Who has the facts wrong?

In the elitist world at the Washington Post, nothing is as much fun as pointing out how Sarah Palin is stupid and knows next to nothing. As a result, the Post put out an article by Glenn Kessler today called "Sarah Palin Struggles with Facts". The article says that it checks Palin's statements and finds them filled with errors. The only problem is that it is the Post that is frequently wrong, not Palin.

Here is an excerpt from the article:

"“If you have more recipients than you have payers into the [Social Security] system, it is like a Ponzi scheme that’s going to be upside down in no time at all. We are going to be underwater with Social Security.”

Palin correctly identifies a potential problem for Social Security — that as the Baby Boom generation retires, there will be fewer workers paying into the system. But she overstates the case by calling it a “Ponzi scheme,” in which money from new investors is used to pay off old investors.

You cannot just look at the number of workers. You also have to look at productivity and technological change — which over time has allowed the nation’s economic output to greatly exceed population growth. That’s why the system has worked so well for so long.

As for being “underwater with Social Security,” the latest trustees report says that Social Security’s trust fund reserves will be exhausted in 2036; after that point, tax income would be enough to pay 75 percent of scheduled benefits through 2085. That’s certainly a problem, but not an insurmountable one — and clearly not a Ponzi-like collapse."

So what are the key points of the WaPo? First, we need to look at "productivity and technological change" to see if the social security system will work. Sorry WaPo. You are wrong! Social security is funded by a tax on wages up to a cut off level that has risen over time. Workers pay about 7% of their wages an employers pay a like amount. The amount paid does not vary at all if the workers are more or less productive. The key here is the number of workers who pay into the system, and if workers are more productive, there will be fewer needed to produce the same output. In other words, a productivity increase would actually harm the social security system in the short run. Palin is correct that the key is the number of people paying into the system versus those taking payments from the system.

The second WaPo error is to talk about the social security reserve fund as if it is a real thing. Sure, there are treasury securities that are held by the Social security trust fund. The problem is that when the time comes to use those funds to pay out benefits, the trust fund will either need to cash those treasury bonds which will require the government to come up with additional money from somewhere or the trust can just sell the treasury securities, a move which will drive US interest rates up dramatically, thereby choking off economic growth. The social security system only works so long as the income from workers is close to the amount paid out. Palin is correct.

Don't get me wrong. I am sure that Palin makes mistakes; we all do. I just find it incredibly smarmy for the WaPo to gleefully point out mistakes by Palin that are actually correct statements. Doesn't anyone at WaPo pay attention to the facts? Apparently not!