Social Security: HuffPo Reports And Rebuts Alan Simpson Speech

Ryan Grimm's article at HuffPo can be found here.

Simpson spoke at at an event hosted by the Investment Company Institute, an organization which would dearly love to see Social Security privatized because of the financial windfall they would receive. The ICI represents mutual funds and other money managers who control more than $13 trillion in assets.

Simpson said that when Social Security was established in 1937/38, life expectancy was 63. "That’s why they set retirement age at 65,” he said. Grimm points out that while that statement is true, that figure is skewed by the eradication of childhood diseases since then (and therefore a lot more younger people live and increase the work force that otherwise wouldn't); in 1938, a man living to be 65 was expected to live to be 77. That's a simple point that actuaries are well aware of, but it seemed to be news to Simpson.

He rejected the premise and said HuffPo's figures must have come from a biased source. Told that the data came directly from the Social Security Administration, Simpson continued to insist it was inaccurate, while misstating the nature of a statistical average: "If you’re telling me that a guy who got to be 65 in 1940 -- that all of them lived to be 77 -- that is just not correct. Just because a guy gets to be 65, he’s gonna live to be 77? Hell, that’s my genre. That’s not true," said Simpson, who will turn 80 in September.

It's important to recognize Simpson's obtuseness on this point: "Understanding life expectancy rates at age 65 in 1940 is central to understanding Social Security itself," says Grimm.

Here's another demonstration of Simpson's wilful ignorance, from one of his "Catfood Commission" hearings:

LAWSON: ---(I)t's my understanding from actually looking at the 1983 commission (which revamped Social Security), they actually started prefunding the retirement of the baby boom by building up that huge surplus.
SIMPSON: They never knew there was a baby boom in '83.

Amazing.  How can someone like this be in such a position of power and influence? As digby says at Hullabaloo:

What they may not have anticipated was just how badly the political system would be distorted by corporate propaganda that made people believe that black is white and up is down.

Or as John Amato says at Crooks & Liars:

I doubt they ever imagined that our political system in seventy years would have turned out members of Congress right out of a John Birch Society hoedown.

In a telephone interview, Simpson also raised the prospect of Baby Boomer retirements: "The statistics right now show a totally unsustainable program that cannot possibly function when 10,000 a day are coming into the Social Security system at 65," Simpson explained to HuffPost. "Was that ever planned [for]? That 10,000 a day would suddenly coming into the system?"

Well, yes, it was. The SS financing system was reformed by the Greenspan Commission in 1983.  In 1994, Social Securities' actuaries noted: "The fundamental ratio of beneficiaries to workers was fully taken into account in the 1983 financing provisions and, as a matter of fact, was known and taken into account well before that."

The explanation for the shortfall -- the program will only be able to pay roughly four-fifths of scheduled benefits after 2037 -- is much simpler: Social Security's actuaries didn't see the wild swing in income inequality that came about since 1983. Income has been largely flat for the middle class while rising for the wealthy. Social Security taxes apply only to the first $106,000, so increases for the rich don't contribute to the trust fund. And compensation increases that come in the form of more expensive health care benefits are also not subject to Social Security taxes. 

Simpson, who has called Social Security “300 million tits on a cow,” says that while his generation is known as "the greatest generation," his critics are members of the “greediest generation.” I'd love to know Simpson's net worth (his father was governor of Wyoming and a U.S. senator).

Simpson has long been an opponent of the AARP, an influential senior citizens' lobby. In his speech, he called the group “38 million people bound together by love of airline discounts.”