Northwest Plan 2013 – Extracts by Webb

2013Northwest-Bruce Sum 1

Click to embiggen. And then do some magnifying. Because even a selected file covering the whole 75 year projection period yields small type.

Anyway this is my first take from Dale Coberly’s numbers for 2013 Northwest Plan with three calculated columns added by me. Those are the three with “Cost-Non Interest Income” as part or all of their label. Which should actually be “Cost-New Non Interest Income”. In any event what this extract shows is that even after the series of FICA increases seen in “New Payroll Tax Rate” there would be a shortfall between FICA and Tax on Benefits on the one hand and Cost on the other, which difference would need to be made up from interest on the existing Trust Fund. The very last column shows this shortfall as a percentage of that year’s Trust Fund and so closely approximates the interest rates needed to have the Trust Fund break even, with any excess being devoted to building up the TF balance to maintain actuarial balance.

‘Approximates’ because there is a missing data point here in that calculated Trust Fund balances depend on a (here) hidden return based on assumed interest rates. So to really evaluate the last two columns you would need to view the entire spreadsheet (coming soon to a forum near you).

Which might have us turn to the column third from the right. This shows the non-interest cash deficiency before and after the series of FICA increases start in 2018. In this scenario the deficiency stabilizes at about 5% of Cost over the 30 years of maximum Boomer impact and then goes to a closer approximation of true Pay-Go after mid-century. The effect of this roughly 5% medium term cash shortfall would be to reduce the Trust Fund Ratio from its current level of nearly 4 times cost to a target level of around 1.25 times cost, a small cushion over the 1.00 requirement under current law for ‘actuarial balance’. The result is that the Trust Fund shrinks in relation to all of Cost, GDP and probably Total Public Debt even as its nominal principal value nevers goes negative. That is the NW Plan is designed to put Social Security on a glide path towards Pay-Go having taken care of the Boomer Bulge along the way. Which is to say providing the piece missing (and by some Commissioners by design) from the 1983 Greenspan Commission inspired Social Security legislative deal.