"Everyone has received them in the mail," says Rep. Frank LoBiondo (R-N.J.). "'John Doe, you have won ten million dollars.' You open the envelope and inside are a packet of official-looking documents bearing seals and stamps. . . . It is not until you get out the magnifying glass and read the fine print on the back of the fourth page do you realize you have a better chance of being struck by lightning twice in the same day than actually winning a prize."
On November 2, the House quickly passed legislation "to protect our mostvulnerable consumers" by requiring "up-front, clear, and easy to readdisclosures" in sweepstakes mailings. If only the government would followthe same rules.
Despite Congress's concern, Americans today receive mailings that makesweepstakes entries look like paragons of full disclosure. But there is nolaw to protect consumers from those mailings, because they come from thegovernment itself. Last month, the Social Security Administration sent outthe first new "Social Security Statement," a four-page report the SSA toutsas a "great tool for financial planning." Designed to calm workers' fearsabout Social Security's future, the statement essentially says, "If youearnthis much and work to this age, this is how much you'll receive from SocialSecurity when you retire."
There's just one problem: it is flat-out untrue. The SSA describes thestatement's purpose as "getting people to look at real numbers." Here aresome real numbers the SSA should look at: the 1999 Trustees Report showsthat by 2034 Social Security will be so short of cash that it may have tocut today's average monthly benefit of $780 to a mere $553.
"All we would have to do in 2034 if there were no changes is cut benefitsback to about 71 percent of their current level," Deputy SSA CommissionerJames Roosevelt admits. (All we would have to do? Tell that to a poorretiree, completely dependent on Social Security, who suddenly findshimselfliving more than 25 percent below the poverty line.) The problem is notthat essential details like this are hidden in the fine print; it's thatthey're not there at all.
Whatever the merits of sweepstakes mailing, anyone who actually reads theentry knows that he has not won anything, that the numerical odds againstwinning are very high and that he does not have to pay in order to enter.Contrast that with the Social Security Statement, from which even the mostmeticulous reader learns what Social Security promises him but nothingaboutthe more than 25 percent payroll tax increase needed to pay it. Addinginsult to injury, the statement costs taxpayers over $70 million annuallytodistribute -- that's very expensive junk mail.
One member of Congress has plans to change this. Rep. John Sununu (R-N.H.)is preparing legislation that would require the SSA to amend the SocialSecurity Statement. Sununu's plan would notify recipients that to repaythebonds in the Social Security trust fund, taxes would have to rise, benefitsfall or borrowing increase; that after the fund runs out, Social Securitywill be capable of paying only 71 percent of promised benefits; and thatSocial Security's rate of return to beneficiaries has dropped steadily overtime. That would give workers a much better idea of how bad a deal SocialSecurity is turning out to be.
Winning a sweepstakes may be a million-to-one shot, but unless market-basedreform raises Social Security's rate of return, your chances of gettingfullbenefits without a tax hike or an increase in the retirement age are evenlower. Maybe Congress should work on government mailings before it setsabout fixing those from Publishers Clearinghouse.