(Not) Understanding Social Security

The Post has issued a rare and rather stunning mid-day write-thru of Jonathan Weisman’s A-13 article today explaining how the White House Social Security plan would work, basically rewriting the entire first four paragraphs of the article:

The mechanism initially detailed by the Washington Post in today’s editions and posted earlier on the Post’s Web site was incorrect.

The original story (available here) should have made clear that, under the proposal, workers who opt to invest in the new private accounts would lose a proportionate share of their guaranteed payment from Social Security plus interest. They should be able to recoup those lost benefits through their private accounts, as long as their investments realize a return greater than the 3 percent that the money would have made if it had stayed in the traditional plan.

That 3 percent level is the interest rate earned by Treasury bonds currently held by the Social Security system.

The Post mistakenly reported that the balance of a worker’s personal account would be reduced by the worker’s total annual contributions, plus 3 percent interest. In fact, the balance in the account would belong to the worker upon retirement, according to White House officials.

The headline has also changed, from “Participants Would Forfeit Part of Accounts’ Profits” to “Participants Would Lose Some Profits From Accounts.” A subtle but important difference (sort of).

White House officials, evidently, were extremely upset (the word “apoplectic” was thrown around) by the inaccurate charactizations in the morning’s print edition and Post editors quickly attempted to remedy it–hence the mid-day correction.

Thankfully, the correction makes social security reform crystal clear to us.