Dean Baker is 'On The Job'

I love Dean Baker. He keeps an eagle eye on the media and points out the inanities that pass for "news". He points out the ignorance that gets past the editor and published. He points out the ideology that prances around as "news".

Here is his latest:

Pension Fund Cashes in Treasury Bonds: AP Screams "Crisis"

Okay, it's not exactly a pension fund, it's the Social Security trust fund that is cashing in some of the government bonds that it holds to pay benefits. This is the way the trust fund was designed to work, but AP somehow cannot find a reporter (or editor) who understands even the most basic facts about Social Security or for that matter Treasury bonds, which get called "IOUs" in the headline and four times in the article. (When GE has its next bond issue, will AP report on the auction of "GE IOUs?")

The whole purpose of building up the trust fund was to help defray the cost of the retirement of the baby boom cohort. This meant that at some point it would be necessary to sell some of the bonds to pay benefits. This has happened somewhat sooner than had previously been predicted due to the economic crisis created by inept policy and Wall Street corruption. It is not clear why anyone should see this as a crisis for Social Security.

The article also includes this non-sequitur:

"Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come."

Actually, the timing couldn't possibly be better. The government is running a large budget deficit because the economy is in a steep downturn. It is very good that Social Security is continuing to pay benefits without any tax increase. This boosts demand and stimulates the economy. AP reporters should know this.

The article also includes the bizarre assertion that:

"Social Security's financial problems have been looming for years as the nation's 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits — and stops paying payroll taxes — Social Security's trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program."

The fact that the program could face a shortfall in 27 years hardly fits most people's definition of crisis. Social Security also faced a shortfall in 1982. By the AP definition of crisis, it was in crisis at least from 1955. (Actually, it faced shortfalls in earlier years also, so by the AP definition, Social Security has always been in crisis -- giving the term a whole new meaning.)

What a careful reader can glean from this story is that AP doesn't like Social Security. The reality is that Social Security will likely face a modest shortfall in future decades, primarily due to the fact our children are projected to live longer lives than we do. This has been happening throughout the program's existence. There is no reason to believe that AP's Social Security "crisis" will be any more difficult to deal with than shortfalls that arose in prior decades.

If you don't already, you really should read his Beat the Press blog at The American Prospect website.

And a few days earlier, Dean Baker published this on his blog:

The New York Times Doesn't Like Social Security

That is what readers could infer from Jackie Calmes' blognote in which she listed Social Security alongside Medicare and Medicaid as "fast-growing entitlement benefit program." Social Security is projected to grow at a 5.3 percent annual rate over the next decade, only slightly faster than the 4.4 percent projected growth rate of nominal GDP over this period. By comparison, Medicare is projected to grow at a 7.0 percent annual rate.

It is also worth noting that Social Security is funded by a designated tax that is projected to keep the program fully funded until 2044. It appears that the NYT is unaware of the funding mechanism for Social Security. Given this designated tax it would make as much sense to cut Social Security as it would to cut interest payment on government bonds (i.e. default on the government debt), especially since interest is in fact a much more rapidly growing category of entitlement spending.

The reference to Social Security appears in a statement telling readers that: "many economists" are advocating cuts in these programs "to avert a fiscal calamity in the coming decade." It is also worth noting that many economists, citing extensive evidence, ridicule the "many economists" who make assertions about "fiscal calamity" without any evidence to support their position.

I wonder when the American public is going to wake up to the 'Boy Who Cried Wolf' story of the right wing ideologues in the US who hate social programs constantly trying to create hysteria in the hopes of destroying these programs.

Here's Naomi Klein on the Right's love of "shock therapy" as their way to shake things up and restructure things to their ideological preferences:



Read her book The Shock Doctrine: The Rise of Disaster Capitalism