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Nedra’s Christmas Club

Associated Press writer Nedra Pickler does not understand how Social Security works. At all.

Nor do her editors.

Nor do the editors of many of the newspapers that rely on the Associated Press.

This is depressing.

Here’s what Pickler wrote in her report Wednesday regarding John Kerry’s campaign visit to Henderson, Nev.:

Also, Bush does not support privatization of Social Security for today’s seniors. He wants to give younger workers the option of putting part of their payroll tax into personal retirement accounts, giving them a chance to make a higher return on that investment in return for smaller Social Security benefits.

(The paragraph before this one vaguely cites “Bush’s campaign” and “the White House,” so it’s possible here that Pickler intended this graf also as a statement of their position. The way it is written, though, it’s difficult to know where the Bush campaign’s statement ends and Pickler’s begins. I’m not sure she knows either.)

Pickler seems to think of Social Security as a federally run Christmas Club. Or like a series of federally mandated IRAs — one for each citizen — that the government runs on our behalf.

In her scheme, your Social Security number functions like an account number. Your payroll taxes are deposited into your own personal Social Security account, from which you will be paid benefits when you retire.

Thus it is possible — in this imaginary scheme — to take a portion of younger workers’ payroll taxes and instead of depositing it into this federally run account, to allow those workers to deposit this portion in some other, “higher return” federally run account. Such a scheme would be neither social nor secure, but that’s not the point here. The point is that this isn’t how Social Security works.

The payroll taxes of younger workers do not go into “retirement accounts” that will someday provide the benefits for those younger workers. The payroll taxes of younger workers go to pay current benefits to those Pickler calls “today’s seniors.”* The younger workers, when they get older and become tomorrow’s seniors, will in turn collect benefits paid for by the payroll taxes of the younger workers of the future.**

Bush’s plan to “give younger workers the option of putting part of their payroll tax into personal retirement accounts” therefore has a direct impact on the benefits of today’s seniors. Another way — a more honest way — of describing this plan is to say that the president wants to take some of the benefits currently being paid to today’s seniors and give them instead to younger workers who will then invest them in private accounts, seeking high returns.

The newspaper I work for ran this story — which is a point against us. But we cut the section on Social Security on the grounds that it was garbled and asinine — which is a point in our favor.

Let’s see how some of the other papers did:

The Chicago Sun-Times leaves the Picklerized description of Social Security intact. Two big thumbs down for the editors there.

The editors at The Houston Chronicle don’t know how Social Security works either. Houston — we have a big problem.

Every citizen of Michigan has a Social Security number, and I’m sure many of them understand how the system works. But the editors of the newspapers served by MichiganNews.com don’t.

The editors of The San Francisco Chronicle would probably explain that they just provide raw wire stories on their Web site. (Just because we published it doesn’t mean we read it.)

Have a pulse and a rudimentary grasp of the English language, but no idea how American government works? You can get a job as an editor at Maine’s Kennebec Journal.

We’re not talking about a complicated subject here — something like the precise meaning of “margin of error” in a given poll. And we’re not talking about something arcane that doesn’t affect the lives of anyone who reads the newspaper. This is Social Security — it affects the lives of everyone who reads the newspaper. It would be nice if editors — or reporters like Pickler — had some idea of what they were talking about.

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* I would be very surprised if there isn’t, somewhere, a publication named “Today’s Seniors.”

** This is how Social Security was designed to function, and basically how it still operates. Since 1983, however, in anticipation of the eventual retirement of the Baby Boom generation, wage earners have been paying a higher-than-usual payroll tax intended to create a Social Security surplus that will help to pay the benefits for the larger-than-usual boomer generation upon their retirement. This makes the system, or part of it at least, slightly resemble the kind of scheme Pickler imagines. Or it might if the surplus were actually being set aside and preserved for future retirees instead of being used to fund the Bush tax cuts. But that’s another story.

  • Soul

    They know how it works. They just want Social Security Privatized, and are plenty willing to lie in order to get it. This is why Freedom of the PRess doesn’t work. It ASSUMES the best about people, and places one class of people above all others, exclaiming that they are to speak for the people regardless of the fact that they are only out for themselves. No rights should be given to any people regarding speech that sets them above any other people. Freedom of the press does that, Freedom of Speech should have been all that was needed. all Freedom of the Press does is give Newspapers a right to libel and make shit up.

  • Legomancer

    I’ve always considered Social Security as a legalized Ponzi scheme, where the benefits to the people cashing out are paid by the new people cashing in. I know there’s a slight difference, but there doesn’t seem to be much of one.

  • Stan

    Fred,
    Thanks for the analysis. I would love to hear more about how the editing of wire stories work. Frankly, when you post things like this, I’m surprised to find out that editors do even read, much less actually edit, the wire stories that they run. I assumed that they just ran them as is. Well, apparently, many of them do just run them as is.
    As far as Social Security is concerned, I do really think Bush&Co are relying on Americans’ ignorance about how the system works in order to acheive their dastardly plans.

  • P. Mullins

    Yes, I think this is an extraordinary post, too.
    I had reason to call the SSA sometime in January or February and was put on hold for long periods. Surprisingly, they do explain the real facts of it to you there–instead of the Muzak. If I hadn’t heard it, I wouldn’t even know what you were talking about, notoriously deficient in such areas. However, I had no idea all the wrong perceptions were being put into print by large and small papers.

  • Todd Johnson

    All I want is to be able to get the equivalent in benefits and or money back of what I have put into the system.

  • JRoth

    Fred, isn’t this reminiscient of the misunderstanding faced by your hero and mine, George Bailey, when there was the run on the banks? “You’re thinking of this all wrong, like I’ve got the money sitting back in a vault. It’s not there – your money is in Ed’s house – that’s right next to yours – and in Joe’s….”
    I should note that it’s not a Ponzi scheme for two reasons. First, no one is getting rich as the middleman – there is no Ponzi. Sure, Congress uses the surplus for general spending, but there’s no serious risk of default – the money will be found. SSI takes a much smaller chunk for admin than any privately-run investment/savings setup (in return for low, but risk-free, returns). Second, except for the first generation that benefitted, benefits generally track inpay – the system is sustainable as long as there are many productive workers. The Baby Boom retirement represents a bubble of disproportion, but every study not put forth by privatizers shows that the system can easily remain solvent past the lifetime of the last Boomer, returning to historic, sustainable ratios of worker to retiree.

  • Mark

    Pickler seems to think of Social Security as a federally run Christmas Club. Or like a series of federally mandated IRAs — one for each citizen — that the government runs on our behalf.
    No, she _doesn’t_ think that’s how Social Security works. Here’s what she said:
    “Also, Bush does not support privatization of Social Security for today’s seniors. He wants to give younger workers the option of putting part of their payroll tax into personal retirement accounts, giving them a chance to make a higher return on that investment in return for smaller Social Security benefits.”
    That is, _under Bush’s plan_, younger workers would have the option of saving some of their money in personal accounts. She’s fully aware that under the current system there are no personal accounts.

  • animus

    “[Bush] wants to give younger workers the option of putting part of their payroll tax into personal retirement accounts, giving them a chance to make a higher return on that investment in return for smaller Social Security benefits.”
    Doing this causes a gap in revenue where contributions drop now but payouts stay as they are until the people opting out start to retire. This really does look as if she thinks the money for those future payouts is stuffed in someone’s mattress somewhere.

  • Pat Vogel

    Um, Mark, I don’t mean to be rude but did you read the whole post? The part about today’s seniors (and all the people who will retire between now and when today’s young workers will retire with their privatized personal account)? Do they just forgo the benefits they were counting on? That’s the place where the assumption about the individual nature of the inflow-outgo falls apart. There isn’t nearly enough in the kitty to cover these obligations without the inflow from current workers.
    And I have other questions about this fascinating topic: isn’t the social security tax really divided into Medicare and OASDI, meaning something like “old age, survivor, and disability income”? How does the privatization plan cover Medicare and the survivor and disability portions of OASDI? If there is no plan to eviscerate Medicare, why not? Is it because people are less gullible and more protective of this benefit because they have an easier time seeing themselves in a vulnerable position when it comes to their health, whereas they are more motivated by greed when thinking about retirement income? This subject is way more complicated than a few politically-inspired slogans can give credit to.

  • Mnemosyne

    Pat Vogel brings up a very good point I’d never thought of before — if Social Security gets privatized, what does happen to those disability and survivor payments? Who takes those over?
    As someone whose college education was in large part funded by Social Security survivor’s benefits, I’d like to know. I don’t think it’s ever really been addressed.

  • 537 votes

    Krugman is on the case today.
    2 additional points to make–we are facing an enormous Social Security bulge as the Boomers retire. I think Krugman compared it to a pig passing through a boa constrictor at one point. The SS Trust Fund was supposed to finance that, but it can’t do that very well when the “lockbox” of funds is crow-barred open to pay for government after giving enormous tax cuts to the rich.
    Making matters worse, all of those Boomers are going to vote, and odds are pretty good they are not going to be voting against their interests. So we have no way to pay their benefits, and eager, powerful hands held out for more benefits. Prescription drug coverage by Medicare is one example of what we can look forward to. Meltdown looming, and zero leadership from the GOP on this issue.

  • Pat Vogel

    Oh, and another thing about Social Security: how many people are aware that their employer matches every penny of what they put in to it? With the Bush administration’s reputation for being radically pro-business, how many of you out there trust that this match will continue under “privatization”?
    They’re counting on your ignorance, folks. Please disappoint them.


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