DAYS OF PONZI! It isn't that hard to explain!


PART 3—IT’S SO EASY: The New York Times does know how to provide basic background information. Consider this morning’s news report about the HPV vaccine.

In 2007, Governor Perry issued an executive order requiring sixth-grade girls to be vaccinated against the human papillomavirus. The Texas legislature countermanded his order. Today, Perry’s order is being criticized by other GOP candidates as an abuse of state power.

In this morning’s Times, Trip Gabriel does some basic background reporting about this burgeoning issue. To wit:

At present, only Virginia and the District of Columbia require this vaccination for middle school entry. The American Cancer Society does not “advocate requiring HPV vaccinations before entering middle school, since parents and even doctors need more time to get used to the idea of the vaccine and to accept that it is safe.”

That said, the vaccine “is strongly recommended by medical groups, including the American Academy of Pediatrics and the American Cancer Society, to prevent cervical cancer.” One more point: “There is no evidence linking it to mental retardation”—the latest cock-eyed, know-nothing claim advanced by Candidate Bachmann.

There! Do you see how easy it is? Just like that, the New York Times provided some basic background knowledge about this burgeoning issue. But neither the Times nor the Washington Post attempted to offer this basic service in the case of Perry’s wild claims about Social Security, claims the fiery fellow advanced at last Wednesday’s GOP debate. Is Social Security “a Ponzi scheme?” Is the program “a monstrous lie?” Is it a “lie” when younger workers are allowed to “expect to receive benefits when they reach retirement age?”

Governor Perry made all these comments and insinuations—and the Post and the Times simply stared into space. (As usual, the career liberal world sat around and let them.) This is sad, because it’s easy to explain how the program works—to explain its future prospects.

For decades, the public has been aggressively disinformed about the Social Security program. Presumably, even our upper-end “journalists” know this. But even today, the Post and the Times are too lazy, too detached, perhaps too afraid, to offer the simplest background information about this critical program. In the last week, they have completely failed to address Perry’s remarks.

Others have done better. In this process, they have shown how easy it is to provide the basic information. One example: In this morning’s Baltimore Sun, the editors somehow managed to tell readers this:
BALTIMORE SUN EDITORIAL (9/14/11): The only real issue is how big a benefit should be provided by Social Security and how it should be financed. The nation's demographics are changing, and the existing formula will not work—at least not for those who retire in 2038 or beyond, according to the most recent analysis. Too many beneficiaries are living too long and are supported by too few workers for the status quo to last.

But the problem is relatively easy to solve. One can raise taxes or reduce the benefit or some combination of both. For instance, delaying retirement age for the next generation, which is sure to live longer and healthier than its predecessors, might be prudent. Capping cost-of-living adjustments might be helpful, too. And increasing the cap on income subject to Social Security taxes would increase revenue and make the system more fair.

The sooner such a solution is agreed upon, the less drastic the change will need to be. But even with no change, future retirees would receive an estimated 80 percent of benefits. Ponzi victims never had it so good.
In his original presentation, Perry implied that younger voters know they will receive no benefits. But how weird! “Even with no change, future retirees would receive an estimated 80 percent of benefits,” the editors managed to say.

It’s amazingly easy to state that fact; younger voters deserve to hear it. But in their hapless news reporting, the Post and the Times didn’t bother to do so—except for one lonely paragraph in last Thursday’s Times, a paragraph which only appeared in the newspaper's late edition.

Last Wednesday night, Perry seemed to tell younger voters—again!—that they will receive no benefits. That statement is a monstrous lie. Even in a somewhat bungled column, Ruth Marcus managed to explain the facts, with ease, on the Washington Post op-ed page:
MARCUS (9/9/11): Perry's overblown rhetoric suggests to younger workers that they will have nothing to show for their contributions—like investors who lose all in a Ponzi scheme. In fact, even after the Social Security surplus is exhausted, the system could continue to pay out more than three-fourths of promised benefits. That would represent an enormous problem for many retirees, but it is hardly a "monstrous lie." Perry's inflammatory suggestions to the contrary are a monstrous misdirection.
In our view, it’s foolish to try to salvage some dignity for Perry’s “Ponzi scheme” comment, as Marcus did elsewhere in this column. This program isn’t a Ponzi scheme; nothing is gained when we try to see some merit in this stupid remark. That said, Marcus found it very easy to explain the basic facts. Disinformed younger voters badly need to hear what she said: “In fact, even after the Social Security surplus is exhausted, the system could continue to pay out more than three-fourths of promised benefits.”

Why weren’t all voters reading such facts in a Washington Post news report?

Over the past several decades, a great deal of disinformation about Social Security has involved its so-called trust fund. A set of persuasive talking points have been churned about this aspect of the program. Some of these points have been designed to make voters think the trust fund is fictitious (“an accounting fiction”). Other points have been designed to make voters think that Social Security will run out of funds altogether when the trust fund is exhausted. But all these points have served to disinform younger voters:
Disinformative talking-points about the Social Security trust fund:
The trust fund is just a bunch of worthless IOUs!
The money isn’t there—we’ve already spent it!
It’s like the left hand borrowing from the right!
The program will go bankrupt in 2037!
If you’ve been alive on the planet, you’ve heard these talking-points down through the years. Unfortunately, most of our highest-ranking “journalists” have been living on the far planet Zarkon during that period. (So have our “academics.”) Expecting them to explain the facts about the trust fund is like asking a hippo to jump to the moon. They couldn’t do it if they tried—and they have so such intention to do so.

That said, Kevin Drum made part of this problem seem quite easy in this recent post. We were puzzled by part of what he wrote, as were some of his commenters. But in the following passage, he is explaining how the program will continue to work after the trust fund is exhausted. We’ll leave his bolds in place:
DRUM (9/8/11): Social Security is actually a much simpler program than that. I'm going to put the rest of this paragraph in bold so you can't possibly miss it. Here's how Social Security works: every month we take in taxes from working people and every month we turn around and distribute those taxes to retirees. That's it. That's how it works, and everyone who actually knows anything about the program knows that's how it works. Taxes come in, benefits go out. And the key to solvency is simple: making sure that those taxes and benefits are in balance.

This is, of course, the way every government program works. Taxes come in, payments to soldiers go out. Taxes come in, payments to NASA rocket scientists go out. Easy!
Once we demystify the program this way, younger voters are ready to grasp this basic fact: Even after the trust fund in exhausted, payroll taxes will still roll in. Their benefits will be paid, from those incoming funds.

How easy is it to explain basic facts about this program? It’s so easy that Perry himself is almost able to do it! In Monday’s USA Today, the ridiculous blowhard took a crack at explaining the situation. His piece was still designed to deceive. But with a few obvious editing changes, the scam would have been done:
PERRY (9/12/11): The first step to fixing a problem is honestly admitting there is a problem. America's goal must be to fix Social Security by making it more financially sound and sustainable for the long term. But Americans deserve a frank and honest discussion of the dire financial challenges facing the nearly 80-year-old program.


By 2037, retirees will only get roughly 76 cents back for every dollar that is put into Social Security unless reforms are implemented. Imagine how long a traditional retirement or investment plan could survive if it projected investors would lose 24 percent of their money?
Perry’s piece is still built around deceptions. For that reason, USA Today should not have published it as it was written. But please note that highlighted statement! With even modestly competent editing, Perry would have said this:

“After 2037, retirees will still receive roughly 76 cents for every dollar that is currently promised to them.”

Perry’s highlighted statement was built to deceive. USA Today should not have published it as he wrote it. But even as Perry strove to deceive, he came very close to telling younger voters the truth:

They will receive benefits in the future. As the Sun has somehow managed to say, “The only real issue is how big a benefit should be provided by Social Security and how it should be financed.”

Those younger voters have been deceived about this program for their whole lives. (Older voters have been deceived too, liberals and tea party folk alike.) Last week, the very loud Perry continued the process of this endless deception.

The New York Times is praised as our greatest newspaper; next in line is the Washington Post. Timid, stupid, detached and afraid, these big “newspapers” kept traps shut about this fiery fellow’s continuing acts of deception.

But then, they’ve had lots of practice down through the years! The worthless hacks cast as “liberal leaders” have kept their traps shut too.

Tomorrow: When the Times (alas!) tried to explain


  1. I discovered by accident this week that a key fact about the controversy over Social Security is either unknown by the media, or, if known, is routinely ignored. The claim that Social Security is "broke" rests upon the annual report of the Trustees. In every year they have "projected" benchmark dates upon which the trust fund would be emptied and some years later when benefits would have to be cut. This forecast is but one of three projections prepared annually, and it is the Intermediate. The least optimistic of the three sees apocalypse coming much sooner. But the third projection, based upon different assumptions, sees the system functioning virtually without any difficulties at all. And the remarkable thing is that history has ratified the optimistic forecasts of the past. I urge you to take account of these facts in your commentary on the misleading controversy over Social Security.

  2. Your title is a bit misleading:


    My laptop says today is wed sep 14.

  3. It's not just that politicians lie about this and reporters fail to correct it. Even "straight" reporters contribute mightily to the false perceptions.

    This morning, Alison Kosik on CNN (a financial/business reporter, supposedly not innumerate) did a supposed "fact check" on SS, at the end of which she cried, "And by 2037, Social Security will run dry!"

    The startled anchor, T.J. Holmes, challenged her on that, at which point she admitted that, no, SS isn't actually going to "run dry," just the trust fund part. Oh. OK. Whew!

    I think this conflation of Social Security as an overall program and the "trust fund," which is only one element of it, is the key source of the misinformation.

    Why do reporters who demonstrably know better, like the lightweight Kosik, continue to do this? In this case, thank goodness for T.J. Holmes.

  4. Hmm, here's another journalist who has been misled...Paul Krugman!

    "Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in)."

    Krugman goes on to say that there won't really be a crisis--but whoa, liberalism's big hero admitting that Social Security has a Ponzi game aspect? Which it undeniably does. And, no, "optimistic" projections do not seem sane given the demographic crunch approaching, including millions of Mexican immigrants who will not be kicking in at the level of the union and white collar workers they are replacing. I would bet money on the pessimistic projections.

    And by the way, if SS remains solvent, but contributors don't get back what they put in, guess what? The game will be pretty much up, because voters will not regard this as a good outcome, and they'll basically strip the program. You do have the option of raising the cap (which really hurts people like me who are self-employed), although that amounts to a giant tax increase on the under $200k earners who are always sacrosanct come election time.

    So liberals do themselves no favor screaming about rosy scenarios and how Social Security is just fine.

  5. My first thought on reading your post today was not that the Times had done any solid reporting but that a Merck representative (who makes the vaccine in question) gave the reporters a fact sheet about the incident in order to protect their interests in the product.

    Regardless, my guess is that you are giving New York Times Style Editor Trip Gabriel too much credit and Times science department reporter and co-author Denise Grady too little.

    At a glance Gabriel appears to be a typical times reporter while Grady appears to have some depth.

    BTW - thanks for all of your work Bob. There is no other blog that I have found that is so insightful as well as enjoyable to read on a daily basis.

  6. The '76% of the dollars promised them' figure is correct, but implies it is 76% of the current benefit amount. And it is not that. It is 76% of the ATTAINED BENEFIT at that time under the law and its CPI adjustments.

    According to Dean Baker and other economists I've read on the subject, that 76% of the attained benefit will still be more in real terms (inflation adjusted terms) that 100% of the current benefit.


  7. LA Times also does a good job summarizing Social Security financing -- as usual, however, it doesn't seem to be in the print edition: