In the February 18 edition of The New York Times, reporters Richard W. Stevenson and Robin Toner misled readers on the impact on Social Security's solvency of raising the cap on the amount of income subject to Social Security payroll taxes. Stevenson and Toner first quoted House Majority Leader Tom DeLay (R-TX), who claimed that if the cap on wages subject to the tax were removed, rendering all wage income subject to the tax, "it buys you six years; that's not good"; then they expanded on DeLay's misleading argument, writing that "eliminating the cap entirely would only delay the onset of the system's projected financial deficits by six or seven years and would have to be accompanied by other steps to ensure that its books balance over the long run."
In fact, the "six or seven years" figure does not concern the "long run" solvency of the program, as Stevenson and Toner suggested. Rather, it refers only to the date when the program stops running annual surpluses. But thanks to the accumulated assets from several decades' worth of annual surpluses, which are invested in U.S. Treasury bonds, the trustees estimate that Social Security will be solvent with no changes for more than two decades after these "projected financial deficits" begin. The trustees currently project that annual deficits will begin in 2018, but the system will be able to pay all promised benefits until 2042. While Stevenson and Toner are technically accurate when they describe this date as the time when annual "financial deficits" begin, they mislead readers when they suggest that this date is relevant to whether the system's "books balance over the long run."
Eliminating the cap on income subject to payroll taxes would postpone the date when annual cash flow deficits begin by six or seven years (from 2018 to 2024 or 2025), but this same measure would allow the system to pay promised benefits in full until at least 2079, extending its solvency by an additional 37 years over what is projected under current law, according to a February 7 memo by the Social Security Administration's chief actuary. The reason is that if the cap was eliminated, the surpluses accumulated prior to 2024 would be substantially larger than projected under current law, and subsequent annual deficits smaller, so these accumulated surpluses would be sufficient to pay benefits much further into the future.
Given their questionable focus on the date when annual deficits begin instead of on the actual long-run solvency of the program, Robinson and Toner should also have noted that the chief actuary informed the White House that under Bush's proposal, "Annual cash-flow deficits (negative annual balances) appear in 2012, or six years earlier than under current law," as The Wall Street Journal reported on February 8.