Obama’s ‘Life of Julia:’ misleading on Social Security

at 12:23 AM ET, 05/07/2012

“Under President Obama: Julia retires. After years of contributing to Social Security, she receives monthly benefits that help her retire comfortably, without worrying that she’ll run out of savings. This allows her to volunteer at a community garden.

“Under Mitt Romney: Julia’s benefits could be cut by 40%.”

— Text from Obama campaign’s “Life of Julia” infographic

The Obama campaign’s “Life of Julia” infographic is a fascinating attempt by President Obama to demonstrate the real-life consequences of political choices — to show how the various bills passed by Congress and signed into law by a president can affect individuals during their lives.

Already, a philosophical dispute has erupted as to whether the story of Julia demonstrates how Democrats believe people must rely on the government for help from cradle to grave. We will leave that question to the pundits.

We also will not dive deeply into some of the assertions in this graphic. Much of it relies on assumptions about the House Republican budget, which because it has not spelled out spending cuts in detail — like all congressional budget resolutions — the Obama campaign simply assumes an across-the-board 20 percent cut in domestic spending. You also have to believe that Republican Mitt Romney would rubber-stamp everything in that budget if he became president.

But we will examine the claim about Social Security because it is a good example of a campaign trick of comparing specifics vs. an unrealistic perfect. For more on the basics of Social Security, please read our Social Security primer.

The Facts

The most recent Social Security trustees report says that, under intermediate assumptions, the Social Security trust fund will be exhausted in 2033, which would result in a 23 percent reduction in benefits if Congress and future administrations do not deal with the shortfall. This is three years earlier than last year’s report.

That sounds a bit worse than it should, because obviously politicians will not let Social Security funding fall off a cliff. In fact, many experts believe the funding problems can be solved with some tinkering around the edges, not necessarily dramatic changes. But, by all accounts, something will need to be done to keep Social Security fully funded for the next 50 years.

Obama recognized this during his debt ceiling talks with House Speaker John A. Boehner (R-Ohio). According to an account in the New York Times magazine, the president offered to accept changes in the benefit formula for Social Security as part of a possible “grand bargain” on reducing the deficit. The article, by Matt Bai, reported:

On entitlements, too, they had moved closer to a final deal. The White House agreed to cut at least $250 billion from Medicare in the next 10 years and $800 billion in the decade after that, in part by raising the eligibility age. The administration had endorsed an additional $110 billion or so in cuts to Medicaid and other health-care programs, with $250 billion more in the second decade. And in a move certain to provoke rebellion in the Democratic ranks, Obama was willing to apply a new, less generous formula for calculating Social Security benefits, which would start in 2015. (The White House had rejected Boehner’s bid to raise the retirement age.)

The article was not specific, but “less generous formula” probably refers to changing cost-of living adjustments in Social Security benefits from a wage-linked inflation index to a different, slower growing consumer price index. Generally, most people would perceive this as a benefit cut, which is certainly how liberal groups reacted when the possibility arose during the debt ceiling talks.

Now back to the “Life of Julia” infographic. Note how carefully the Obama campaign’s statement is worded. It says that, under Obama, Julia “receives monthly benefits that help her retire comfortably.” It does not promise that projected benefits will not be cut, but it certainly implies that.

And how does the Obama campaign figure that Romney, by contrast, has Social Security proposals that “could” cut benefits by 40 percent? Here, the campaign assumes that Romney’s plan is similar to a plan advanced by three Republican senators, who proposed raising the retirement age and reducing benefits for higher wager earners — two proposals embraced by Romney.

The Social Security actuary evaluated the senators’ plan and found it could cut benefits by 40 percent for high-wage earners by 2050. (The reductions would be less for lower-wage earners — see Table B-1). However, the analysis also found that, with these changes, Social Security benefits could continue to be paid through 2084. Some might argue that the proposals are rather drastic. Still, as we have seen, if nothing is done, there won’t be enough money to pay full benefits under the current system by 2033.

In any case, Eric Fehrnstrom, a Romney senior adviser, argues that the actuary’s analysis of the senators’ plan cannot be applied to the Romney proposal because although it is “structurally similar . . . we have not specified the exact thresholds for the means-testing of Social Security.”

This is the game that both campaigns like to play. The Obama campaign is trying to nail Romney with specifics, while avoiding it for itself, just as the Romney campaign is trying to dodge the specific implications of its proposals.

While Romney is proposing a cut in benefits for high-wage earners, candidate Obama in 2008 also targeted high wage earners as a way to extend Social Security’s solvency, proposing a payroll tax increase on people making more than $250,000. Then and now, Obama has opposed any increase in the retirement age, so that is a real point of contention between the two candidates.

The Pinocchio Test

This frame of the “Life of Julia” series is fairly misleading. If Obama actually does something to improve the solvency of Social Security, benefits are likely to be cut in some fashion. If Obama — and future presidents — do nothing, benefits will also be cut.

The Obama campaign could have chosen to fight Romney with real specifics — such as saying that Julia could retire as scheduled, without fear of an increase in her retirement age — but instead it chose to compare a version of Romney’s proposals with a potentially unrealistic outcome.

Three Pinocchios




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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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