CONTACT: Linda Granell(909) 335-5195[email protected]Ref# 01-30
Oct. 27, 2000
SOCIAL SECURITY HEALTHY AND WEALTHY
The Social Security system is not in trouble, says economist Christopher Niggle of the University of Redlands.
Widely held views that Social Security will be in deficit by the mid-2000s are based on a financial scenario unjustified by national statistics of the past century, he says. In fact, he believes Social Security is likely to be in the black for the foreseeable future.
So sure is Niggle of the financial health of the system that he questions the motives of some of those who promote the system's demise and advocate privatization.
"I don't think a lot of people have looked hard at the data," Niggle says. "The worst-case scenario has gained acceptance partially through misleading propaganda by people of enormous influence who have an ideological preference to reducing the responsibility of government, along with a lot of people who think they can make money if the system is privatized.
"Imagine if one or two hundred billion dollars in Social Security money is released onto Wall Street. The management and transaction fees would be a bonanza for the financial firms."
Niggle's paper on "The Political Economy of Social Security Reform Proposals" is scheduled for the December issue of the Journal of Economic Issues. He also presented a paper on the topic at the Association for Institutional Thought annual meeting in San Diego last spring. His research is funded in part by a grant from the John Randolph Haynes and Dora Haynes Foundation of Los Angeles.
Niggle has looked very hard at the data.
Predictions of Social Security shortfalls are based on one of three 75-year projections developed annually by the Social Security Administration's Board of Trustees. Niggle says that this projection -- the worst-case scenario -- is founded on an implausible future.
The pessimistic scenario forecasts an economic growth rate of only 2 percent until 2008 and 1.3 percent thereafter, with social security subsequently in deficit by the year 2034. The system currently has accumulated a surplus of about $900 billion -- twice the annual outlay.
And even the most optimistic scenario forecasts a growth rate of only 2.5 percent through 2008, 2.2 percent thereafter, with a surplus of about $11 trillion in 2034.
In fact, the national growth rate has averaged over 3 percent since 1900 and 4 percent the past five years.
Niggle believes the Social Security system should remain intact, with government offering a supplemental plan akin to a matching 401K that would incentivize lower-income workers to save more for retirement.
A professor of economics, Niggle has been on the University of Redlands faculty since 1983. He received his Ph.D. in economics from the University of California, Riverside. Niggle has published extensively on such topics as transitional economics of Central Europe and monetary policy.
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