The Intercept tells us that Elon Musk is just all wrong, then spends the rest of the page telling us how Elon Musk is exactly right. One of the things that journalists know is that many readers stay just for the first couple of paragraphs. So, get the incorrect assertion in at the top, so they’ll see it and believe it, then walk it back further down so that you can say “But I explained it!”.
The specific point that Musk made is that the U.S. government has a lot more than just that public debt to worry about. There are also a series of promises that have been made which are going to have to be paid for. So when Musk says that “True national debt, including unfunded entitlements, is at least $60 trillion – roughly three times the size of the entire U.S. economy. Something has got to give,” he is in fact right.
The headline for this story is “ELON MUSK REVEALS JAW-DROPPING IGNORANCE ABOUT SOCIAL SECURITY. Musk’s blathering illustrates how the people at the top of U.S. society just repeat what are essentially billionaire urban legends.” which certainly seems to be indicating that Musk is wrong. It’s down in paragraph six that the admission is made that he’s actually right.
The amount that Social Security has promised to pay out is that large. And that’s not just the amount promised, that’s the amount more than the taxes already agreed to pay for it. That’s what the “unfunded” there means. FICA, or Social Security, taxation is too low by that $60 trillion that is.
Musk is right.
It is also true that, as The Intercept says, this gap can be filled. If taxes rose by 1.4% of GDP (GDP is the whole economy, everything) then that would pay that bill. That’s nothing so that’s OK, right?
Except that is also playing with those numbers, here to make the solution look small. Currently, the Federal government takes about 18% of everything – that GDP – in tax. So, if we want to get 1.4% more of GDP then Federal taxes have to rise by 8%. That’s each and every Federal tax, your income tax rate, my capital gains tax rate, everyone’s Social Security rate and even the gas tax has to rise by 8%. Which isn’t quite so small.
Or, the way this is actually set up, Social Security taxes pay for Social Security. Currently, those taxes are around 5% of the GDP. To get another 1.4% of GDP means increasing those taxes by about a third. That’s not so small now, is it?
The Intercept is set up as an independent journalistic enterprise, charitably funded by a part of Pierre Omidyar’s e-Bay fortune. Which is great as far as we’re concerned. The site gets some 3.5 million visits a month which makes it a reasonable part of the media ecosystem. But rather the point of independence is to be able to be objective we think – something not greatly in evidence here.
Musk is entirely correct, something does have to give. Either taxes have to rise, substantially, or benefits paid out have to fall. Leading an article with a claim that this is all jaw-dropping ignorance, of a “billionaire urban legend” is hugely biased reporting.