I don't have time right now to go line-by-line on Padcrasher's claims, none of which have a source cited.
In the meantime, here are some choice citations from the President's Commission on Social Security Reform (comprised and co-chaired by equal numbers of Democrats). The report can be obtained at http://www.csss.gov/reports/Final_report.pdf
, and I encourage everyone interested in the future of Social Security to read it, especially Chapters 3 and 4. Give special attention to Model 2, which comes closest to the President's proposal.
This document is part of the public domain and may be excerpted and reposted at will.
"The current system faces cash flow deficits that are anticipated to grow continually, exceeding 6 percent of the nation’s payroll by 2075. This is an annual shortfall in 2075 of $1.36 trillion dollars (in constant 2001 dollars)." (Page 69)
"Social Security currently consumes 4.2 percent of the nation’s gross domestic product, or GDP. If additional revenues were to be devoted to Social Security to pay benefits under the scheduled benefit formula, that fraction would have to rise to 6.7 percent of GDP by the year 2075." (Page 70)
"Social Security actuaries are required by Congress to make long-term calculations, and the Office of the Actuary has typically used a 75-year valuation period for this long-term analysis. The current system is not in actuarial balance. The 75-year shortfall is equivalent, on average, to 1.86
percent of the nation’s taxable payroll. This measure is a convenient shorthand for quantifying the magnitude of the financing shortfall, averaged over the valuation period. However, this measure suffers from many important disadvantages.
First, the measure is largely indifferent as to the timing of the cash outlays and cash receipts. As such, it treats a dollar of Social Security revenue the same whether that dollar was spent on Social Security benefits, saved, or spent on non-Social Security spending.
A second disadvantage is that this measure conceals trends in shortfalls. For example, the 1.86 percent actuarial deficit of the current system hides the fact that Social Security has surpluses today but will experience even larger shortfalls in 75 years -- exceeding 6 percent of taxable payroll.
A third disadvantage is that the 75-year time horizon is arbitrary since it ignores what happens to system finances in years outside the valuation period. For example, we could eliminate the actuarial deficit by immediately raising the payroll tax by 1.86 percent of payroll. However, as we move one
year into the future, the valuation window is shifted by one year, and we will find ourselves in an actuarial deficit once more. This deficit would continue to worsen as we put our near term surplus years behind us and add large deficit years into the valuation window. This is sometimes called the "cliff effect" because the measure can hide the fact that in year 76, system finances immediately "fall off the cliff" into large and ongoing deficits.
A fourth disadvantage is that the criterion of actuarial balance is biased against programs that advance fund the system through personal accounts. This is because the value of the assets invested in personal accounts is not included as part of the calculation. Thus, many reforms that would improve the longterm financial footing of the system would appear to worsen it by this measure. In this sense, improvements in 75-year balance are useful but not the only measure that can be used to achieve fiscal sustainability." (Page 71)
"Under a personal account program, workers would be given the option to invest a portion of their payroll taxes in accounts that they would own. Like any sound investment program, investing in personal accounts requires additional resources up front. During the transition to a personal accounts program, tax revenues invested in the accounts would no longer be available to finance traditional benefit payments, although during a period of program surpluses additional revenues exist to finance the accounts.
Therefore, funds must temporarily be found to finance personal account investment while simultaneously paying benefits to retirees. Over time, these investments in personal accounts offer financial returns to the Social Security program via reductions in the rate of growth of system costs, to retirees in the form of higher expected benefits, or both.
The temporary increase in resources needed to fund the investment in personal accounts is sometimes referred to as the "transition cost." This terminology is often misunderstood, however, because it ignores the corresponding returns on these investments. To focus only on the "cost" of the investment while disregarding the benefits is to count only one side of the equation....
In short, if the extra saving proposed for Social Security personal accounts is considered a "cost," then any person who saves or sacrifices for the future for any reason pays a similar cost.
It is often said that Americans should "save and invest for the future." The so-called "transition costs" associated with personal accounts for Social Security are precisely that: saving and investing for the future, to reduce the need to raise taxes, cut benefits, or curtail other necessary government initiatives. The more Americans can save for the future, the better off we will be in the long run." (Page 73)
"Current projections show that benefits specified under current law would leave Social Security underfunded by about $3.157 trillion or about $21,000 per current worker (in present value). An important measure of the contribution of a Social Security reform proposal to the health of the economy is the extent to which a given reform can reduce the size of this unfunded obligation. We emphasize this measure as it quantifies the contribution of personal accounts plans to our nation’s long-term economic well-being.
Each of the models developed here improves this situation, to some degree. Line 1 of the table shows that in today’s dollars, Model 1 would be projected to have Personal Account assets of $10.3 trillion in 2075 ($1.1 trillion in present value); Model 2 would have $12.3 trillion ($1.3 trillion present value), and Model 3 would have $15.3 trillion ($1.6 trillion present value). The overall gain in system assets, inclusive of Trust Fund balances, is reported in Line 2. Here we see that each model improves on the current system’s projected debt in present value terms, in Model 1 by $0.5 trillion, in Model 2 by $4.8 trillion, and in Model 3 by $5.0 trillion." (Page 91)
"Assuming surpluses would not be available for transition financing, Model 1’s transition cost is $1.1 trillion, Model 2’s is $0.9 trillion, and Model 3’s is $0.4 trillion. If current surpluses were available, the costs would decline to $0.7 trillion for Model 1, $0.4 trillion for Model 2, and $0.1 trillion for Model 3. As a percentage of GDP, the latter values are remarkably small, at 0.29 percent, 0.33 percent, and 0.10 percent respectively." (Page 93)
So let's review: the current present value of the unfunded liability is over $3 trillion. The transition cost to a self-sustaining Model 2 program with personal accounts would be between $0.4 and $0.9 trillion. Hmmmm, tough call.
Keynes is dead and we are living in his long run.