Cato’s commentary today takes a shot at inaccuracy in political advertising on the issue of Social Security.
While politicians being inaccurate when trying to get elected is hardly anything new, there is one comment that bears repeating (over, and over, and over until someone gets the message):
Perhaps even more disturbing than the actual falsehoods is how the ads ignore Social Security’s looming financial crisis. Social Security will begin running a deficit in just 11 years. Of course, in theory, the Social Security Trust Fund will pay benefits until 2040. That’s not much comfort to today’s 33-year olds, who will face an automatic 26 percent cut in benefits unless the program is reformed before they retire. But even that figure is misleading, because the Trust Fund contains no actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system. It says nothing about where the government will get the money to pay back those IOUs.
Even if Congress can find a way to redeem the bonds, the Trust Fund surplus will be completely exhausted by 2040. Then, Social Security will have to rely solely on revenue from the payroll tax — and that revenue will not be sufficient to pay all promised benefits. Overall, the system’s unfunded liabilities — the amount it has promised beyond what it can actually pay — now total $15.3 trillion. Yes, that’s trillion with a “T.” Setting aside some technical changes in how future obligations are calculated, that’s $550 billion worse than last year. By failing to act last year, Congress handed our children and grandchildren a bill for another $550 billion.[...]
It is perfectly reasonable to disagree with various Social Security reform proposals, including personal accounts. But Social Security is too important to be left to demagoguery. At a minimum, we should expect the truth about the choices we face.