Well more than you might think.
If you examine the economic and demographic assumptions that together generate the standard Intermediate Cost alternative of the Social Security Trustees you see a picture of a future America that is kind of bleak. I mean I lived through the period from 1968 to 1983 and economically it was not much fun. We had war and assasinations and oil crises and three recessions and a constitutional crisis over impeachment. It wasn’t all doom and gloom, over that same rough time period the world transtioned from the baseline assumption that nuclear armeggedon was pretty much ultimately unavoidable to a place where that prospect seemed inconceivable. And as a kid who grew up with school “duck and cover” drills that was an unalloyed good, but still there was a widespread sense that in particular these kind of economic outcomes were outside the norm, that times had been better before and that times would be better again. In part this was just nostalgia for an America that for a lot of people really never was, after all ‘Happy Days’ and ‘Back to the Future’ were not exactly documentaries, but Reagan’s ‘Morning in America’ had a real resonance to people, there was a real sense that the future could be better than the immediate past and even the imagined past of the fifties as seen through the lens of ‘Father Knows Best’.
But none of that optimism shows up in the Tables and Figures of the Social Security Reports. Instead they and commenters thereon insist that the future is simply going to mirror the outcomes of 1968-1983, indeed just the other day I had a commenter that insisted that Low Cost outcomes were impossible because they were inconsistent with the last forty years. Well that is what happens when you pick a starting point that manages to take in all of the worst post-war years and ignores everything that happened before. I will be unpacking some numbers below the fold but want to leave these doomsayers with a hopefully provocative question.
Why the hell are you betting against America? While we maybe well and truly entering permanent Roubini-land why are you doubling down based on that?
As I say it all starts with the numbers, and in particular the numbers as seen in Table V.B1: Principal Economic Assumptions, Table V.B2: Additional Economic Factors, and Table V.A1: Principal Demographic assumptions, all of which (and many more) to be found in 2008 Social Security Report: List of Tables. The Economic tables show outcomes in five year periods since 1960 and annually since 1997 and then turn around and project annual results for the following ten years and then for multi-year periods (V.B1) or intervals (V.B2) after that. The Demographic table reports both by interval back to 1940 and then annually from 1995. Going forward Table V.A1 projects results with 5 year intervals.
Generally speaking the various models of the Trustees’ Report assume that under all three alternatives (Low Cost, Intermediate Cost, and High Cost) results will settle out in the relatively short term at ultimate levels. Which is just another way of defining long term sustainability of the US economy under projections that are presumed to range from optimistic (Low Cost) to pessimistic (High Cost) with Intermediate serving as a median. So lets take a look at some of those numbers and contrast them with 2004, a year of good economic performance but not one that most people would remember as exceptional.
Productivity: 2004 2.4%; High Cost ultimate 1.4%; Intermediate Cost 1.7%; Low Cost 2.0%
Real Wage: 2004 1.8%; High Cost .6%; Intermediate Cost 1.1%; Low Cost 1.6%
Unemployment: 2004 5.5%; High Cost 6.5%; Intermediate Cost 5.5%; Low Cost 4.5%
Real GDP: 2004 3.6%; High Cost 1.2%; Intermediate Cost 2.1%; Low Cost 2.9%
Immigration: 2004 1.25 million; High Cost .77 million; Intermediate Cost 1.025 million; Low Cost 1.305 million
Now I know some people will want to jump in and start the standard defense of ‘Boomers!’ and ‘Covered worker ratio!!’. And yeah I get that but these ultimate numbers are all for period beyond 2050 when the impact of the Boomers on the economy should be pretty much a fading memory (we will be 86 to 104 in 2050). Why on earth should we assume that even optimistic numbers for the second half of the twenty-first century will trail the numbers of the second half of the twentieth century so badly? I understand that conditions approaching perma-recession could happen, I am the farthest thing from a global warming denier or from not recognizing the food/fuel crisis going forwards. On the other hand I am not just ready to simply write America’s economic future off as a lost cause either.
I am not happy with the status of America today. Which doesn’t mean I have lost faith in its possibilities tommorrow. Which know it or not is exactly what embracers of Social Security ‘crisis’ have done. Dudes and dudettes what caused you to lose your faith here? Criminy its the Fourth of July.