Retirement Policy Institute • 1997 • 137 pages • $24.95
John Attarian is a freelance writer in Ann Arbor, Michigan.
Author A. Haeworth Robertson has fought the good fight for decades. Upon becoming Chief Actuary of the Social Security Administration (SSA) in 1975, he began trying to dispel misunderstandings of Social Security by both the SSA and the public. In 1978, he resigned to pursue his educational effort, which yielded two books, The Coming Revolution in Social Security (1981) and Social Security: What Every Taxpayer Should Know (1992), more than 100 articles and papers, and over 500 speeches.
But after 20 years of listening to “lies and hypocrisies surrounding the selling of Social Security to the public,” Robertson’s patience has run out. “I am compelled to speak out as forcefully as possible about one of the greatest frauds ever perpetrated on the American public.” Hence this concise, angry, and hard-hitting book for general readers.
Alarmed at Social Security’s oncoming financial crisis and the lateness of the hour, he warns that “if we do not take action by the year 2000, it will be too late.” After that, revising Social Security will entail profound social and economic turmoil.
He attributes the gross deception of the public to media ignorance and self-preservation among politicians and bureaucrats alike. “Some people have the paternalistic, arrogant attitude that they know what is best for you and that whatever is necessary to achieve their goals for what they perceive to be best for you is justified.” If they must “misrepresent the facts or hide future costs” to secure public consent and “keep those Social Security taxes rolling in,” so be it.
Much of The Big Lie is a long-overdue demolition job, exploding pernicious myths and grimly telling the truth. Your “contributions” do not provide your benefits; they’re redistributed to current beneficiaries. Nor are benefits guaranteed. Congress has already reduced benefits several times—for example, raising the normal retirement age from 65 to 67. Without reforms, further cuts are inevitable.
And forget about the “trust funds” supposedly accumulating to pay future benefits. Containing only Treasury debt, the funds, Robertson says bluntly, are “stark naked; there is nothing in them that can be used to pay future benefits.” Their only true asset is the government’s ability to collect taxes in the future.
Robertson is especially scathing about “the biggest lie of all”—the myth that the current system is affordable and needs only modest tax and benefit changes. Using both SSA’s intermediate-cost and high-cost (which he deems more accurate) actuarial assumptions, he shows that provision for financing promised benefits for the Baby Boomers is “grossly inadequate.” Under the high-cost projections, balancing income and outgo over the 2010-2060 period will require increasing Social Security taxes 48 percent or cutting benefits 32 percent. Medicare’s outlook is even worse.
Want to retire in your early sixties? Forget it.
In all this, Robertson is absolutely right. Changing Social Security, he concludes, is imperative. The only question is, “Do we want a relatively easy rescue now, or do we want a frantic, disorganized and futile rescue at the last minute?”
Robertson offers the Freedom Plan, which acknowledges “some necessary compromises” as we leave a system “with countless outstanding promises and trillions of dollars in liabilities.” He would keep the current system through end-1999. Beneficiaries aged 55 and up as of January 1, 2000, would stay in Social Security without change. To recognize the unfunded accrued liability for their benefits, estimated at $14 trillion as of that date, the government would put $14 trillion of Treasury bonds in the trust funds. People under 55 would no longer participate in Social Security or Medicare, neither paying taxes nor collecting benefits. Instead, they would receive Freedom Bonds equal to their past taxes, plus interest, for Old-Age Insurance and Health Insurance (but not Survivors Insurance or Disability Insurance), deposited in individual Freedom Accounts. They would pay taxes into the system at today’s Social Security rates, receiving more Freedom Bonds in exchange. They could also make private investments in their Freedom Accounts, e.g., real estate or securities. Besides retirement, they could use their accounts to buy disability and health insurance. Contributions to the accounts would be deductible from gross income for tax purposes.
While not, alas, phasing Social Security and Medicare out, the Freedom Plan has great merits. In formally acknowledging Social Security’s unfunded liability, it is outstandingly honest. The greater freedom of choice, and full income-tax break for the taxes and contributions, are attractive. So is the refreshing straightforwardness, eschewing the extravagant promises of other “reform” plans leaning on “the magic of compound interest.” Robertson isn’t peddling any snake oil.
When a former chief actuary says the Emperor is naked, it’s time to arrest Social Security for public indecency. Every syllable of Robertson’s anger is justified. His expertise lends his arguments unassailable credibility. A rousing, readable, and trustworthy humbug-buster, The Big Lie belongs on every Baby Boomer’s bookshelf.