Everyone Is Lying To You About Social Security – Here Is The Truth (IMAGE)

President Franklin Delano Roosevelt signs the Social Security Act on August 14th, 1935. http://en.wikipedia.org/wiki/Franklin_D._Roosevelt

President Franklin Delano Roosevelt signs the Social Security Act on August 14th, 1935. Photo from Wikipedia.

There might be no government program that repeatedly enters the public conversation as much as Social Security does. And there might be no other program that is the subject of as many distortions. Remember this November 2012 interview on CBS with Goldman Sachs CEO Lloyd Blankfein? Keep in mind as you read this that Blankfein is a Democrat.

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BLANKFEIN: You’re going to have to undoubtedly do something to lower people’s expectations — the entitlements and what people think that they’re going to get, because it’s not going to — they’re not going to get it.

PELLEY: Social Security, Medicare, Medicaid?

BLANKFEIN: You can look at history of these things, and Social Security wasn’t devised to be a system that supported you for a 30-year retirement after a 25-year career. … So there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised. But in general, entitlements have to be slowed down and contained.

Blankfein’s comments are wrong on so many levels it is hard to know where to begin. Let’s start with the easiest to challenge: that Social Security wasn’t intended to support you “for a 30 year retirement after a 25 year career.” Perhaps a CEO such as Blankfein might expect a 30 year retirement and a 25 year career, but for most working Americans their career usually begins somewhere between the ages of 18 and 22, and eligibility for a reduced Social Security pension starts at 62. Basic math makes it obvious that most people work for at least 40 to 45 years before being eligible to draw Social Security. In regard to the second part of his comment, very few people enjoy a “30 year retirement.” The average male will collect Social Security for 13 years, the average female for 17 years.

Blankfein mentions raising the retirement age for Social Security. Thanks to the Social Security Amendments of 1983, this has already happened once. That law provided for gradually raising the age at which a person can collect full Social Security benefits from 65 to 67 for anyone born in 1938 or later. For example, someone who was born between 1943 and 1954 will not be eligible for full Social Security benefits until he or she reaches the age of 66.

You can be sure that the folks who think it is no big deal to ask everyone to work three to five years longer are all people who have worked in white-collar professions for most or all of their working lives. They simply do not understand the toll that daily physical labor, such as working in construction trades, driving delivery vehicles, doing custodial work, or any of a myriad of other activities takes on the human body. Many construction workers and truck drivers start working in those fields when they are 18 or 19. By the time they are in their 50’s they are often reaching a point where their bodies are starting to break down from the strain. Scott Quenneville, a 47 year old delivery driver, told the Wall Street Journal

I’ve already had two knee surgeries after going up and down these trucks all day. I don’t even know if I can make it to 57 and there’s no way I can make it to 65.

This is the type of worker that people like Lloyd Blankfein expect to work to age 70, or even later.

One of the biggest distortions to come out of the discussions about Social Security is the falsehood that people live “a lot longer now than they used to.” This is a prime example of the misuse of statistics, yet it gets repeated as gospel by Republicans, Democrats, and the media. While it is true that life expectancy at birth has increased dramatically over the past 80 to 100 years, due to much lower infant mortality, life expectancy at adulthood has increased very little.

The Social Security Administration offers a table that shows remaining life expectancy for those who turned 65 in various years.

You can see that the increase in life expectancy at age 65 from those who reached that age in 1940 to those who reached it in 1990 is a paltry 2.6 years for males and 4.9 years for females.

In the CBS interview Blankfein refers to Social Security by the popular term, “entitlement.” Most Americans are “entitled” to Social Security, because they have contributed to it for years. It may be a little hard for people such as Blankfein to understand, because many of them collect the vast portion of their salary through dividends and interest, which means that they pay no Social Security (FICA) tax at all. Even those high income individuals who do pay FICA tax on their salary may not fully appreciate how much the average worker contributes, because as of 2013 the tax is only collected on the first $113,700 of income. So a $40,000 a year truck driver pays FICA tax on every dollar he earns, while a $225,000 a year corporate executive pays the tax on only about half of his or her income.

Another claim that has been made numerous times is that most people get more out of Social Security than what they paid in FICA taxes. This has historically been true. However, a 2010 report written for the Senate Committee on Aging paints a different picture.

…for workers who earned average wages and retired in 1980 at the age of 65, it took 2.8 years to recover the value of the retirement portion of the combined employee and employer shares of their Social Security taxes plus interest. For their counterparts who retired at the age of 65 in 2003, it will take 17.4 years. For those retiring in 2020, it will take 21.6 years. (pp 13-14)

Remember the statistic shared above: the average male collects Social Security for 13 years, the average female for 17 years. So most recipients will not recoup all of their contributions plus interest, even as the program is constituted now. Reducing benefits or changing the method of benefit calculation will make this even worse.

It is a fact that without changes the Social Security Trust Fund will eventually not be able to continue to pay benefits at the current rate. This is due at least in part to programs such as Supplemental Security Income (SSI) and Disability Insurance which allow people to collect benefits before they have contributed to the trust fund over a working lifetime. Still, as Bernie Sanders observes, Social Security can pay 100 percent of benefits owed for the next twenty years, and 75 percent of benefits after that. Former Secretary of Labor Robert Reich has also stated that raising the earnings cap on the FICA tax will make Social Security solvent into the foreseeable future.

One final fact about Social Security: In and of itself it does not add a single cent to the deficit. What has happened over the years is that a succession of congresses, controlled by both parties, have raided the Trust Fund for a variety of reasons, and now it largely consists of U.S. Treasury securities. Remember when George W. Bush called the Trust Fund “just IOU’s?” Those were government bonds he was talking about. Since those bonds pay interest which has to be paid out of government revenue, that is how Social Security “adds to the deficit.” Congress caused the problem, and now they want you to pay for it.

(The following website has excellent information debunking many Social Security myths: www.retirementrevised.com)