Frank mocks the idea that Social Security’s trust fund has failed to save effectively for the future. The issue, as the commission made clear, is not that the government will default on the fund’s bonds. It is that Social Security’s payroll‐tax surpluses have traditionally substituted for other taxes in funding the day‐to‐day operations of the government. Because of this, as the Brookings Institution’s Henry Aaron has warned, “the reserve does not add to national saving … and, hence, it does not add to future productive capacity.” Even Representative Robert Matsui (D., California), an opponent of personal accounts, has termed the fund “a vault full of Treasury Department IOUs.” If skepticism of trust‐fund financing is a conspiracy, it is indeed a broad one. Frank seems puzzled that, given recent declines in the stock market, the commission continues to favor personal accounts. But the commission envisions workers investing only about one sixth of their payroll taxes in personal accounts; of that one sixth, about one half would be invested in equities. Frank claims that market investment provides higher retirement income “only if you’re lucky,” but his worst‐case scenario belies this assertion: even if a worker had retired when the stock market was at its recent lows, the one twelfth of his taxes invested in stocks would still have paid higher returns than does the traditional system.
Finally, in a move of almost stunning deceptiveness, Frank claims that a “slight change” of just one percentage point in wage growth would keep Social Security solvent until around 2060. Frank neglects to mention that a one‐percentage‐point increase is in fact a doubling of the projected rate of wage growth, from 1 to 2 percent annually. (Nor does Frank say exactly how wages will double if we continue to devote ever larger shares of national income to entitlement programs for the elderly.) Even with a permanent doubling of wage growth, individuals born today would not receive their promised Social Security benefits. A cursory glance at the system’s annual reports reveals how little higher wages contribute to system solvency.