Obama on Social Security in Manchester Union Leader

Sen. Barack Obama has an op-ed in today's Manchester Union Leader regarding Social Security reform. It's worth reading the whole thing, posted here, but here I'd like to dissect a few factual claims Obama makes in the piece.

First, Sen. Obama says, "Social Security has lifted millions of seniors and their families out of poverty. Without it, nearly 50 percent of seniors would live below the poverty line."

This is a common talking point, but let's be clear on what it means: if we forced people to pay Social Security taxes all their lives but didn't pay them any benefits, yes, nearly 50 percent of seniors would live below the poverty line. But this is a silly standard. If we were truly "without" Social Security, we would also be without Social Security taxes, which individuals could then save on their own for retirement. So the better question would be, "Without Social Security taxes and benefits, what would the poverty rate among seniors be?" The answer is, about the same as the current rate.

Second, Sen. Obama also says, "The underlying system is sound and the actual problem, a projected cash shortfall over the next 75 years, is relatively small and can be readily solved. For starters, that means strengthening the program over the long-term by returning to basic fiscal responsibility, so we're not borrowing billions from the Social Security Trust Fund."

This response doesn't make much sense, for two reasons. First, if the cash shortfall is small and can be readily solved, it shouldn't be difficult for Sen. Obama to propose a plan to fix the whole shortfall, not just the 15 percent of it his tax increase would fix. And second, if borrowing from the Social Security trust fund is a problem, then the problem is over $2 trillion larger than the small and readily solved one he acknowledges. That is, for the Social Security problem to be small and distant, as Sen. Obama claims, we have to assume the trust fund is "real" saving. But if one of the keys to reform is to stop borrowing from the trust funds, which we've been doing for a quarter century, then the problem isn't small and distant: it's large and begins in only around a decade.

Third, Sen. Obama says, "The Bush privatization plan that Sen. McCain now embraces would tell 39,000 New Hampshire residents that they're on their own, putting them at risk of falling into poverty and costing each of them more than $235,000 over their lifetimes."

Leaving aside whether Bush's plan was privatization and whether McCain embraces it, where is the math that supports the claim that it would cost people $235,000 over – this is the important part – their lifetimes? (Is $235,000 a correct number? I have no idea how it's being calculated, but here I'll focus on the bigger questions.) To balance Social Security going forward, we need to increase taxes or reduce benefits. Different plans may apportion things differently between tax increases or benefit cuts, but the total amount by which we need to raise taxes or cut benefits is the same. If we want Americans not to be hit with a $235,000 benefit cut, then they would need to be hit with a $235,000 tax increase. It appears that Sen. Obama is counting lifetime benefit reductions under President Bush's plan, but not the lifetime tax increases that would be necessary to avoid these benefit cuts.

Finally, Sen. Obama says, "It means ensuring Social Security's solvency while protecting middle class families from tax increases or benefit cuts, and without raising the retirement age. What I will do is ask those making over $250,000 a year to contribute a little more as part of a bipartisan plan that would be phased in over many years starting a decade or more from now."

Someone needs to show me how Sen. Obama will "ensure" solvency with the plan he outlines, one which fixes only around 15% of the long-term deficit. He can't do it, and it's irresponsible for Sen. Obama to tell Americans that he can. Right now he's only "asking" higher earners to pay more, but if he is truly to ensure solvency he will be asking others for sacrifice as well.