Social Security Actuarial Balance in Historical Perspective

[Paul Krugman] sends us to:

And comments:

Paul Krugman: I think the key message is what has happened to the estimate of actuarial balance -- the difference between projected outlays and projected revenues over the next 75 years. This is the thing that is supposed to get steadily worse as time goes by, as the 75-year window contains ever fewer years in which the baby boomers are in the work force, paying payroll taxes, and ever more years when the boomers are out of the work force and collecting benefits.

In fact, however, the actuarial balance has been improving rather than worsening. It is now better than it has been since 1993. What this tells us is that projections made in the mid-to-late 1990s were, in the light of subsequent revisions, way too pessimistic.

Comments

[anne]

Imagine my surprise; though wait for the end of the world articles sure to come. Be afraid, be somewhat afraid.

[Barkley Rosser]

I have not yet looked at it, but Bruce Webb has privately told me some tidbits out of this latest SSA Trustees Report, from which I gather this table is drawn. It now appears that for the low cost projection, the lowest positive balance for the system is projected to be at +$380 billion in 2043, after when that positive balance just soars off into infinity.

In general, the projections look better in this report. Reality may be finally sinking in there, in spite of having Cato's super fanatical Andrew Biggs serving as Deputy Director, or whatever his title is, having had to be appointed by Bush during a Congressional recess. So, indeed, those of us who have been saying that social security is not a big problem are finding our case further reinforced once again.

[christofay]

So it depends on whether the Federal govt honors the bonds it's stuffing the "lock box" with.

How far are you going to trust the Feds?

Bear in mind that Bernanke, Clinton, McCain, and the rest of the finance side of the govt are contemplating trillion dollar bail outs of innovative finance sphere.

[PQuincy]

I see that in today's LA Times on the trustees' reports, by one Ricardo Alonso-Zaldivar, the author discusses at length the mythical program called "Medicare and Social Security." The article correctly describes the challenges that many foresee for the Medicare part of this mythical program, and even quotes David Walker on how politicians shouldn't say "I'll never change Social Security and Medicare."

Pity that this reporter -- presumably someone with knowledge of public policy? -- didn't point out that these are two _entirely different_ programs.

Meanwhile, I see that other commentors continue to suggest that the Federal government will stop paying its debts, that in fact, the Federal government has 'no intention' of paying its debts. Since those debts fund payment to one of the largest and most reliably voting populations in the country, one wonders how they reach this peculiar conclusion, but hey, it's a free country.

[SvN]

Q: What is the appropriate confidence interval to attach to such estimates?

My mind continues to be boggled by the number of otherwise intelligent and well-meaning people who take estimates based on 75-year point forecasts at face value.

[Bruce Webb]

SvN Somehow I missed this thread but since no one else answered:

Realistically the numbers that count are those of the first five to ten years, the question of solvency is likely to be settled during the next Presidential term, ultimate numbers are more of a thought experiment serving only to anchor the short term number series. The real question is not what the confidence interval should be for 2083 but what it should be for 2010-2012, the years when the rubber will likely hit the road. If you want to make your own estimation the important economic numbers are in Tables V.B1 and V.B2 while the demographic assumptions are in V.A1
2008 Report List of Tables http://www.ssa.gov/OACT/TR/TR08/trLOT.html

The Trustees do supply a probability analysis but I am not at all sure it shows what it purports to, instead it seems to be making a circular argument. But people who actually understand these things can judge for themselves. Stochastic Projections: http://www.ssa.gov/OACT/TR/TR08/VI_stochastic.html#103970