Embrace Your Mistakes

Over three years of researching Social Security, I have come to two conclusions. One, Social Security is a vital program.  Two, there is no single force driving that program to crisis faster than the media and the experts that it quotes.

Today, polls show that roughly 80% of the public believe that Social Security is heading for crisis without reform.  Social Security reform has number. That support is however diluted across dozens of ideas by the media which has abdicated any responsibility for educating the voters.

In 2012, there was very little coverage of Social Security in the Presidential campaigns.  During the debates, President Obama stated that Social Security was 'structurally sound'.  The Trustees project that in the 14 seconds that Obama took to say it, Social Security issued roughly $220,000 of additional broken promises.  Both candidates talked about the necessary changes in terms of tweaks.  The Trustees put the cost of these 'tweaks' at nearly 10 trillion in 2013 dollars. The media treated these euphemisms as facts.

Ideology is largely what passes for information in the media.  Recently, on Bloomberg, Barry Ritholtz wrote that small changes to the wages subject to payroll taxes would make Social Security solvent well into the next century. It isn't close to true, and quickly discounted with research from Social Security Administration. 

To his credit, Mr. Ritholtz wrote a correction.  Unfortunately his correction was even less accurate. It introduced a web page from the American Academy of Actuaries that was based on data from 2009.  He doesn't disclose that this data is trillions of dollar out of date.  By profession, Mr. Ritholtz is a money manager.  Do you think he buys and sells companies based on earnings from 5 years ago when the companies which have shown deteriorating financials for nearly 10 consecutive years? 

Bloomberg will tell you that it is not responsible for Mr. Ritholtz's opinion or his research. Mr. Ritholtz in all likelihood will tell you that it is not his responsibility to correct information on the website of the American Academy of Actuaries. The American Academy of Actuaries will likely tell you that people should use the more current webpage on its site. Ironically enough, Mr. Ritholtz original article condemned the lack of accountability in pundits.

And thus the rumor spreads faster than the fact.  News outlets and bloggers pick-up stories from Bloomberg because of its reputation.  Bloomberg trusts Mr. Ritholtz, who seems to have assumed that the American Academy of Actuaries was a reliable source. There is virtually no accountability in the entire process.

None of the characters here are particularly unusual.  Mr. Ritholtz isn't the lone writer using dubious sources.  The American Academy of Actuaries aren't the sole source of noise. The Social Security debate has evolved into a cottage industry of agenda-driven think-tanks pushing a flavor of social policy through Social Security.  Cato Institute pushes privatization.  The Heritage Foundation sells its American Dream.  These groups plus NASI, and CEPR, all make a living selling the noise that has turned the Social Security debate into a shouting match.