Northwest Plan for a Real Social Security Fix: Duesenberg Draft

The Northwest Plan for a Real Social Security Fix was introduced and then revised in 2009, explaining why the post link references ‘Vers 2.0’. What makes the NW Plan ‘real’ is that it is both permanent and contingent. To explain this mild paradox lets take an analogy. Let’s say you have a 1935 Duesenberg that is road ready and looks and operates just as it did when it rolled off the dealer’s display stand. This doesn’t mean the car went untouched, instead keeping a classic car ‘just the same’ means constant maintenance including repairs, part replacements, updates, fluid changes and regular detailing. But if all of that is done correctly and on schedule spectators and passengers might well not perceive any changes at all. On the other hand if the maintenance schedule is allowed to drift for a few years then what could have been routine adjustments tend to become repairs and restoration. The Northwest Plan is a method for transforming Social Security from a reliable enough 1935 Oldsmobile that nonetheless required some work every decade or so to take care of that engine knock to a constantly maintained 35 Duesenberg that never is allowed to knock at all. And it does this by applying Social Security’s version of Best Practicable Technology as given in the form of the Intermediate Cost Alternative of the CURRENT Annual Report of the Trustees of Social Security. This does not require that the plan’s mechanics endorse ever jog and tittle of the economic and demographic models that underlay IC, their job is to bring the car up to current specs as provided by accepted authority. (This is akin to what CBO does when producing its current law baseline, for that particular purpose they are constrained by the rules they are given). Most people who encounter the SS Annual Report do so in the form of its Summary. The Summary simply assumes Intermediate Cost and applies certain tests of ‘Actuarial Balance’ to it. Additionally it quantifies the gap between current law scheduled benefit and the projected outcome of Intermediate Cost. That is Social Security can pass the test for ‘Short Term Actuarial Balance’ while still having a gap in the out-years, in our analogy it can be an acceptably running 35 Olds even as it is drifting away from 35 Duesenberg form.