The New York Times today has an article by John Leland that offers a little reality check on all of the clueless establishment talk about raising the retirement age.
As Atrios and others have noted, it is a welcome corrective to a very lopsided debate. However, there was one paraphrased quote from a Social Security "reformer"/opponent/privatizer in the article that got me wondering.
Here's the passage from the NYT piece:
Workers like Mr. Hartley present a conundrum for a Social Security overhaul, said Eugene Steuerle, a fellow at the Urban Institute, who favors raising the retirement age. People are living longer, and providing "old age" benefits to them when they are relatively young and healthy, he said, makes less available to them when they are older and frailer.
While most of the article implicitly pushes back on this "young and healthy" line from Steuerle (amusing side note: "Steuer" in German means "tax"), it was that sneaked-in line about "people are living longer" that caught my attention. It passes by almost without question, as though the great crisis of the system is this unexpected increase in longevity, and because of this development in the average American lifespan, cuts must regrettably be made. But is this true?
As informed Americans are aware, the last major change to Social Security happened in 1983, when the Greenspan Commission (yes, that Greenspan) recommended a number of changes to payroll tax rates and other formulas. Congress passed the bill, Ronald Reagan signed the tax increase into law, and as we now know, the resultant surpluses were used to cover up the deficits created by military spending and tax cuts for the rich.
That was 1983. And now we're allegedly in another crisis because "people are living longer"? Were actuaries so dumb in 1983 that they could not foresee a gradual increase lifespan and factor it into any proposed solution?
The 1983 Commission report is online at the SSA website. If you click on section K, then click on "Tables of Historical Data," and go to Table 12, you will see for yourself what the 1983 commission predicted regarding lifespan.
Actually, you can see from the table that they developed three sets of predictions that were based on the rate of longevity increase: slow, intermediate, and fast. If you look at the report's Introduction, you will see that the Commission based its recommendations on the "intermediate" set (Alternatives II-A and II-B).
So the 1983 predictions must have been WAY off, to put the system in such a crisis, right? Not so. In 1983, this is what the Commission predicted the American lifespan to be in 2005:
Male 73.2, Female 81.4
And remember, payroll tax increases and other adjustments were made on the basis of this projection. And now, here is the actual 2005 figure, from the Census website:
Male 74.9, Female 79.9
For a 22-year-old prediction, I'd say that's pretty good. The men are living 1.7 years longer than projected, and the women 1.5 years fewer.
What to take away from this? The next time somone says, "people are living longer and taking more money out of the Social Security system," you have a ready reply. Government actuaries weren't dumb in 1983, and the Greenspan Commission based its tax recommendations on a longevity prediction that has proved largely accurate. In other words, we have been paying payroll taxes for a generation based on the assumption that lifespans would increase by the amount that they, in fact, have.
And then you must say: there is no Social Security crisis. There is an income tax/military spending crisis, and Social Security has been used to cover it up. Don't let the cover-up become permanent.