Response to FactCheck.org Article on MoveOn's Social Security Ad
MoveOn.org objects strongly to FactCheck.org's February 1 article calling our new Social Security ad "false". MoveOn.org Civic Action stands by the ad, and the figures cited in the ad. Below is MoveOn.org's response to the FactCheck.org article, and supporting letters to the FactCheck.org article from prominent economists.
MoveOn.org Response to the FactCheck.org Article (Tom Matzzie)
Supporting Letter from Dean Baker, Center for Economic and Policy Research
Supporting Letter from Henry Aaron, The Brookings Institution
Supporting Letter from Ross Eisenbrey, Economic Policy Institute
Supporting Letter from Lee Price, Economic Policy Institute
Supporting Blog Post by Max B. Sawicky, Economist
Supporting Letter from Roger Hickey, Campaign for America's Future
MoveOn.org Response to the FactCheck.org Article
Brooks Jackson
Director, Annenberg Political Fact Check
Annenberg Public Policy Center
320 National Press Building
Washington DC 20045
Dear Mr. Jackson:
We strongly object to your claim that MoveOn.org Civic Action was inaccurate in saying that President Bush's privatization plan would cut Social Security benefits. Social Security was designed to provide a retirement benefit that bears some relationship to workers' wage income during their working career. As wages rise, Social Security benefits have always risen along with them. This was done informally prior to 1974 (Congress raised benefit levels every few years) and has been done with formal wage indexation since 1974.
President Bush's plan cuts benefits compared to what workers would receive under current law. This implies very substantial reductions over time. In our ad, we mentioned the 46% cut in benefits that retirees would suffer at the end of the Social Security Trustees' projection period. To take another example, according to the Trustees projections, workers retiring forty years after the Bush plan is put in place would see a benefit cut of 36 percent compared to currently scheduled levels. Using the Congressional Budget Office projections, the Bush plan implies cuts of 41 percent for such a worker.
In referring to a cut against scheduled benefit levels, MoveOn was using the standard framing for the whole debate. There would be no Social Security shortfall whatsoever, if the goal was simply to provide the current benefit level. President Bush and proponents of privatization have consistently used the scheduled benefit as their benchmark when they have warned of benefit cuts, if no changes are made. This statement is not true if a benefit cut means a cut against current benefit levels -- it only could be true if they are referring to scheduled future benefits. In this sense, MoveOn.org Civic Action has referred to benefit "cuts" in exactly the same way as the president. If Fact Check only considers a cut as a reduction against current benefit levels, then it should correct the president and other proponents of privatization who routinely warn of benefit cuts.
In fact, this is the same way that Fact Check itself has referred to benefit cuts. Towards the end of its release criticizing our ad, the release asserts:
"Furthermore, current law will force an actual cut in benefits eventually, under official projections. The Social Security trustees estimate that under current law, without a tax increase, all benefits would have to be cut 27% when the Social Security Trust Fund is exhausted in the year 2042, and would continue to be cut each year thereafter. The Congressional Budget Office has a more optimistic projection, predicting that the trust fund wouldn't be exhausted until 2052--ten years later--and that benefits would have to be cut only 22% at first."
Since the longstanding debate on Social Security has proceeded from the standpoint that not paying currently scheduled benefits is a "cut," and that is the framing that both sides in the debate have adopted, and FactCheck itself finds it difficult to avoid this framing, I suggest that you adopt the standard framing. At the very least, you should not accuse an organization that uses the standard framing of being misleading or inaccurate.
Sincerely,
Tom Matzzie
Washington Director
MoveOn.org
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Supporting Letter from Dean Baker, Center for Economic and Policy Research
Brooks Jackson
Annenberg Public Policy Center
320 National Press Building
Washington, DC 20045
Dear Mr. Jackson:
It has come to my attention that you corrected an ad on Social Security placed by Move-On.org, because it referred to President Bush’s proposal to “cut” benefits. Your correction claimed that this was inaccurate, because the plan would freeze benefits at their current levels, rather than cut them.
I would take issue with your correction in this case. The standard reference point in the Social Security debate has always been the current law scheduled benefit. The only reason why the program is ever projected to face a shortfall is because this scheduled benefit is projected to rise in step with wage growth. The goal of Social Security policy has always been to ensure workers an income in retirement that bears some relationship to their wage income during their working years. Move-On was simply being consistent with the standard usage in saying that President Bush’s plan would lead to a cut in benefits – it would absolutely lead to a cut relative to scheduled benefits.
Obviously the reference point is somewhat arbitrary. While I don’t think that Move-On can be criticized for using the standard reference point in this debate, Fact Check is free to adopt whatever reference point it deems appropriate. However, it must be consistent in its usage. President Bush and other proponents of privatization have frequently raised the prospect of benefit cuts, if the Social Security shortfall is not addressed.
If you examine the payable benefit levels, in either the trustees or Congressional Budget Office projections, you will see that they are always higher than the benefit received by current retirees. Therefore, if your standard of a benefit cut is measured against the current benefit level, then President Bush and other proponents of privatization have not been accurate in raising the possibility of future benefit cuts if nothing is done. By your definition, benefit cuts are simply not a possibility given current projections.
If you intend to be consistent in this debate you will either apologize to Move-On, noting that they had used the term “cut” appropriately in the context of the Social Security debate, or you will highlight President Bush’s inaccurate references to the prospect of benefit cuts as he pushes his plan for privatizing Social Security.
I would be happy to discuss this issue with you further if there are any points that are unclear or you would like to see substantiated.
Sincerely,
Dean Baker
Co-Director
Center for Economic and Policy Research
1621 Connecticut Ave., NW
Washington, DC 20009
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Supporting Letter from Henry Aaron, The Brookings Institution
From: Henry Aaron
Sent: Thursday, February 03, 2005 9:56 AM
Subject: Mr. Jackson,
Mr. Jackson,
I am writing to you because, like many others, I think that the job of holding elected and appointed officials to the truth is an honorable and important activity. You deserve congratulations for performing that function.
In that connection, I was sent a copy of your statement scolding MoveOn.org Civic Action for accusing president Bush of embracing large cuts in Social Security. The point of your piece, as I understand it, is that a) Bush says that this plan will not call for any cuts for benefits of current retirees or for workers over a certain age (probably age 55) and b) switching to price indexing would not represent a cut in benefits.
I would urge you to reconsider your criticism of MoveOn.org Civic Action on at least the second point. Even the first claim of the president is not credible, for reasons I'll indicate below.
But let's start with the price indexing issue.
By analogy, let's look first at Medicare. It covers a list of services. Strictly speaking, that list of services is the list promised in law. As one example, that list includes "hospital services." What hospital services consist of changes with time, as new technology is introduced. What people have expected since 1965 when Medicare was enacted and what they expect now, has always been that the services Medicare covers would change over time and grow with the evolution of medical technology. No one believed, when Medicare was enacted, that Medicare would pay only for the services available in 1965 and that services developed in, say, 1975 would be excluded from coverage.
If some president came along in, say, 2005, and proposed freezing the range of services for which Medicare would pay at the package available in 2005, everyone would recognize that such a proposal cuts benefits for all years in the future. Such a change would represent a drastic cut in the government's commitment, from a promise to pay for the evolving package of services regarded as standard at each point in time, to a promise that excluded all services developed after 2005.
Similarly, Social Security since 1972 has been a national commitment to hold the ratio of benefits to average earnings – the replacement rate – approximately constant. That is what wage indexing does. (To be sure, Congress did the job wrong in 1972 and had to fix it in 1977, but that was not a shift of policy but discovery of the right way to effectuate the policy that a Republican president and a Democratic Congress agreed to in 1972. It has been government policy for thirty-three years to maintain a constant replacement rate. In fact, that has been government policy far longer; before 1972, Congress effectuated it with ad hoc adjustments. But I don't want to quibble about dates. My point is that the policy of constant replacement rates is the long-standing law. Changing that commitment is a benefit cut. What else would one call it?
As a second and, I believe, even more telling, example, let's look at the income tax system. We currently have a system under which bracket widths and standard deductions are indexed annually for price inflation. This practice holds the ratio of taxes to income at any given real income level constant. Over time, however, real incomes grow. This income growth pushes people into higher tax brackets. This bracket creep and raises average tax rates (with any given tax rate schedule). Until the Bush administration, Congress periodically cut taxes to keep the ratio of taxes to income roughly constant over the long run [recent tax cuts have gone further]. These discretionary changes in law were universally recognized as tax cuts.
Suppose a president came along and proposed to change the way taxes are indexed. Instead of adjusting bracket widths and standard deductions for price increases, this president proposes to adjust them by income increases. In that event, the ratio of taxes to incomes would automatically not tend to increase as income grows. I cannot imagine that anyone would fail to label this shift as a tax cut, as it would do automatically what explicit tax cuts had previously done.
This example is directly parallel to the difference between price and wage indexing of Social Security. Taxes are simply transfer payments with signs reversed. A switch from price to income indexing of the tax system would be universally and uncontroversially recognized as a tax cut. If you agree, then I believe you must agree that the switch from wage to price indexing of Social Security should be universally and uncontroversially recognized as a benefit cut.
The final point—that president Bush has not proposed to cut benefits for retirees or workers over the age of 55 raises a different issue—one of political credibility. A president can promise anything he likes, but that does not mean that one should take it seriously. In the case of promises not to cut any particular program, one must evaluate that claim in light of the circumstances. All responsible budget analysts understand that the federal budget is going to face increasing deficits, not falling ones—because of the Iraq supplemental, the alternative minimum tax, the likelihood that at least some of the tax cuts will be made permanent, and other reasons. Under plausible assumptions (see Brookings' Restoring Fiscal issued last year), deficits outside the retirement programs will exceed $1 trillion within the ten year budget window (and things have gotten a bit worse since then). If one diverts hundreds of billions in revenues from government coffers into individual accounts, those deficits will be even larger. Under such circumstances, can anyone take seriously the claim that any major government program will be wholly insulated form spending cuts? Such claims simply fail the laugh test.
But whether or not you accept this last point—which I freely acknowledge is a matter of judgment, not fact—I hope you will accept the force of the two examples I outlined on why a switch from wage to price indexing cannot reasonably characterized in any way other than as a benefit cut. Not to recognize that it is a benefit cut would be to embrace logic that leads to absurdities in the other two examples.
Best regards,
Henry J. Aaron
The Brookings Institution
1775 Massachusetts Avenue N.W.
Washington, D.C. 20036
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Supporting Letter from Ross Eisenbrey, Economic Policy Institute
From: Ross Eisenbrey
Sent: Wednesday, February 02, 2005 3:01 PM
To: Editor@FactCheck.org
Subject: Social security and MoveOn
I find it shocking that you criticize MoveOn for claiming that benefits will be cut under the President’s plan (because they compare projected benefits under current law to projected benefits under Option 2) and then commit precisely the same “error” yourself. After 2042 (or 2052), benefits will be higher than they are today even if nothing is done to change the program’s finances. The 27% “cut” you cite is from the projected level of benefits under current law. You, and others consider that a cut because the current law sets the benefit to replace a portion of a worker’s earnings. When the President proposes changing the formula so it does not replace a worker’s earnings but establishes a fixed level of benefits, he is cutting the benefit. That is, if the President’s proposal was implemented today, then benefits would be lower. You owe MoveOn a public apology. And you should talk to someone with expertise in the SS program, such as Ken Apfel, before you write about it.
Ross Eisenbrey
Vice president & Policy director
Economic Policy Institute
1660 L Street N.W.
Suite 1200
Washington, D.C. 20036
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Supporting Letter from Lee Price, Economic Policy Institute
Dear Brooks Jackson,
You incorrectly charge that “MoveOn.org launched a false TV ad” in three House districts.
As part of your critique, you argue that “Bush hasn’t proposed anything specific yet.” In all probability, Bush will never provide specifics, but that should not prevent critics from pointing out what he has effectively been backing He not only selected the 2001 commission, but the Economic Report of the President last year touted that commission’s Plan 2 which would shift from wage indexing to price indexing. White House briefings have continued to push that solution since President Bush’s post-election promise to ‘use his political capital’ to privatize Social Security. Projections of Plan 2 both by the Congressional Budget Office and by the economists at Goldman Sachs show that the switch to price indexing results in cuts consistent with the MoveOn.org Civic Action ad’s claim of “Social Security benefit cuts of up to 46 percent” in the future, even after realistic potential gains from private accounts are included.
Your analysis of what constitutes a “cut” is internally contradictory. While asserting that price indexing initial benefits would not constitute a “cut,” your analysis asserts that “current law will force an actual cut in benefits eventually.” In fact, average benefits will grow substantially between now and 2042. As a result, your assertion that “all benefits would have to be cut 27% when the Social Security Trust Fund is exhausted in the year 2042” is “false” in your own framework because benefits would never fall below where they are today. On the other hand, if that would be a 27% “cut” (and I think it would), then Plan 2 would cause a 46% cut and there is nothing false about the MoveOn.org Civic Action ad.
Your commentary also ignores the central point of the ad – that the Bush initiative would lead to “working retirement.” Administration spokesmen and their allies have consistently touted as one of the advantages of their proposal that it would cause many more people to stay in the work force longer.
In summary, I see nothing “false” in the MoveOn.org Civic Action ad, but serious problems in your analysis of it.
Obviously this explanation is a thumbnail description of a more complicated analysis than can be told in an email. I would welcome the chance to have a longer conversation with you about this topic, especially as the details we’re expecting begin to unfold tonight. If a trip to DC is within the realm of possibility, I’d be happy to assemble a meeting with other knowledgeable people in this area.
Lee Price
Research Director
Economic Policy Institute
1660 L Street N.W.
Suite 1200
Washington, D.C. 20036
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Supporting Blog Post by Max B. Sawicky
PASSING BAD CHECKS
In case you hadn't heard, Factcheck.Org is not about checking facts. It's about ersatz neutrality, fortified with spurious analysis. The ersatz stems from the illusion that because they have a roughly equal number of criticisms of right and left, they must be accurate. No. Only if the criticisms are accurate are they, like, accurate. My colleagues at EPI had gotten used to them mangling empirical labor market questions. Now they're onto Social Security. I suspect that they try to alternate between sides, and under that imperative make sure they find something to criticize, whether it's there or not.
Here they accuse MoveOn of unfactuality because the latter claims that the White House is scheming to reduce Social Security benefits. I would have said any fool knows this, until today. There is no reason to talk about the long-term shortfall in the program unless you mean to either raise taxes -- which Bush has ruled out -- or cut benefits. Nor is there any ambiguity about how much. If you eliminate the shortfall in perpetuity, you hammer benefits. It's not a haircut.
These benefit cuts apply to the elderly because, duh, that's who retires. So the MoveOn ad has pictures of elderly persons. Factcheck sez this is wrong because the benefits of the presently elderly are not on the table. Oh please.
Actually the MoveOn ad was too kind. They could have talked about benefit cuts for widows and survivors that are in play, once you start monkeying around with the Social Security retirement program.
The other idiocy is the notion that reducing benefits from their scheduled level is not a cut, it's a reduced increase. Just like a punch in the nose is actually a reverse elbow jerk.
Checking a few other Factcheck blurbs turned up additional un-factness. For instance, here they resurrect the demographic canard about workers to retirees -- common enough -- but then go on to say:
The projection uses "intermediate" assumptions, but even under a "low cost" set of assumptions (birth rates 13% higher, improvements in life expectancy slow by half, and immigration increases 44%) each of today's young workers would have only 2.4 workers supporting them at retirement in 2040. Either way, the system faces an enormous financial crunch.
No. What the Trustees actually say is that under the "low-cost" scenario, the "enormous financial crunch" is much less crunchier. Under the low-cost scenario the Trust Fund is solvent through the projection period, to 2080 (p. 15, Trustees' 2004 report). The Trust Fund has no balances after 2042 in the "Intermediate" scenario, but in the low-cost scenario it has nearly $18 trillion (and rising) in assets by 2080. Doesn't exactly fit the last sentence in the quote above, does it?
Subsequently their piffle descends into utterly moronic stupidity, criticizing the AARP ad that showed a photograph of a commodities trading floor because the AARP was talking about stocks, not commodities.
Reminds me of some visitors to MaxSpeak.
Posted by max at February 2, 2005 03:21 PM
Max B. Sawicky is an Economist at the Economic Policy Institute in Washington, D.C.
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Supporting Letter from Roger Hickey, Campaign for America's Future
From: Roger Hickey [mailto:hickey@ourfuture.org]
Sent: Thursday, February 03, 2005 8:33 PM
To: Editor@FactCheck.org
Subject: re: MoveOn.org Civic Action Social Security Ad
Re: MoveOn.org Civic Action Social Security Ad
Liberal group's ad falsely claims Bush plan would cut benefits 46 percent.
Tom Matzzie is correct in his objection to your piece on MoveOn ad.
I happen to know that several prominent economists -- Henry Aaron among them -- have emailed you to object to your analysis, because they have mentioned to me their dissatisfaction with your piece. Everyone in this debate refer to cuts in terms of the promised benefits in the year in question.
Matzzie is right to cite your use of the standard treatment of cuts:
"all benefits would have to be cut 27% when the Social Security Trust Fund is exhausted in the year 2042." We think that sentence clearly refers to benefits in 2042, not current benefits.
The MoveOn ad also refers to benefits in the future, not current benefits.
You should post other objections.
Roger Hickey
Co-director
Campaign for America's Future.
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