Senator Schumer has a newfangled way of spreading misinformation and scaring people over Social Security reform. He’s been traveling around New York State to tout his online “web calculator” that purports to show how much Americans stand to lose if President Bush succeeds in reforming the Social Security system. Everyone’s benefits are at risk, Mr. Schumer told a crowd at the Albany Public Library last week. To prove the point, he had local residents log onto his Web site and calculate how much they would earn from the traditional Social Security plan versus the “Bush Privatization Plan.”

The calculator assumes that Social Security will be able to pay out its promised benefits for all future retirees. The Social Security Administration has said it will only be able to pay 73 cents on the dollar after the “trust fund” is exhausted in 2042. But Mr. Schumer’s calculator tells you what the government has promised, not what it can afford. Then there’s the “Bush Privatization Plan,” which Mr. Schumer has made up. His calculator assumes that initial benefit payments under the Bush plan will be indexed to prices rather wages. Some Social Security reform advocates have suggested this switch to price indexing. They argue that the point is to preserve retirees’ purchasing power, not to keep track with wage growth. But the president hasn’t endorsed the idea, so Mr. Schumer has no reason to include it in the president’s plan, save to make it appear that Mr. Bush has proposed a “cut” in benefits.

To compound the “cuts,” Mr. Schumer’s calculator projects an anemic 3% return on the average retiree’s portfolio. That’s an unrealistically conservative estimate. The Social Security Administration, in evaluating possible reform proposals, assumes a 6.5% return from stocks, a 3.5% return from corporate bonds, and a 3% return from government bonds. The agency’s actuaries expect that the average personal account – half stocks, half bonds – would yield a 4.6% return. And that’s still a conservative portfolio and a low return by historical standards. But Mr. Schumer’s calculator expects only a 3% return. That means a worker would opt for a personal retirement account and then invest all his money in government bonds.

It’s just about the worst-case scenario for an individual retirement account. And clearly Mr. Schumer hasn’t thought this through. Or else he’s being less than candid. He maintains a quixotically rosy outlook for the government-run system. So, after assuming that the Social Security system can create money from thin air and that private accounts will under perform typical investment portfolios, Mr. Schumer concludes – surprise! – that Mr. Bush’s plan is worse than the present system.

Fortunately, the Social Security Administration itself has run the same experiment with less biased assumptions. In a memorandum, “Estimates of Financial Effect for Three Models Developed by the President’s Commission to Strengthen Social Security,” the SSA’s actuaries evaluated a reform proposal that included price indexing and private accounts. An average worker making $35,000 who retires in 2042, they found, would end up with 94.1% of what was promised to him under the old system – and 128% of what the old system would actually be able to pay. But Mr. Schumer’s calculator wants you to believe that the same worker would suffer a 29% benefit cut after he’s able to invest his Social Security dollars. If you buy that, the senator also has a bridge to sell you in Brooklyn.