Will the Presidents Commission use CBO or SSA Numbers?
by Bruce Webb
Well some things are coming clear about the Presidents Deficit Commission. One its Chairmen have made it clear that its business starts and stops with Entitlements, the concerns some Republicans had that this would be Obama’s way of boosting taxes on the General Fund side or slashing military spending have been shown to be misplaced. Moreover it is clear from the NYT article cited by Jack yesterday plus many other indications that Social Security is front and center, after all the GOP has used the prospect of cuts to Medicare as a centerpiece to their opposition to HCR.
So the ground in being prepared for a grand debate on Social Security. But the question I want to throw out today is this: Who will be the scorekeeper? And the answer to that has huge implications.
There are three main governmental actors who score Social Security and they are not lined up neatly in either methodology or timing. First and foremost are the Trustees of Social Security. They release their Annual Report typically on March 31st though it can come out, as it did last year, as late as May. When it does come out it will be available here: Trustees’ Reports and of course in short order via a link in a post here at AB.
At that point we will be able to compare its numbers to those of the Congressional Budget Office. The CBO gives ten year numbers for Social Security with its standard Budget Outlooks and updates of its Baseline but its main analysis of Social Security comes each August in the form of a document entitled ‘CBO’s Long-Term Projections for Social Security’. The 2009 version of this is available here: CBO Publications: Social Security and Pensions
A third scorekeeper is the White House Office of Management and Budget which releases its own 10-year numbers on Social Security with its release of the President’s Budget. Normally these numbers would not be front and center in a Social Security discussion, but this is after all a Presidential Commission and moreover the current top two at OMB are themselves authors of prominent Social Security plans: Diamond-Orszag and Liebman-MacGuineas-Samwick (LMS).
So we are faced this year with our own Clash of the Titans. And it matters because the data sets are incongruent, where CBO in August projected a 75 year actuarial gap of 1.3%, SSA put it at 2.01% in May. Whereas SSA tells us that the Trust Fund will likely go to depletion in 2037 based on the best available information they had a year ago, CBO using updated information from last Spring/Summer still would have that date be 2043. And that time gap is very significant, it is the difference between mid-point Boomers being 82 or just crossing the average projected mortality date and 88 when most of that cohort will have shuffled off to Buffalo (and points beyond).
A couple of days ago it was announced that the Executive Director of the President’s Commission would be former top Clinton advisor and DLC Chair Bruce Reed and presumedly Bruce is staffing up as we speak. We don’t know when the Commission will actually hold its first hearings but certainly those will be shaped and informed by the numbers in the soon to be released SSA Trustees Report. But the time-table established would have the Commission issue recommendations in December presumedly to be acted on by the next Congress in Spring 2011. Which means that the Commission and then Congress are going to be dealing with four sets of numbers in succession: 2010 Social Security Report (April), Presidents 2011 Budget (Summer), CBO’s Long-Term Projections (August), and then in all likelihood the 2011 SS Report (April 2011).
So it should be interesting, because the set of policies you need to address a 2% of payroll gap in 2037 are very different from those needed to address a 1.3% gap in 2043. And the reality is that the situation on the ground has moved significantly since even those numbers were produced.
I addressed the question SSA? or CBO? to a big group of policy experts. And one of the biggest, and one with a long resume of top jobs at both SSA and CBO firmly answered ‘CBO’. But some people closer to the current action said essentially ‘Not so fast, that decision has not been made’. Well it makes a huge difference because coincidentally some of the major proposals out there like changes in retirement age and cap increases typically score right at 0.7% of payroll and so very close to the difference between SSA and CBO, if we adopt the former they might have to be included in a proposal, if we adopt the latter they could be scrapped without damage.
By and large the Press reporting in years past and most policy discussion generally has revolved around the Trustees numbers and until the debate over HCR few people even understood the role of CBO is scoring legislation. Now that the focus is turning squarely on Social Security commenters who have been content to deal with issues like Trust Fund Depletion in terms of ‘will run out’ are suddenly going to be confronted with an amount of ambiguity and varying datasets that they just are not prepared for. But at least Angry Bear readers will have had a little heads up.
As politicians, I think that they will use the numbers from the SPCSV, the Society for the Prevention of Cruelty to Senior Voters. 😉
Given the variations in the several agencie’s projections for what will the future hold twenty five years out, I wonder what a look back would tell us about the validity of such future economic projections. Given that there is an intention to “correct” for the possible consequences of those future projections it seems prudent to begin to focus on the reliability and validity of such long term projections. So what is it these several agencies had to say about the future twenty five years in the past? What did the Trustees Report, the CBO and the OMB reports of 1985 project for the financial stability of Social Security in 2010? Were those past projections valid based on actual outcomes? If those agency reports are going to be the basis for actions taken by the Congress regarding the future of Social Security I’d like to know that the reports from the past bear some semblence to the reality of today.
Well CBO has only been in the Social Security scoring business for a decade or two, they were not around to score the Greenspan Commission according to some veterans of that staff.
My web-site has links back to every Social Security Report back to 1942.
Bruce–As a matter of curiousity, I’d like to know who it is you have talked to in SSA about solvency. I could be familiar with these peoples’ careers. This would give me an insight into what camp they belong to. Going back to Dorcas Hardy’s period under Reagan’s administration, the upper ranks of SSA management have become progressively more Petersonized, if you will. And, the result has not been good in some important operational regards.
Take the Disability mess, for example. One factor that has to be taken into account in any Commission is what to do with the pending mountain of hearings–about 700K now, representing billions in unpaid claims and payment errors. This backlog was the direct result of inadequate budgets for SSA over 20 or more years. Congress appropriates SSA’s operating budget from the TF and some general revenues (for SSI.) Under Republican Congresses since 1994, staffing has remained inadequate to meet the needs of the public. Worse, huge operational backlogs have developed in every aspect of the program.
Right now, people are still happy with SSA. But, if this sort of creeping rot keeps spreading, and it will without attention from the git go, the percentage of payroll shortfall won’t matter. Congress will continue to starve SSA with predictable results. Service quality will continue to deteriorate and so will public support. I hope that projections of futures costs will take operations into account. If not, collecting FiCA is not the problem. Finding a Social Security office when you need it will be the problem.
Nancy e-mail me at bruce.webb@mac.com. The names and opinions of our group are officially off the record, but I would discuss them with you under some condition of confidentiality.
1. The Annual SSA report does not exactly choose to predict exactly what will be. It provides actuarial estimates based on the records of SSA indicating the numbers of people on the rolls and their ages adjusted for estimates of death and disability. The report has high estimate, low estimate and intermediate. The Budget offices use the basic data from SSA and adjust it based on posxsible new legislation and other decision-making options. The agency budget office prepares the annual budget that projects a few years beyond the budget years. The program estimates in the budget are prepared by the agency with advice from the Actuary.
2. The disability program of SSA has been the most difficult because of the diefinition of disability and the subjective judgment of the individual, especially in periods of unemployment. “Unable to work in my old job” is not the same as unable to engage in any substntial gainful activity – thus the appeals of negative denials.
3. The headquarters disability operation has been the worst managed portion for 50 years. I can’t explain why here. I spent 30 yeasr in SSA, 24 in headguarters, the first 6 there in the agency budget office,s
So,
we are going to have an imaginary problem discussed using unreasonable predictions from people who don’t agree with each other, all based on a fundamental failure to understand the nature of social security.
you will understand why my heart is not in it.
but for anyone who still cares… you can veryify this yourself with a little reading and a little arithmetic:
Social Security has nothing to do with the current debt/deficit.
There is no reason it should have anything to do with any future debt/deficit.
The much screamed about future shortfall in Social Security can be prevented with a payroll tax increase of about 20 cents per week each year while incomes are going up ten dollars per week each year. Or no increase at all would still allow benefits to be paid at a higher real level than today’s.
The future cost of Medicare will not be high compared to the level of future incomes. The choice will be between continue to pay for medical care (whether Medicare or private) the way we do now, at the prices projected on the assumption that the rate of increase will not change, or to do something sensible about medical care costs and use the money for second vacations in Vegas every year.
Raising the retirement age “because we are going to live longer” is stupid. Most people do not want to work until they die, or are “too old to work” or do much of anything else. People used to understand the idea was to make enough money so you could retire as young as possible, depending on whether you wanted a simple retirement or a round the world cruise. Of course most people didn’t make even the simple retirement until Social Security made it possible for them to SAVE THEIR OWN MONEY and not lose it to inflation or market gyrations.
ALL of the “fixes” on the table… including those favored by Bruce’s expert friends… would turn Social Security into welfare by taxing people who have no realistic expectation of getting their money back. Or it would destroy the effectiveness of Social Security as retirement INSURANCE. If you can’t retire because the benefits are not high enough to buy groceries or because the law won’t let you collect them until you are seventy… then you do not have “retirement” insurance. You have a game where you prepay part of your nursing home bill.
This whole thing is an exercise in evil dishonesty on the part of the Petersons and their ilk, and profound stupidity on the part of the President’s men, and a stunning failure of the rest of us to defend our own interests… interests which we have paid for ourselves.
Well, just being a little peon who collects Social Security and worked until I was 77 I am more than a bit upset that the government has stolen (of course they left I.O.U.’s) more than 7 trillion dollars from Social Security and no one seems to think it should be paid back. This has been going on for quite some time and is never mentioned when it is time to revamp the system. But then maybe I have it all wrong and this never happened. It was a good idea when it started but then most people did not live to retire. Now we old seniors are living longer but not better unfortunately. Bottom line, it’s a fine mess we have gotten ourselves in.
Bruce
I think you missed the point of Jack’s question. the twenty-five years was not the point. What is the track record of predictions.
Here is a hint. What was their predicition last year?
If they can’t predict for one year, why should we be making major changes in a program based on predictions for ten year? Especially when no one can give you a sane answer to “what difference does it make?
Suppose the Trust Fund runs out sooner? does the sky fall? no. SS goes to pay as you go with or without a payroll tax increase.
And when you are talking about “scoring” a 7 tenths of one percent of payroll difference you need to unpack that for the readers… 0,7% of payroll is five dollars per week for the average worker. two dollars per week for a low wage worker. only the worker only pays half of it. So what sane worker who understands that his choice is between a couple of dollars per week now and not being able to retire until until he is seventy five is going to choose to keep the money?
ii said sane worker.
Here is a record of CBO projections for SSA OASDI trust funds exhaustion. Note that the CBO dropped the projected calendar year of OASI exhaustion from 2048 to 2042, a six year decline, during the period of CBO reports issued from August 2008 to August 2009.
CBO – Projected Social Security OASDI
Combined Trust Funds Financial Exhaustion Date
Under Current Law
CBO Report – End of Calendar Year OASDI Exhaustion
Jun 2004 LTSSO – 2052
Dec 2004 DOSSP – 2052
Mar 2005 LTSSO – 2052
Dec 2005 LTBO – 2050
Jun 2006 LTSSO – 2046
Dec 2007 LTBO – 2043
Aug 2008 LTSSO – 2048
Jun 2009 LTBO – 2047
Aug 2009 LTSSO – 2042
Notes:
LTSSO – Long Term Social Security Outlook
LTBO – Long Term Budget Outlook
DOSSP – Long-Term Analysis of the Diamond-Orszag Social Security Plan
2007 LTSSO – No document published
Aug 2008 LTSSO – “Another commonly used metric is the trust funds’ exhaustion date, which CBO projects will be 2047 under the extended-baseline scenario and 2045 under the alternative fiscal scenario. Once the trust funds are depleted, the Social Security Administration no longer has legal authority to pay benefits. In the years following the trust funds’ exhaustion, annual outlays would be limited to annual revenues, so the benefits that could be paid would be substantially lower than the benefits that were scheduled to be paid. In its August 2008 report titled Updated Long-Term Projections for Social Security, CBO projected benefits under two scenarios: a “payable benefits” scenario, in which outlays are limited by the availability of trust fund balances, and a “scheduled benefits” scenario, in which they are not limited. This report uses the latter scenario.”
Aug 2009 LTSSO – “In 2043 — CBO’s projected date for the exhaustion of the trust funds — revenues will equal only 83 percent of scheduled outlays. Thus, payable benefits will be 17 percent lower than scheduled benefits.” Therefore, 2042 is the last projected calendar year for payment of full scheduled benefits. It is stated as the actual calendar year of OASDI exhaustion in the above presentation to maintain consistency with all other projected OASDI exhaustion calendar years based on CBO commentary in the other reports.
Sources:
http://www.cbo.gov/publications/collections/collections.cfm?collect=5
http://www.cbo.gov/publications/bysubject.cfm?cat=3
.
CBO METHODOLOGY
CBO has provided guidance, including that outlined in the Long Term Social Security Outlook reports (LTSSO), which explains why CBO and SSA internal reporting does not match up with regard to the projected calendar year for OASDI exhaustion. There are at least three such documents, in addition to the LTSSO annual guidance, which have been made available since 2002 including the long term model overview issued in 2009.
Differences Between CBO’s Long-Term Social Security
Projections and Those of the Social Security Trustees
Pages 34-35
CBO’s Long-Term Projections for Social Security: 2009 Update
http://www.cbo.gov/ftpdocs/104xx/doc10457/08-07-SocialSecurity_Update.pdf
CBO’s Long-Term Model: An Overview
June 2009
http://www.cbo.gov/ftpdocs/103xx/doc10328/06-26-CBOLT.pdf
Quantifying Uncertainty in the Analysis
of Long-Term Social Security Projections
November 2005
http://www.cbo.gov/ftpdocs/68xx/doc6873/11-16-MonteCarlo.pdf
Measuring Changes to Social Security Benefits, Long-Range Fiscal Policy Brief No. 11, December 1, 2003
http://www.cbo.gov/doc.cfm?index=4866&type=0
.
Here is a record of CBO projections for SSA OASDI trust funds exhaustion. Note that the CBO dropped the projected calendar year of OASI exhaustion from 2048 to 2042, a six year decline, during the period of CBO reports issued from August 2008 to August 2009.
CBO – Projected Social Security OASDI
Combined Trust Funds Financial Exhaustion Date
Under Current Law
CBO Report – End of Calendar Year OASDI Exhaustion
Jun 2004 LTSSO – 2052
Dec 2004 DOSSP – 2052
Mar 2005 LTSSO – 2052
Dec 2005 LTBO – 2050
Jun 2006 LTSSO – 2046
Dec 2007 LTBO – 2043
Aug 2008 LTSSO – 2048
Jun 2009 LTBO – 2047
Aug 2009 LTSSO – 2042
Notes:
LTSSO – Long Term Social Security Outlook
LTBO – Long Term Budget Outlook
DOSSP – Long-Term Analysis of the Diamond-Orszag Social Security Plan
2007 LTSSO – No document published
Aug 2008 LTSSO – “Another commonly used metric is the trust funds’ exhaustion date, which CBO projects will be 2047 under the extended-baseline scenario and 2045 under the alternative fiscal scenario. Once the trust funds are depleted, the Social Security Administration no longer has legal authority to pay benefits. In the years following the trust funds’ exhaustion, annual outlays would be limited to annual revenues, so the benefits that could be paid would be substantially lower than the benefits that were scheduled to be paid. In its August 2008 report titled Updated Long-Term Projections for Social Security, CBO projected benefits under two scenarios: a “payable benefits” scenario, in which outlays are limited by the availability of trust fund balances, and a “scheduled benefits” scenario, in which they are not limited. This report uses the latter scenario.”
Aug 2009 LTSSO – “In 2043 — CBO’s projected date for the exhaustion of the trust funds — revenues will equal only 83 percent of scheduled outlays. Thus, payable benefits will be 17 percent lower than scheduled benefits.” Therefore, 2042 is the last projected calendar year for payment of full scheduled benefits. It is stated as the actual calendar year of OASDI exhaustion in the above presentation to maintain consistency with all other projected OASDI exhaustion calendar years based on CBO commentary in the other reports.
Sources:
http://www.cbo.gov/publications/collections/collections.cfm?collect=5
http://www.cbo.gov/publications/bysubject.cfm?cat=3
.
Dolores
There are a few mistakes in what you wrote… I make them myself… but nothing that matters really.
The amount of social Security extra payments they are planning to steal is only about 3 Trillion, and much of that is “interest.”
Most people DID live to retire. That bit about the life expectancy being lower than retirement age is a lie. or at least deliberately misleading. all those kids who used to die in childhood lowered the life expectancy but they did not contribute to Social Security, and the people who did contribute to social security mostly lived to retirement age and ten or twelve years beyond that. in other words long enough to get their money back and more.
the “more” came from the more kids living and growing up to pay taxes and making more money so paying more in taxes than the older people did. it’s the way things work in general. though the Big Liars will find ways to confuse you about it.
I am sorry you are not living as much “better” as you would like. But my guess is that without Social Security you’d be living a lot worse. And so will your kids.
Coberly,
I share your frustration. These deceitful efforts are all the more disheartening as they may be carried forward by our “socialist” President, who seems more accurately to grovel at the feet of conservatism. Though I don’t accept that our right wing, fascist polliticians are in fact conservatives. There is a difference. Maybe they are conservative in that our original founders, the writers of our Constitution were slave owners. So many contradictions. Ours is a corporatist state. All decision making is given over to the managerial society. Our Congress and Executive have been coopted to the corporate point of view. The effort to tinker with a program that has worked so well, which can’t be shown to be in any current financial difficulty is only motivated by the intention to destroy that program. They don’t want to pay their fair share. They call themselves patriotic, but in fact they want only to take from their country and not give back any share of their takings. One can only hope that at some point they become so bold as to awaken the senses of the people and that that awakening will motivate the people to take genuine political action and clean the houses of our government. Not by exchanging one party for the other. but by beginning to insist on represwentatives who are not a part of the corporate system that seeks to maintain control over their econoomic lives.
Here is a record of CBO projections for SSA OASDI trust funds exhaustion.
Note that the CBO dropped the projected calendar year of OASI exhaustion from 2048 to 2042, a six year decline, during the period of CBO reports issued from August 2008 to August 2009.
CBO – Projected Social Security OASDI
Combined Trust Funds Financial Exhaustion Date
Under Current Law
CBO Report – End of Calendar Year OASDI Exhaustion
Jun 2004 LTSSO…..2052
Dec 2004 DOSSP….2052
Mar 2005 LTSSO….2052
Dec 2005 LTBO…….2050
Jun 2006 LTSSO…..2046
Dec 2007 LTBO…….2043
Aug 2008 LTSSO….2048
Jun 2009 LTBO…….2047
Aug 2009 LTSSO….2042
Notes:
1. LTSSO – Long Term Social Security Outlook
2. LTBO – Long Term Budget Outlook
3, DOSSP – Long-Term Analysis of the Diamond-Orszag Social Security Plan
4. 2007 LTSSO – No document published
5. Aug 2008 LTSSO – “Another commonly used metric is the trust funds’ exhaustion date, which CBO projects will be 2047 under the extended-baseline scenario and 2045 under the alternative fiscal scenario. Once the trust funds are depleted, the Social Security Administration no longer has legal authority to pay benefits. In the years following the trust funds’ exhaustion, annual outlays would be limited to annual revenues, so the benefits that could be paid would be substantially lower than the benefits that were scheduled to be paid. In its August 2008 report titled Updated Long-Term Projections for Social Security, CBO projected benefits under two scenarios: a “payable benefits” scenario, in which outlays are limited by the availability of trust fund balances, and a “scheduled benefits” scenario, in which they are not limited. This report uses the latter scenario.”
6. Aug 2009 LTSSO – “In 2043 — CBO’s projected date for the exhaustion of the trust funds — revenues will equal only 83 percent of scheduled outlays. Thus, payable benefits will be 17 percent lower than scheduled benefits.” Therefore, 2042 is the last projected calendar year for payment of full scheduled benefits. It is stated as the actual calendar year of OASDI exhaustion in the above presentation to maintain consistency with all other projected OASDI exhaustion calendar years based on CBO commentary in the other reports.
Sources:
http://www.cbo.gov/publications/collections/collections.cfm?collect=5
http://www.cbo.gov/publications/bysubject.cfm?cat=3
.
CBO METHODOLOGY
CBO has provided guidance, including that outlined in the Long Term Social Security Outlook reports (LTSSO), which explains why CBO and SSA internal reporting does not match up with regard to the projected calendar year for OASDI exhaustion. There are at least three such documents, in addition to the LTSSO annual guidance, which have been made available since 2002 including the long term model overview issued in 2009.
Differences Between CBO’s Long-Term Social Security
Projections and Those of the Social Security Trustees
Pages 34-35
CBO’s Long-Term Projections for Social Security: 2009 Update
http://www.cbo.gov/ftpdocs/104xx/doc10457/08-07-SocialSecurity_Update.pdf
CBO’s Long-Term Model: An Overview
June 2009
http://www.cbo.gov/ftpdocs/103xx/doc10328/06-26-CBOLT.pdf
Quantifying Uncertainty in the Analysis
of Long-Term Social Security Projections
November 2005
http://www.cbo.gov/ftpdocs/68xx/doc6873/11-16-MonteCarlo.pdf
Measuring Changes to Social Security Benefits, Long-Range Fiscal Policy Brief No. 11, December 1, 2003
http://www.cbo.gov/doc.cfm?index=4866&type=0
.
CBO METHODOLOGY
CBO has provided guidance, including that outlined in the Long Term Social Security Outlook reports (LTSSO), which explains why CBO and SSA reporting does not match up with regard to the projected calendar year for OASDI exhaustion. There are at least three such documents, in addition to the LTSSO annual guidance, which have been made available since 2002 including the long term model overview issued in 2009.
Differences Between CBO’s Long-Term Social Security
Projections and Those of the Social Security Trustees
Pages 34-35
CBO’s Long-Term Projections for Social Security: 2009 Update
http://www.cbo.gov/ftpdocs/104xx/doc10457/08-07-SocialSecurity_Update.pdf
CBO’s Long-Term Model: An Overview
June 2009
http://www.cbo.gov/ftpdocs/103xx/doc10328/06-26-CBOLT.pdf
Quantifying Uncertainty in the Analysis
of Long-Term Social Security Projections
November 2005
http://www.cbo.gov/ftpdocs/68xx/doc6873/11-16-MonteCarlo.pdf
Measuring Changes to Social Security Benefits, Long-Range Fiscal Policy Brief No. 11, December 1, 2003
http://www.cbo.gov/doc.cfm?index=4866&type=0
.
Jack
i was wondering it the democrats have not become the party of the financial elite. while the republics have genuinely become the party of the insane right. there is a difference.
since i can’t come up with a reasonable reason why they want to destroy social security i have to guess about possible conspiracy theories. it seems to me the people who run the world… not conspiracy theory yet, it’s just a fact that the people with lots and lots of money work hard every day to influence government policies, and succeed everywhere they think it is important… have decided that social security and secure retirement of any kind for workers is not in their interest. and i continue to believe that people of this class really do hate workers. it is a psychological necessity to hate the people you are hurting. for a time the interests of the financial class corresponded with new deal type policies… whatever they said in public… because “high mass consumption” was considered necessary for wealth creation… the kind of wealth the rich enjoy.
anymore that may be seen as less true. anyway something is going on that doesn’t meet any “rationality” test i can think of.
MG
thanks as always for providing us with documentation.
but i repeat, the projected death date of the trust fund, or even the real death date of the trust fund
DOES NOT MATTER.
Social Security pays for itself. Pay as you go. Payroll taxes to Benefits. A small “trust fund” is needed to provide the month to month smoothing to make up for uneven tax collections and benefit payouts. A slightly larger trust fund can smooth over periods of recession. And the large trust fund we have today can ease the “generational inequity” of the baby boom. But none of these functions is “necessary” in any fundamental sense.
The whole “argument” is nonsense.
Here is a record of CBO projections for SSA OASDI trust funds exhaustion.
Note that the CBO dropped the projected calendar year of OASDI exhaustion from 2048 to 2042, a six year decline, during the period of CBO reports issued from August 2008 to August 2009.
CBO – Projected Social Security OASDI
Combined Trust Funds Financial Exhaustion Date
Under Current Law
CBO Report – End of Calendar Year OASDI Exhaustion
Jun 2004 LTSSO…..2052
Dec 2004 DOSSP….2052
Mar 2005 LTSSO….2052
Dec 2005 LTBO…….2050
Jun 2006 LTSSO…..2046
Dec 2007 LTBO…….2043
Aug 2008 LTSSO….2048
Jun 2009 LTBO…….2047
Aug 2009 LTSSO….2042
Notes:
1. LTSSO – Long Term Social Security Outlook
2. LTBO – Long Term Budget Outlook
3, DOSSP – Long-Term Analysis of the Diamond-Orszag Social Security Plan
4. 2007 LTSSO – No document published
5. Aug 2008 LTSSO – “Another commonly used metric is the trust funds’ exhaustion date, which CBO projects will be 2047 under the extended-baseline scenario and 2045 under the alternative fiscal scenario. Once the trust funds are depleted, the Social Security Administration no longer has legal authority to pay benefits. In the years following the trust funds’ exhaustion, annual outlays would be limited to annual revenues, so the benefits that could be paid would be substantially lower than the benefits that were scheduled to be paid. In its August 2008 report titled Updated Long-Term Projections for Social Security, CBO projected benefits under two scenarios: a “payable benefits” scenario, in which outlays are limited by the availability of trust fund balances, and a “scheduled benefits” scenario, in which they are not limited. This report uses the latter scenario.”
6. Aug 2009 LTSSO – “In 2043 — CBO’s projected date for the exhaustion of the trust funds — revenues will equal only 83 percent of scheduled outlays. Thus, payable benefits will be 17 percent lower than scheduled benefits.” Therefore, 2042 is the last projected calendar year for payment of full scheduled benefits. It is stated as the actual calendar year of OASDI exhaustion in the above presentation to maintain consistency with all other projected OASDI exhaustion calendar years based on CBO commentary in the other reports.
Sources:
http://www.cbo.gov/publications/collections/collections.cfm?collect=5
http://www.cbo.gov/publications/bysubject.cfm?cat=3
.
Here is a record of CBO projections for SSA OASDI trust funds exhaustion.
Note that the CBO dropped the projected calendar year of OASDI exhaustion from 2048 to 2042, a six year decline, during the period of CBO reports issued from August 2008 to August 2009.
CBO – Projected Social Security OASDI
Combined Trust Funds Financial Exhaustion Date
Under Current Law
CBO Report – End of Calendar Year OASDI Exhaustion
Jun 2004 LTSSO…..2052
Dec 2004 DOSSP….2052
Mar 2005 LTSSO….2052
Dec 2005 LTBO…….2050
Jun 2006 LTSSO…..2046
Dec 2007 LTBO…….2043
Aug 2008 LTSSO….2048
Jun 2009 LTBO…….2047
Aug 2009 LTSSO….2042
Notes:
1. LTSSO – Long Term Social Security Outlook
2. LTBO – Long Term Budget Outlook
3, DOSSP – Long-Term Analysis of the Diamond-Orszag Social Security Plan
4. 2007 LTSSO – No document published
5. Aug 2008 LTSSO – “Another commonly used metric is the trust funds’ exhaustion date, which CBO projects will be 2047 under the extended-baseline scenario and 2045 under the alternative fiscal scenario. Once the trust funds are depleted, the Social Security Administration no longer has legal authority to pay benefits. In the years following the trust funds’ exhaustion, annual outlays would be limited to annual revenues, so the benefits that could be paid would be substantially lower than the benefits that were scheduled to be paid. In its August 2008 report titled Updated Long-Term Projections for Social Security, CBO projected benefits under two scenarios: a “payable benefits” scenario, in which outlays are limited by the availability of trust fund balances, and a “scheduled benefits” scenario, in which they are not limited. This report uses the latter scenario.”
6. Aug 2009 LTSSO – “In 2043 — CBO’s projected date for the exhaustion of the trust funds — revenues will equal only 83 percent of scheduled outlays. Thus, payable benefits will be 17 percent lower than scheduled benefits.” Therefore, 2042 is the last projected calendar year for payment of full scheduled benefits. It is stated as the actual calendar year of OASDI exhaustion in the above presentation to maintain consistency with all other projected OASDI exhaustion calendar years based on CBO commentary in the other reports.
Sources:
http://www.cbo.gov/publications/collections/collections.cfm?collect=5
http://www.cbo.gov/publications/bysubject.cfm?cat=3
.
Coberly, I made a spelling correction to the other post, so I deleted and reposted it.
The CBO identified four general solutions or combination thereof for Social Security and the Federal Government’s General Fund back in 2004. I think this sums it up.
The Outlook for Social Security
June 2004
http://www.cbo.gov/doc.cfm?index=5530
“As a result, outlays are projected to begin exceeding revenues in 2019, with the gap growing ever wider thereafter.”
“Outlays comprise scheduled benefits and administrative costs. Annual outlays exceed annual revenues beginning in 2019; scheduled benefits cannot be paid starting in 2053.”
“Only four approaches to closing that gap are possible, each of which has its own drawbacks:”
1. “The benefits that are scheduled to be paid to future recipients under current law could be reduced, lowering Social Security’s contribution to their income.”
2. “The taxes that fund Social Security could be raised to draw additional resources from the economy to the program.”
3. “The resources consumed by other federal programs could be reduced to cover the gap between Social Security’s outlays and revenues.”
4. “The federal government’s borrowing could be increased, which would be another way to draw more resources from the economy to Social Security. That borrowing would need to be repaid by future generations, however, either through increased taxes or reduced federal spending.”
The CBO identified four general solutions or combination thereof for Social Security and the Federal Government’s General Fund back in 2004. I think this sums it up.
The Outlook for Social Security
June 2004
http://www.cbo.gov/doc.cfm?index=5530
“Only four approaches to closing that gap are possible, each of which has its own drawbacks:”
1. “The benefits that are scheduled to be paid to future recipients under current law could be reduced, lowering Social Security’s contribution to their income.”
2. “The taxes that fund Social Security could be raised to draw additional resources from the economy to the program.”
3. “The resources consumed by other federal programs could be reduced to cover the gap between Social Security’s outlays and revenues.”
4. “The federal government’s borrowing could be increased, which would be another way to draw more resources from the economy to Social Security. That borrowing would need to be repaid by future generations, however, either through increased taxes or reduced federal spending.”
The CBO identified four general solutions or combinations thereof for Social Security and the Federal Government’s General Fund back in 2004. I think this sums it up.
The Outlook for Social Security
June 2004
http://www.cbo.gov/doc.cfm?index=5530
“Only four approaches to closing that gap are possible, each of which has its own drawbacks:”
1. “The benefits that are scheduled to be paid to future recipients under current law could be reduced, lowering Social Security’s contribution to their income.”
2. “The taxes that fund Social Security could be raised to draw additional resources from the economy to the program.”
3. “The resources consumed by other federal programs could be reduced to cover the gap between Social Security’s outlays and revenues.”
4. “The federal government’s borrowing could be increased, which would be another way to draw more resources from the economy to Social Security. That borrowing would need to be repaid by future generations, however, either through increased taxes or reduced federal spending.”
Yes, that is precisely the point of my question. To all of you statisticians out there forgive my impudence, but in the social sciences, economics included, you seem unable to make any reliable predictions about the future. Not a surprise given the myriad factors involved in regards to economic phenomenon and the uncontrollable nature of many of those factors. And isn’t it a basic rule of meaurement that if one cannot demonstrate reliabililty of the data then one cannot claim validity for that data. Is it only the economists who seem not to understand that their understanding of future events is subject to significant error? You may be able to measure the present and the past, but that often leaves a wide margin of error in predicting, (what you guys like to call projecting as though that makes the guess work more accurate) the future.
Just to be sure that this brief exchange doesn’t get lost mid thread I’m repeating it here.
coberly
Bruce
I think you missed the point of Jack’s question. the twenty-five years was not the point. What is the track record of predictions.
Here is a hint. What was their predicition last year?
If they can’t predict for one year, why should we be making major changes in a program based on predictions for ten year? Especially when no one can give you a sane answer to “what difference does it make?
Suppose the Trust Fund runs out sooner? does the sky fall? no. SS goes to pay as you go with or without a payroll tax increase.
And when you are talking about “scoring” a 7 tenths of one percent of payroll difference you need to unpack that for the readers… 0,7% of payroll is five dollars per week for the average worker. two dollars per week for a low wage worker. only the worker only pays half of it. So what sane worker who understands that his choice is between a couple of dollars per week now and not being able to retire until until he is seventy five is going to choose to keep the money?
ii said sane worker.
Today, 5:37:38 PM – Flag – Like – Reply – Delete – Edit – Moderate Jack
Yes, that is precisely the point of my question. To all of you statisticians out there forgive my impudence, but in the social sciences, economics included, you seem unable to make any reliable predictions about the future. Not a surprise given the myriad factors involved in regards to economic phenomenon and the uncontrollable nature of many of those factors. And isn’t it a basic rule of meaurement that if one cannot demonstrate reliabililty of the data then one cannot claim validity for that data. Is it only the economists who seem not to understand that their understanding of future events is subject to significant error? You may be able to measure the present and the past, but that often leaves a wide margin of error in predicting, (what you guys like to call projecting as though that makes the guess work more accurate) the future.Today, 9:34:13 PM – Flag – Like – Reply – Delete – Edit – Moderate
Jack
I think the only point of the “prediction” is to have something to shout about. This prediction has had millions of dollars of publicity so the people think it is a settled fact. That publicity did not come about by chance. I still can’t beieve that every newspaper columnist in the country is bought and paid for, but it’s either than or group stupidity.
Coberly,
I have made this point before, but to repeat. I see it as a good guy, bad guy routine that the members of the two organized parties play for the benefit of the citizen population. Both parties are the hand maidens of the banking and finance sectors. Over the past several decades a group of those political insiders made the transition to the finance sector. Peter Peterson got his start with Nixon’s administration, along with Kissinger. Kissinger is not directly in finance, but his “consulting” firm works arm in arm with that sector. Then there are the boys of the Carlyle Group who understood the wisdom of directly including members of the political class within their ranks. At one time political elites came out of the finance industry. That still occurs a la Goldman Sachs, but it has also become fashionable to go from government into high finance. Phil Gramm is another good example. Right from elected official to UBS upper echelon executive. Was it his economic brilliance, do you suppose?
So there isn’t so much of an ideological divide between Republicans and Democrats. They take turns screwing the populace. They just make it seem that they represent opposing ideologies when in fact they represent the ideology of wealth. Their wealth, not the country’s nor the people’s. And when something gets done that seems beneficial to the masses I’d suggest watching for the other shoe to drop. We’ll need health care reform in order to pay the medical bills that may accompany old age laboring.
I missed nothing. Jack asked what a look back would show. I pointed out that I supplied a convenient source to find that data on my site. If Jack or anyone wants to produce a piece on what the future looked like in 1998 or 2004 or whenever you are only a couple of clicks away.
Um, sane workers might be reluctant to pay in more as a way of fending off late retirement, when at any momemt, another Bush scion may take control of the national budget and arrange so that, despite the 1983, sorry, the 2011 deal, they still have to work longer for less.
The problem with prefunding is that the funds end up reducing the necessity to either borrow or tax. One party is in the habit of reducing the necessity to borrow, the other of reducing the necessity to tax. Borrowing less in the current periods stands us in better stead to meet future obligations. Taxing less over the past few decades demonstrably has not better prepared us for the future.
There may not be a big ideological divide, but there is a geographic divide. Democrats live near finance. Republicans live near povery and ignorance.
Now, those are general rules, not absolutes. But when dealing with broad trends in political behavior and rhetoric, and think general rules are helpful. Where there is finance, there is benefit from allowing finance to run amok. Where there is poverty and ignorance, there is a chance to exploit each to maintain the other.
Jack,
What I find odd is that you think economists don’t understand the errors to which their projections are prone. If you read what economists write for each other, rather than for the general public, you will find a reasonable level of recognition of source and types of error.
When you make assertions about what other people know, think and believe without first looking very closely at their own utterances, you are likely to end up making foolish mistakes, as you have done here. On this point, I would urge you to consult the methods of sociology and anthropology. Your mistakes here are along the lines of those that casual observers of foreign cultures often make. You missed something, so you assumed it wasn’t there.
Now, about this whole enterprise of making predictions, and how badly they can turn out, let’s keep in mind that predictions like the one’s made here aren’t done for fun. If statisticians and actuaries and economists were all trumping up forecasts in order to change influence policies when otherwise, there would be no policies, it would be a pretty blameworthy enterprise. But the fact is, these policies exist, and tax and benefit rates have to be established. We can do that with limited understanding of what will be needed, or we can do it with really, really limited understanding of what will be needed.
Personally, I’d go for merely limited, instead of really, really limited. Others seem to be arguing – whether they realize it or not – for really, really limited. Please, those of you who think doing forecasts that don’t meet your standards is a mistake and should be ended, tell us what you would do to try to balance income and outlays in future years.
kharris,
Of course the best long term solution to the problem of poor governmental representation is for the electorate to begin to choose representatives that have their best economic interests at heart. I don’t know which may be the more difficult to do? Educate the people so that they will choose more wisely. Or, put pressure on the current congressional body and the Senate to act on Social Security based on an honest assessment of the Social Security system. Here at AB we have our understanding of the facts, thanks to Bruce and Coberly. We want our elected representatives to represent our interests not the interests of Perter Petrerson and his cohorts. To my mind the media is the problem in this debate.
We don’t need fair and balanced reporting on this issue. We need journalism that presents the facts. We need journalists that read beyond the fantacies of the Concord Coalition. So write to your Congressperson and your Senators. Tell them to be more inquisative in regards to Social Security’s financial stability. Let them know how you will vote when you know how they will vote. Demand that they show their cards now and that they step up to the podium and speak out for the sanctity of the Social Security system as it is, not as some would eviscerate it.
“If you read what economists write for each other, rather than for the general public, you will find a reasonable level of recognition of source and types of error.” kharris
I’ve no interests in what economists say to one another if it differs from what is said to the general public. We are concerned here only with the influence being put upon elected representatives in regards to the Social Security program. Our concern is that that influence be based on reasonable assumptions and facts and that predictions of future outcomes be disclosed to be uncertain and subject to error in design and error of measurement.
“Please, those of you who think doing forecasts that don’t meet your standards is a mistake and should be ended, tell us what you would do to try to balance income and outlays in future years.” kharris
Making a forecast is not a mistake that should be ended. Making a forecast that is subject to significant error of both design and measurment requires that the forecasters describe the probablitiy of error in their public announcements. The many facts and figures being published and discussed read more like a certainty than a forecast that is more subject to change than is the weather report for the next month. At the end of every such report should be a disclaimer: THIS ANALYSIS IS SUBJECT TO ERROR. THE LONG TERM FORECASTS INCLUDED WITHIN THIS REPORT ARE ONLY AN EDUCATED GUESS. LEGISLATIVE DECISIONS BASED ON THIS REPORT MAY RESULT IN DISASTROUS CONSEQUENCES TO THE PUBLIC. THE AGENCY MAKING THIS REPORT CANNOT BE HELD RESPONSIBLE FOR THE INTERPRETATIONS OF ITS CONTENTS BY OTHERS SEEKING TO PROMOTE SOME PREDETERMINED HIDDEN AGENDA.
harris
i wasn’t suggesting prefunding. the increase in taxes would take place as needed: pay as you go.
jack
sadly, i agree with you. i just hate being paranoid. harris’ reply may or may not understand the the geography of democrats and republicans is only a matter of what lies work where. the people doing the lying are, as you say, of one mind.
i don’t know as much about the politics and personalities as you do, but i did have some experience working with liars once, and was amazed at how good they were at it, and how easy the people were to fool. lying on either side of an issue is something they teach in law school, for what that’s worth.
Jack
poor kharris. again I agree with you. I am sure there are academic economists who are quite careful with their predicitions.
but the ponit is “economists” means the guys in public making the predictions that politicians use to fool the people. no sane person can take the 75 year Social Security predictions seriously. they exist only to provide shouting points for liars.
again, even if the predictions were accurate, there is absolutely nothing in what they are actually predicting… as opposed to the Peterson spin on the predictions… that justifies any action whatsoever now. The prediction of the trustees is that some time in the future the Trust Fund will run out of money. We already knew that. It is meaningless. The prediction of the trustees is that sometime in the future Social Security will need to raise taxes or cut benefits (or raise the retirement age,the cruellest cut of all). But the actual raise in taxes is so small that no one would notice it. The only people who would choose to have their benefits cut to avoid a few dollars per week in extra payroll tax are those people who are totally incapable of imagining what that would mean to them, or especially to others much closer to the survival line than they hope to be.
So once more with feeling: the “predictions” of “economists” especially with regard to Social Security are meaningless, misleading, and exist in their current form only to help fool the people into allowing the “fix” that will make Social Security worthless as retirement Insurance.
I’ll repeat one additional and most salient point. The reliance on Social Security benefits for so many people has increased persistently over the past three decades. This has been due to the decreasing prevalence of the classic defined pention plan. Corporate America no longer guarantees its employees long term employment nor an adequate retirement income as an additional reward for their long term loyalty. Even the vaunted civil service retirement plans are a pale reflection of what they once were. The long envied Tier I employees in NY State’s system had a pension worth the loyalty they gave to their employer and limited pay plans they accepted. New hires have no such thing. Current “pension” plans encourage workers to save as much as is possible in a variety of tax advantaged accounts. The value of those savings plans rides the roller coaster ride we call long term investment. The only sure thing is the aministrative expense deducted every year by the plan sponsors. Together with the fact that the value of work has been steadily eroding over the past three decades, the situation for the average American worker regarding retirement has become dire. Social Security benefits have become an essential part of pension planning rather than an emergency back up plan.
jack
once again, too true. Oregon had a good plan. too good. The newspapers ran a campaign that made it look like public employees were retiring in the south of france and laughing at the taxpayers who paid for it all. absolutely nothing was said about pensions as a fair trade off for lower pay while working. or even that public employees needed to be paid anything at all.
and the other day Los Angeles’ mayor was on the radio saying that public pensions had to be cut to avoid bankruptcy. he happened to mention some numbers the NPR reporter was too dumb to pick up on: they can cut pay/benefits 3000 per year or they can raise taxes 100 per year. No discussion about whether this was a fair trade. Just the usual hysteria “pensions are a huge horrible burden on taxpayers.”
I am wondering if it is just stupid greed on the part of the financial industry who see they can make money handling people’s efforts to “invest” for their own retirement, or if the real Powers have concluded that in the nearish future there will be so many of us and so few resources left that they need to wean us from the idea of ever retiring at all. When granny can no longer work, it’s time for a walk out on the ice floe… oh, wait, there won’t be any ice floes. Well there’s always Soylent Green. The Greenies will like that. good reycling ethics.