The 2005 Social Security Trustees Report

The 2005 Social Security Trustees Report lowers the estimate of Social Security's deficit through 2079 to 0.6% of GDP. Last year's Trustees Report pegged the deficit through 2078 at 0.7% of GDP.

Social Security's financial status improved even though the new forecast window adds a big deficit year--2079--to the calculation. And its financial status improved even though the Bush administration assumed:

1. Reduced earnings on the part of the young.
2. Reduced death rates on the part of the old.
3. Lower labor force participation on the part of the young and old.
4. More short term inflation.
5. No change in long-run productivity growth (in spite of very good productivity news).
6. No change in immigration (in spite of immigration running ahead of assumptions).

That's six thumbs on the scales, and still the long-run deficit shrinks.

So why is the headline that the financial status of Social Security has gotten worse? Can you say "an easily snowed press corps"? I knew you could.

Comments

[AllenM]

2078- I will be dead. or 112 years old and Social Security will be dead. No me importa. After all the Republicans will totally blanch at the thought of finally having to raise taxes to actually meet the medicare crisis that will be here in two years.

[Movie Guy]

A related issue...

$1 TRILLION projected loss of revenue to Medicare

MaxSpeak - March 23, 2005
STOP ME BEFORE I KILL AGAIN

http://maxspeak.org/mt/archives/001256.html

CBPP explains the Bunning amendment which strips out a 1993 provision of Social Security legislation.

$1 Trillion stripped from Medicare over the next 75 years and the issue can't be filibustered!

Imagine that...

"The Bunning amendment envisions repeal of the 1993 provision. Doing so is estimated to cause a revenue loss of $64 billion over five years. The Bunning amendment accorded this $64 billion in added tax cuts special “reconciliation” protection, making the measure easier to pass and protecting it from filibuster.

The $64 billion in lost revenues would result in $7 billion in added interest payments on the debt, bringing the amendment’s total cost to $71 billion over five years."

"The revenue losses that the Bunning proposal would cause Medicare to bear would mount over time. Over the next 75 years, the customary period for measuring Medicare and Social Security solvency, the proposal would cause the Medicare Hospital Insurance Program to lose $1 trillion in revenue (measured in present value terms). This would increase the shortfall in the program by 12.3 percent, or about one-eighth.

Looked at another way, the loss from the Bunning proposal would be equivalent to more than one-quarter of the 75-year shortfall in Social Security."

It can't be filibustered as a stand alone budget measure because of its special “reconciliation” protection.

CBPP link:

WITH BUNNING AMENDMENT, SENATE BUDGET WOULD MOVE UP MEDICARE INSOLVENCY BY FOUR YEARS AND INCREASE DEFICITS BY MORE THAN $200 BILLION

http://www.cbpp.org/3-18-05bud.htm

$1 TRILLION projected loss in Medicare revenue and the issue is barely being discussed...

[Scotto]

Wow! What does this say about their leadership...

> 1. Reduced earnings on the part of the young.
> 3. Lower labor force participation on the part of the young and old.

All the good jobs have gone away. You want fries with that?

> 4. More short term inflation.

Welcome to the late 70's kiddos.

> 5. No change in long-run productivity growth (in spite of very good productivity news).

Bye bye innovation.

6. No change in immigration (in spite of immigration running ahead of assumptions).

"Pedro" better watch out, sounds like a crackdown is coming...

[Robert Waldmann]

Don't forget Joenertia.

Lieberman said every years delay adds $ 600 billion to the present value of the shortfall. Brad explained why this means nothing. Also it is false

" The trustees said that Social Security's unfunded obligations total $4 trillion over the next 75 years, an increase from last year's projection of $3.7 trillion in unfunded liabilities."

That's up $300 billion not $ 600 billion. $ 300 billion less bad than no change means the situation has improved as noted by Brad.

[Steve in Seattle]

Why are they estimating reduced earnings and lower labor force participation for young people? Is it because of a demographic change (lower numbers of people) or is it lower income/capita?

[Movie Guy]

Here is a Bloomberg analysis of the trustees' report:

Medicare May Raise Seniors' Premiums 12% Next Year, Report Says

http://www.bloomberg.com/apps/news?pid=10000103&sid=aFDyUoqmfIv0&refer=us

March 24 article excerpts:

The increase would push premiums for doctor visits deducted from Social Security checks up 49 percent over three years to $87.70 a month, the health-insurance program's trustees said in an annual report yesterday. Medicare, which covers more than 41 million elderly and disabled people, annually adjusts patient premiums and deductibles for hospital care.

The program's out-of-pocket costs have been rising faster than pension benefits under the government's Social Security program. While Medicare premiums rose 13.5 percent last year and 17.4 percent in 2005, Social Security checks increased by 2.7 percent in 2004 and 2 percent this year. The retirement program's trustees projected a 2.2 percent raise for next year.

Past premium increases resulted from a 2003 law reversing cuts in Medicare payments to doctors. Patients bear 25 percent of physician costs, and Medicare pays the rest.

"Correcting this situation would require a 12 percent increase in the 2006 premium," wrote the trustees, which include Treasury Secretary John Snow and Health and Human Services Secretary Michael Leavitt, in the report. "This increase would need to be larger" if Congress raises payments to physicians for next year.

Patients' out-of-pocket spending on hospitalization would rise 4.8 percent to $956 a year, according to the trustees' estimates. Deductibles for those who stay overnight in hospitals rose 4.1 percent this year and 4.3 percent last year.

Medicare will expand coverage of prescription medicines next year. The premium for the optional coverage will be $37.37 a month on top of the doctor-visit premiums, the trustees estimated.

"The average increase that seniors will perceive will be 60 percent, and that's a phenomenal number," said the American Enterprise Institute's Antos. "What this almost certainly means is that in the fall, when this is revealed for the second time, there will be a political uproar."

[James Klas]

From Maxspeak:

[
That means a permanent tax increase of 1.2 percent of GDP would offset the Social Security gap, forever and ever and ever. In FY2006 dollars, that would be $155 billion. By contrast, the cost of the tax cuts since 2000 in the same terms is 2.2 percent of GDP (Auerbach, Gale and Orszag, 2004). So eliminating 55 percent of the Bush tax cuts offsets the Social Security shortfall over the infinite horizon.
]

One day the Democrats are going to go back onto the offensive.

When they do, I hope they press the Republicans on the promises they made that the US could afford their tax cuts without taking from the Trust Fund.

Current claims that "the money is spent" are fundamentally dishonest from that perspective.

[bhaim]

It would be nice if the population projections by the SS actuaries and Census Bureau matched.

The Census bureau is projecting a larger US population in 2030 for example.

http://www.census.gov/ipc/www/usinterimproj/