Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

February 14, 2005
By: Kevin Drum

CRISIS? WHAT CRISIS?....In my continuing quest for interesting charts and graphs related to Social Security, I came across a pretty good one today. But first some background.

By law, the Social Security trustees are required each year to make projections of the system's future solvency. In fact, they make three projections: high, low, and intermediate. The intermediate projection is the one that everyone uses.

But which of these projections is actually the most accurate? The trustees have been making these three projections for quite a while, which means there's enough historical data to see how they've fared. David Langer, an actuary who's been following the Social Security debate for years, presents this chart showing past projections of how big the trust fund would be in the year 2002:

Take a look at the percentages I've highlighted inside the orange rectangle. The low-cost projection is consistently more accurate than the intermediate projection. As Langer puts it:

The chart suggests that (1) the high cost projection is so far off it deserves to be discarded, (2) the intermediate cost projection should be redesignated as high cost, (3) the low cost projection, since it is on target, merits promotion to the intermediate level, and a new low-cost basis needs to be developed.

Consider the ramifications. The intermediate basis currently projects the assets to run out in 2041, while the low-cost basis develops a surplus of $18 trillion. At the end of the 75-year projection period, the difference grows to zero vs. $83 trillion.

Now, Langer has made some incendiary charges of political interference in the forecasting process that have made him pretty unpopular with the Social Security actuaries. Still, his numbers speak for themselves: the low-cost projection is historically the most accurate one, and it shows that the trust fund is not only solvent forever, but runs a huge surplus.

That doesn't sound like much of a crisis, does it?

Kevin Drum 3:56 PM Permalink | Trackbacks

Bookmark and Share
 
Comments




 

 

Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM



buy from Amazon and
support the Monthly