Kerry Falsely Claims Bush Plans To Cut Social Security Benefits
It's not Bush's plan, and it wouldn't cut benefits.

October 18, 2004

Modified: October 18, 2004

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Summary



A Kerry ad claims "Bush has a plan to cut Social Security benefits by 30 to
45 percent." That's false. Bush has proposed no such plan, and the proposal
Kerry refers to would only slow down the growth of benefits, and only for
future retirees. It was one of three possible "reform models" detailed by a
bipartisan commission in 2001.

The ad also says nothing about what Kerry would do to address the troubled
state of Social Security finances. Unless taxes are increased, the system's
trustees say currently scheduled benefits would have to be cut 32%.

Analysis



This misleading ad, released Oct. 17, is one of a very few attempts made by
either side to discuss the troubled state of the Social Security system.
It's an issue that will confront the winner of this campaign when the first
of the post-World-War II Baby Boom generation reaches early-retirement age
in 2008.


Kerry Ad

"January Surprise"

Announcer : The truth is coming out. . . George Bush has finally
admitted he intends to privatize social security in a second term. "I'm
going to come out strong after my first swearing in," Bush said, "with. .
..privatizing social security." First George Bush threatens social security
with record deficits of over $400 billion. Now Bush has a plan to cut social
security benefits by 30 to 45 %. The real Bush agenda? Cutting social
security.

"The Truth is Coming Out"

The Kerry ad starts by saying "the truth is coming out," and then proceeds
to misinform voters by saying "Bush has a plan to cut Social Security
benefits by 30 to 45 percent."

It's a familiar campaign ploy, similar to the tactic used by Bill Clinton in
1996, when his ads accused Bob Dole of supporting a $270 billion "cut" in
Medicare. In fact, what Dole supported was a slowdown in the projected
growth of Medicare spending, at a time when Clinton himself was proposing a
$124-billion reduction (without, of course, calling his own plan a "cut.")



The Kerry ad is wrong on several counts:

..Bush hasn't proposed any specific plan . This ad refers to one of three
different possible "reform models" that were detailed in the final report of
the President's Commission to Strengthen Social Security in December 2001.
Bush hasn't endorsed any of them. He may propose something similar if
elected, but so far hasn't spelled out for voters exactly what he has in
mind.

..The plan the Kerry ad refers to doesn't affect benefits for current
retirees at all, and Bush has said consistently that whatever plan he
proposes won't cut benefits for those now drawing them, or those nearing
retirement. Stating that Bush plans to "cut Social Security benefits" will
be heard by many seniors as a plan to cut their benefits, which isn't true.

..Even for future retirees, benefits will grow under the "reform model" the
Kerry ad refers to. That model would reduce the rate at which the starting
point for future benefits is expected to grow, by increasing starting
benefits to keep pace with rising prices, rather than with rising wages as
has been the case since 1977.

The backup for the ad provided by the Kerry campaign cites a study issued
in July by the Congressional Budget Office of "plan 2" contained in the
final report of the bipartisan President's Commission to Strengthen Social
Security. The commission was co-chaired by the late Sen. Daniel Patrick
Moynihan of New York and by Richard D. Parsons, who is currently Chairman of
the Board and Chief Executive Officer of Time Warner Inc.

The commission stated that all three of the possible "reform models" it
examined would allow for increases in benefit levels paid to future
retirees:

Commission's Final Report: In fact, every Commission Reform Model will
increase benefits at least as fast as inflation, ensuring that no future
generation of retirees receives less purchasing power than today's retirees.
Hence, fears that benefits will be cut or retirees thrown into poverty are
simply false.

The commission said that continuing to peg future benefits to rising wages
would require a large payroll tax increase and is "not affordable." Instead
the commission proposed to peg future starting benefits to rising prices for
two of its model plans:

Commission's Final Report: The current benefit formula increases the
starting benefit from year to year at the rate of wage growth, which is
generally faster than is required to maintain purchasing power. This rate of
benefit growth is not affordable given current system revenues. Fortunately,
current payroll tax rates are sufficient to afford benefits that grow at
least as fast as inflation.

The "30 to 45 percent" figure in the Kerry ad is from the Congressional
Budget Office study and found that "first-year real benefits are projected
to remain generally constant." In other words, the starting point of
benefits paid to future retirees would be unchanged in terms of purchasing
power from those paid currently.

That would be less than the higher rates resulting from continuing current
practice, which Congress adopted in 1977 despite warnings that it could not
be sustained financially.

The CBO found that under Plan 2, first-year benefits paid to retirees born
in the 1980s would be 30 percent lower for middle- and upper-income persons
than under a wage-indexed system. (The reduction would be less for
low-income persons.) The figure would reach 45 percent only for future
retirees born in this decade, most of whom are yet unborn.

So Kerry's ad is incorrect. It would have been accurate to say, "Bush may
propose to hold benefits for future retirees constant instead of letting
them grow faster than inflation." But that's not nearly as scary.

Private Accounts Don't Require Indexing Change

It should also be noted that creating private Social Security accounts, as
Bush proposes, doesn't require substituting price-indexing for
wage-indexing. Price-indexing could also be used to hold down the future
cost of the current system as well. In either case, wage-indexing propels
the starting point of future benefits upward more rapidly, and costs more.

Also, the proposed price-indexing wouldn't affect annual cost-of-living
adjustments for retirees once they begin receiving benefits, only the level
at which benefits are set in the first year they are paid. After the first
year, benefits would continue to be increased yearly to maintain purchasing
power.

An Issue Undebated

There are a host of unanswered questions about Bush's intentions regarding
Social Security, and the campaign so far hasn't shed much light on any of
them. Bush has said he wouldn't increase payroll taxes, but maintaining
benefits for current retirees while allowing some portion of current payroll
taxes to go into privately owned accounts will cost at least $1 trillion and
perhaps much more, depending on what estimates are used. Bush hasn't said
where the money would come from.

Kerry, on the other hand, hasn't said how he would preserve the current
system. Social Security's finances are unstable, and its trustees stated in
the most recent annual report that by the year 2078 it will require a
payroll tax increase of nearly 50% to maintain the currently scheduled rise
in benefit levels. If taxes are not increased and no other changes are made,
benefits would have to be cut 32% that year.

Sources


"New Kerry Ad Exposes Bush's January Surprise - Social Security
Privatization," news release, 17 Oct 2004.

Congressional Budget Office, "Long-Term Analysis of Plan 2 of the
President's Commission to Strengthen Social Security," 21 July 2004, Revised
30 Sep 2004.

President's Commission to Strengthen Social Security, " Strengthening Social
Security and Creating Personal Wealth for All Americans ," final report, 21
Dec 2001.

Brooks Jackson, "Truth Was An Occasional Casualty In Sunday's Debate,"
CNN.com, 7 Oct 1996.

"2004 Annual Report of the Board of Trustees of the Federal Old-Age and
Survivors Insurance and Disability Insurance Trust Funds," 23 March 2004.

For the love of God, stop with the political attack posts! Go vote early
and be done with it.

Sincerely,

Stephen

Michael McKelvy wrote:

A Kerry ad claims "Bush has a plan to cut Social Security benefits by 30 to
45 percent." That's false. Bush has proposed no such plan, and the proposal
Kerry refers to would only slow down the growth of benefits, and only for
future retirees. It was one of three possible "reform models" detailed by a
bipartisan commission in 2001.

If you look at the numbers and massage them a tiny bit, the claim
holds water. This is no different than the half-truths Bush is spewing
at Kerry.

Kerry is adjusting for inflation and projecting the lost income
from the lack of raises. It really will end up meaning about 30%
less effective purchasing power.

OTOH, Social Security is hopelessly broken and cannot be fixed,
so to claim Bush will kill it or that it can even be saved at all
is more smoke and mirrors. I'd love to see one of them actually
say "I'm sorry, but due to the mismanagement of the previous ten
Administrations, Social Security is hopelessly crippled and dying.
There's nothing more that I could do other than slow down the
inevetable death of the program. If he(pointing at the other
candidate) says he can fix it, he's being lied to by his
advisors, who are painting rosy picture for him in order to
save their jobs, and presenting it as if it can really happen."

But directness is a lost art in politcs these days.

.The plan the Kerry ad refers to doesn't affect benefits for current
retirees at all, and Bush has said consistently that whatever plan he
proposes won't cut benefits for those now drawing them, or those nearing
retirement.

So, how does the math work out, then. Empty promises on both sides
because they honestly believe that it can be salvaged. They say
a man tries to bail out a sinking ship the hardest right before it
actually sinks.

Social Security is dying. Nothing can stop it without bankrupting
our entire economy. So, we need to look at other alternatives.

"Joseph Oberlander" wrote in message
ink.net...


Michael McKelvy wrote:

A Kerry ad claims "Bush has a plan to cut Social Security benefits by 30
to 45 percent." That's false. Bush has proposed no such plan, and the
proposal Kerry refers to would only slow down the growth of benefits, and
only for future retirees. It was one of three possible "reform models"
detailed by a bipartisan commission in 2001.

If you look at the numbers and massage them a tiny bit, the claim
holds water. This is no different than the half-truths Bush is spewing
at Kerry.

Kerry is adjusting for inflation and projecting the lost income
from the lack of raises. It really will end up meaning about 30%
less effective purchasing power.

OTOH, Social Security is hopelessly broken and cannot be fixed,
so to claim Bush will kill it or that it can even be saved at all
is more smoke and mirrors. I'd love to see one of them actually
say "I'm sorry, but due to the mismanagement of the previous ten
Administrations, Social Security is hopelessly crippled and dying.
There's nothing more that I could do other than slow down the
inevetable death of the program. If he(pointing at the other
candidate) says he can fix it, he's being lied to by his
advisors, who are painting rosy picture for him in order to
save their jobs, and presenting it as if it can really happen."

But directness is a lost art in politcs these days.

.The plan the Kerry ad refers to doesn't affect benefits for current
retirees at all, and Bush has said consistently that whatever plan he
proposes won't cut benefits for those now drawing them, or those nearing
retirement.

So, how does the math work out, then. Empty promises on both sides
because they honestly believe that it can be salvaged. They say
a man tries to bail out a sinking ship the hardest right before it
actually sinks.

Social Security is dying. Nothing can stop it without bankrupting
our entire economy. So, we need to look at other alternatives.


How can it be dying, it's only several Trillion in the hole.