Social security myths: they are vanishing along with the surplus.

'WHEN something is unsustainable," so goes the aphorism, "it tends to stop." Usually invoked about tangible phenomena, the old saw is equally true about unsustainable arguments. If a conception is unsustainable in the face of overwhelming evidence, it must die. Sometimes it dies with a whimper, sometimes with a bang.

In recent years a fashionable myth took hold on the left end of the American political spectrum: the myth of overly conservative Social Security projections. Social Security didn't really face a shortfall, it was said in these quarters. The supposed threats to the system amounted to a "manufactured crisis," based on faulty projections of the Social Security trustees, hyped by conservatives (and their enablers in the scorekeeping agencies) who wanted to destroy the treasured program.

The myth is exploding into pieces before our eyes, done in by evidence that can no longer be brushed aside. Yet such was its power that it continued to be invoked even as Social Security's projected near-term surpluses were disappearing. While some were renewing their efforts to deny the coming Social Security shortfall, the Congressional Budget Office was quietly providing updated projections for congressional staff. The new numbers showed that the FY2010 Social Security surplus would be almost wholly eliminated: a mere $3 billion, a pale shadow of the trustees' projection, last year, of $88 billion.

To the extent that things are turning out far worse than the trustees previously envisioned (to say nothing of the persistently more optimistic CBO, whose projections we will discuss later), this was primarily due to factors that no one could precisely have foreseen. Social Security this year faced the programmatic equivalent of a perfect storm: the recession depressed payroll-tax revenues at the same time that Baby Boomer benefit claims were surging, and the program was paying out its largest cost-of-living increase (5.8 percent) since 1982.

Even before the recent downturn, however, the myth was groundless and should never have gained traction. Those who bothered to look could see that there was never a plausible chance that the projected shortfall would vanish. The myth was sustained by various fallacies. Among them were:

Conflation of aggregate and per capita growth. The "National Jobs for All Coalition," in a typical example of this mistake, recently stated that the Social Security projections "assume that in years to come real GDP will grow much more slowly than it has over the past century or more, when it has averaged around 3.2 percent per year." The implication--indeed, often the overt statement--of this line of argument is that without this inexplicable projection of a growth slowdown, the problem would be much smaller.

But total growth depends on a number of factors, and some of those factors are changing. The Social Security projections were not arbitrarily assuming a decline in productivity growth per worker--they were taking into account a very realistic projection of a decline in the number of workers added to the labor force every year, as the Baby Boomers head into retirement. From 1963 to 1990, annual labor-force growth was never lower than 1.2 percent, and reached as high as 3.3 percent. Now, net labor-force growth is expected to drop to 0.5 percent by the end of the next decade and stay there.