Wednesday, March 16, 2005

Don't link to reports if you cannot do the math

Slate argues that Bush's mathematics on Social Security is wrong, and links to a report to prove their point. Unfortunately for Slate, the report supports Bush's position, not theirs. Moral: Don't link to reports that you think support your point if you cannot do math. Slate says:
Bush was encouraging a misconception. As Paul Krugman has explained, remaining life expectancy for a 65-year-old black man is 14.6 years, not two. It's true that black male life expectancy at birth is only 69, but black-white mortality differences trail off throughout life. (By the late stages, black men outlive white men of the same age.) So, while blacks are likely to spend fewer years taking money out, they're also likely to spend fewer years paying in.
The numbers do not support this. The relevant life expectancy to look at is from age 20 to 65. People start paying into social security at around age 20, and start withdrawing from it at around 65.

According to the CDC report Slate points to, black men in the 19-20 age cohort can expect to live for 51.4 more years and white men can expect to live for 57 years. That gives 20 year old white men a life expectancy of 77, and 20 year old black men have a life expectancy of 71.4. If social security kicks in at 65, both white and black men have been paying into the system for 45 years, but whites withdraw for 12 years and blacks withdraw for 6.4 years. To me, this means that social security is twice as good a deal for white men than for black men.

Moreover, black men in the 64-65 age cohort can expect to live 15.2 more years and white men can expect to live for 17.3 more years. This means that white men get to draw social security for 2 years more than black men.

I interpret this as meaning that once black men get to age 20 and start to pay into social security 1) they are more likely than white men to die before reaching retirement age meaning they do not get to withdraw anything, and 2) even if the black man manages to reach retirement age (65), they should still expect to draw benefits for 2 years less.

Social security is a bad deal for black men. I understand that Democrats like to think of themselves as being champions of black people, but their decision to oppose social security reform genuinely puts them at odds with their black constituency. I bet you that the author did not even bother reading the report before pointing to it.

The Slate aritcle gets its second argument wrong as well. It says
So, here's the situation. In an op-ed written in Spanish and not made available in English on any federal Web site, the administration argues that Latinos, who live longer than whites do, should support Bush's reform plan because upon retirement they rely disproportionately on Social Security. Meanwhile, in forums and private meetings aimed at blacks, the administration argues that blacks, who upon retirement rely disproportionately on Social Security, should support Bush's reform plan because they don't live as long as whites do.
The reality is that social security is not a particularly good deal for anyone from an investment perspective (although I do like the forced savings and annuities aspect of it). Blacks don't even get 100% of this bad deal, they get 80%. So when Bush says that Latinos, who rely more on social security are getting a bad deal, he's right. When he says that blacks are getting an even worse deal, he's right there too.


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