CNN economics correspondent wrong on projected Social Security benefitsFebruary 2, 2005 4:31 PM EST ››› DUNCAN BLACK
On the February 1 edition of CNN's Wolf Blitzer Reports, economics correspondent Kathleen Hays aided President Bush's attempt to depict a Social Security "crisis" by understating benefits that the Social Security trust fund will be able to pay future retirees if no changes are made to the system.
In purporting to illustrate the impact of a 27 percent benefit cut -- which the Social Security trustees estimate will be required in 2042 unless changes to the system are enacted before then -- Hays calculated the impact of a 27 percent cut in the current average monthly Social Security benefit. But the relevant calculation is the impact of a 27 percent cut in the average benefit in 2042 -- the year this cut would actually occur -- when the average benefits promised under current law will be substantially higher.
Under current law, Social Security benefits for new retirees are indexed to the average growth in wages, which generally increase faster than prices. According to the trustees, the average Social Security benefit is expected to rise by about 50 percent between 2004 and 2042. As currently promised, the average monthly benefit in 2042 would be worth about $1,300 in 2004 dollars; payable benefits, after the 27 percent cut, would be $949 in 2004 dollars -- nearly 50 percent higher than the $636 figure that Hays claimed would be the average monthly benefit following such a cut (and about 9 percent higher than the current average monthly benefit of $872).
From the February 1 edition of CNN's Wolf Blitzer Reports:
WALKER: There will be money in Social Security. The question is, how much money? Even when the trust fund runs dry, 2042, there will be about 73 cents in revenue for every dollar of promised benefits.
HAYS (voice-over): That would leave people with just three-fourths of their monthly benefits. Right now, the average monthly Social Security payment is about $872; three-fourths of that is just $636. That's a 27 percent cut.