The Corner

Toward Solvency

The White House says that its progressive benefit cuts would eliminate 70 percent of the deficits projected for Social Security 75 years from now. Critics such as Jason Furman say that Bush’s plan would actually get rid of only 30 percent of the program’s deficit over the next 75 years. (Via Brendan Nyhan.) Who’s right?

They’re estimating different things, to start with. The Bushie estimate is about what happens in one year, the 75th. The point is that the cuts move you very close to a positive cash-flow by then and thus gets you on the path to sustainable solvency. But since there are deficits before (and afterward) that year, it’s right to say that the cuts would eliminate only 60 percent of the cumulative deficits over the next 75 years.

The 60 percent and 70 percent figures are each useful to keep in mind.

Furman, however, gets from 60 to 30 by counting the costs of personal accounts. The accounts cost the government money over the 75-year period because some people contribute to their accounts before 2080 but retire afterwards, so the savings from the reduced traditional benefits they accept in return for the accounts isn’t recorded. This “loss” is really just an artifact of accounting. Looked at on a person-for-person basis, or over the infinite horizon, the accounts don’t make the program less solvent.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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