist

from the December 3, 2007 edition

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Presidential candidate Barack Obama got himself into hot water with some in his own party when he recently said that Social Security faces a "crisis."

Senator Obama's problem is that the nation's most popular social safety net program is actually in pretty good shape.

"The whole problem is exaggerated," says Mark Weisbrot, codirector of the left-leaning Center for Economic and Policy Research (CEPR) in Washington. "Nobody needs to talk about it."

The Trustees of the Social Security system, in their report last spring, calculated that the system's income would be inadequate to pay the full benefits promised to seniors in 2042. By then, 35 years hence, many baby boomers will be gone. For those still living, the payroll revenues that provide the basic income for the system will be sufficient to pay 75 percent of promised benefits. The next generation of retirees will also get 75 percent – not zero, as so many of them believe because of the false talk about the system being "bankrupt." And unless the nation's productivity stalls for decades (Social Security benefits are linked to wage levels), that 75 percent will have a buying power perhaps 30 percent greater than the Social Security benefits received by seniors today.

An analysis of the Congressional Budget Office puts the shortfall – not bankruptcy – at 2046, a few years later, when the Social Security Trust Fund runs out of the Treasury bonds it has been stockpiling because current payroll revenues each year exceed benefits paid.

A professional actuary, David Langer in New York, sees a brighter picture. He figures Social Security's finances are actuarially sound and able to pay full benefits for the next 75 years.

Mr. Langer reaches his conclusion after examining a decade's worth of 75-year projections made by the trustees. He found that the most optimistic of the three annual projections has been most accurate. Those more cheerful predictions show Social Security completely sound, with even a small surplus at the end of 75 years. "There is no problem, actuarially," Langer says.

He blames conservatives and their think tanks – including the CATO Institute and Heritage Foundation – for a long "propaganda campaign" that has foisted on the public the idea that Social Security is in deep trouble. He also criticizes the media for accepting the gloomy view of these critics, many of whom advocate privatizing Social Security.

The Trustees' middle projection, which the Trustees see as most likely, indicates that Social Security's financial shortfall over 75 years amounts to $4.7 trillion. By comparison, the war in Iraq and Afghanistan is expected to cost at least $1 trillion and the Bush tax cuts another $1 trillion over time.

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