Reading the 2014 Social Security Report: Released July 28
The Countdown is ON!
(Update 2: It’s out, links work. See you in Comments)
(Update for Post Publication) If things go as scheduled the 2014 Report of the Trustees of Social Security will be released to the web at 12:15 Easter or less than two hours from the time this post published. Assuming the same continuity in URLs between Reports as we saw the last few years the liks below should go immediately live. Until then of course they are dead and for that matter untested. If by chance they remain broken eager beavers can go right to the main page of the Reports and link from there: http://www.ssa.gov/oact/tr/ . Or not, since that page was down just a second ago, possibly for updating. One way or another you will have linkage soon after noon.
The 2014 Report of the Trustees of Social Security is scheduled to be released at 12:15PM Eastern, or 15 minutes after the scheduled publication time of this post. Assuming that the file name conventions of past Reports are maintained each of the following links should come alive coincident with the public release of the Report in DC, at least in past years the release to the web has been instantaneous. But I guess we will see, and I will be testing and editing links as necessary.
The full Report is released in HTML and PDF. Those who want to read the Report in leisure can download it in PDF here: 2014 Social Security Report. On the other hand those who want to share impressions immediately would do better to work from the HTML version and its breakout of all the relevant Tables and Figures. 2014 Social Security Report linkable HTML version
Those readers who prefer their Reports unmediated feel free to dive in to either format. But for those who want some pointers as to valuable places to start and/or pointers on what those various Tables and Figures are trying to say can follow me below the fold.
First thing to know is that all the various Tables and Figures are linked from the following pages:
2014 Social Security Report: List of Tables
2014 Social Security Report: List of Figures
So once again feel free to dive in.
But if we had to break some stuff out we might begin with some top line numbers like Date of Trust Fund Exhaustion. Which while not as important as one would think is generally the point chose as ‘Crisis’, the date the Trust Funds can no longer fully fund Scheduled Benefits. While most people don’t quite grasp the implications of the event a lot of the MSM reporting revolves around its TIMING, as in whether ‘Crisis’ is closer or farther away. So for whatever it is worth that date can be found here:
Table II.D1.—Projected Maximum Trust Fund Ratios During the Long-Range Period and Trust Fund Reserve Depletion Dates
But the date doesn’t actually tell us much, more important is the very next Table which does two important things. One it provides some numbers for the magnitude of ‘Crisis’ in terms of the percentage of payroll shortage between ‘Scheduled’ and ‘Payable’ benefits for the past Report and the new one. And two it breaks out the reasons for change between the two. For example is the change totally driven by changes in assumptions about future Demographics? Or largely by changes in Methodology? Or did the Office of the Actuary just biff on their past assumptions of near, medium and long term economic growth? Because the lessons you draw from the Report are going to vary a lot based on the combined answers to these questions.
Table II.D2.—Reasons for Change in the 75-Year Actuarial Balance, Based on Intermediate Assumptions
And maybe that is enough for now. I’ll have a lot to say based on my actual reading of the Report both in comments here and in future posts but perhaps it is best to allow some of you to watch the movie before I break in with spoilers and critical commentary. Enjoy!
WSJ reported release time for Noon. Yet the website is still down (for updating?) at 12:20 Eastern. Waiting —–
75 year actuarial gap for OASDI -2.88%. Up 0.16% from -2.72, with 0.6% of that due to change in actuarial period (i.e. structural). Table II.D2
Exhaustion date for combined OASDI Trust Funds: 2033. DI in isolation 2016, OAS 2034. No change from 2013. Table II.D1
semi bottom line (if i am reading correctly):
the unfunded deficit could be closed by an immediate and permanent tax increase of 2.88% (combined) or 1.44% for most workers.
This is considerably less than CBO’s 3.5% (if i remember correctly), so I am reasonably sure that when i get around to calculating it, a one tenth of one percent (each) increase in the tax each year for about the next 20 or 22 years will close the actuarial deficit FOREVER (as far as the eye can see). this is somewhat at odds with the gloom and doom language the Trustees use, but it is “just math.”
i understand that you now have the means to import Trustees data directly into the spreadsheet for Northwest Plan. you may need to go to the “yearly” tables. I am not so skilled with computers and will need to enter the data by hand. I actually prefer it that way. I understand things better when i handle them and count on my fingers.
The Three Alternatives and their methodology in a nutshell:
“Uncertainty of the Projections
Significant uncertainty surrounds the intermediate assumptions. The Trustees use several methods to help illustrate that uncertainty.
A first approach uses alternative scenarios reflecting low-cost (alternative I) and high-cost (alternative III) sets of assumptions. Figure II.D7 shows the projected trust fund ratios for the combined OASI and DI Trust Funds under the intermediate, low-cost, and high-cost assumptions. The low-cost alternative includes a higher ultimate total fertility rate, slower improvement in mortality, a higher real-wage differential, a higher ultimate real interest rate, a higher ultimate annual change in the CPI, and a lower unemployment rate. The high-cost alternative, in contrast, includes a lower ultimate total fertility rate, more rapid improvement in mortality, a lower real-wage differential, a lower ultimate real interest rate, a lower ultimate annual change in the CPI, and a higher unemployment rate2. These alternatives are not intended to suggest that all parameters would be likely to differ from the intermediate values in the specified directions, but are intended to illustrate the effect of clearly defined scenarios that are, on balance, very favorable or unfavorable for the program’s financial status. Actual future costs are unlikely to be as extreme as those portrayed by the low-cost or high-cost projections. The method for constructing the low-cost and high-cost projections does not lend itself to estimating the probability that actual experience will lie within or outside the range they define.”
Expect more to say about Low Cost in future posts.
On Reports and Spreadsheets.
I plan to import all the important Tables into Excel form and make them available to whomever on a shared Cloud Drive. I will also be cutting, pasting and merging a variety of those Tables to present the information in more informative combined ways. Whether and when the new data gets incorporated into a 2014 version of the NW Plan is up to Dale, either way the Trustees’ numbers will be available for inspection and whatever import others may like.
Expect a Post soon highlighting Table VI.D4.—Sensitivity of OASDI Measures to Varying Real-Wage Assumptions
“The cost rate decreases with increasing real-wage differentials. Higher wages increase taxable payroll immediately, but they increase benefit levels only gradually as new beneficiaries become entitled. In addition, cost-of-living adjustments (COLAs) to benefits depend not on changes in wages, but on changes in prices. Each 0.5-percentage-point increase in the real-wage differential increases the long-range actuarial balance by about 0.81 percent of taxable payroll.”
i.e. More Jobs. At Better Wages.
Similarly Table VI.D5 has the Sensitivity to CPI Assumptions
While Table VI.D6 has the Sensitivity to Real Interest Assumptions
That is not all fixes have to come right from increases in FICA or changes in the Cap formula. The American economy and hence the financing of Social Security are hugely dynamic. Who knew?
The American economy may be hugely dynamic
but anyone waiting for the economy to bail out Social Security is living in a fool’s paradise.
if the economy improves, the raises in the payroll tax will not be necessary. if the economy does not improve enough or in time, those payroll taxes will be the difference between having enough when you retire and not having enough. the difference is life and death.
and the extra eighty cents per week each year is not going to make any difference in your lifestyle.
even if the economy really went to hell and you had to pay the tax increase out of the same or less money than you have today (not in the cards, the projection is you will have twice as much money as you have today) the decision would be “how much do I need to live on when i can’t work anymore vs how much to i need (want) to live on while i am young enough to work.”
that could result in a payroll tax a percent of your wages that would scare you if you didn’t think about it, but while you wouldn’t like it, it would still be what it would take for you to live when you can no longer work.
i don’t like to bring this up, because the odds against it happening that way are huge, and most people can’t think clearly about it… though it is something they would do “naturally” if the situation arose. unless of course by then they had allowed Social Security to be “fixed” or killed or funded at a level too low to support life after work. Because they just knew there had to be a better way than paying for it themselves.
go back to thinking in terms of eighty cents per week per year. everything else can be worked out from there. if you do the work of thinking about it.
Speaking of Low Cost. While the numbers didn’t move much under the Intermediate Cost assumption there were huge changes in outcome under Low Cost as seen graphically in the following two figures:
2013 Figure II.D6: http://www.ssa.gov/oact/tr/2013/II_D_project.html#119028
Last year Low Cost showed the combined TFs going to depletion in around 2068. Meaning even Low Cost wouldn’t ‘fix’ Social Security.
2014 Figure II.D6: http://www.ssa.gov/oact/tr/2014/II_D_project.html#119028
Trust Funds bottom out with a Ratio of around 75 in 2075 and then recover to seemingly achieve ‘Sustainable Solvency’ (as defined) right at the end of the projection period.
And while I may indeed be living in a Fool’s Paradise there is a big difference between just waiting for the economy to save Social Security and actually actively working to make policy move in the directions that would. Say “More Jobs. At Better Wages”.
Sure 80cents a week would work. But is that good enough? Because what the Northwest Plan does is close the gap between Scheduled and Payable. A good and worthy thing but one that ignores WHERE the Scheduled baseline would be under different sets of economic and demographic assumptions. That is outcomes in the direction of Low Cost not only serve to close the gap they also serve to raise the baseline.
In Inside Baseball terms they change both the numerator and denominator of Rosser’s Equation in ways that work to increase real basket of goods outcomes for future retirees.
Maybe I am a Fool. But even a Boy Fool can Dream.
Why worry about 2068? Ten year increments would be a fixable range. I would also add if the economy does not get better and put more people back to work, we will have more to worry about than SS. By the way, how do the Millennials fit into the equation? Their cohort is bigger than baby-boomers.
Hmm. The Infinite Future got a demotion.
From 2003 to 2013 the main body of the Report included discussion and illustrative Tables on the gap between income and cost as projected over the Infinite Future Horizon. Which among other things generated big scary dollar numbers for the Bad Guys to hyperventilate about. Well to my surprise they at first seemed to disappear in this Report, poof! But no, they just got demoted to Appendix F. Even thought they actually ticked up a bit (mostly due to the change in actuarial period, thought the Bad Guys never bother breaking that stuff out).
It is more a curiosity than anything. I need to check the Summary to see how it was handled there.
“fools paradise” is a figure of speech. don’t take it personally.
and if you can do more than “assume” low cost or “say” more jobs at higher wages” i will be your biggest supporter.
but meanwhile there is a very simple, cheap, fair, practical, and obvious measure we can take which will not foreclose the “more jobs at higher wages” solution while insuring ourselves against the unfortunately highly probably event that the more jobs and higher wages will not materialize in time to pay “enough” in benefits to those who are going to need them whether they think they will or not.
it’s why it’s called “insurance.”
Dale you have a funny definition of ‘support’. Because every time I try to lay the groundwork for some kind of action on this front, say by discussing the numbers underlying the Low Cost alternative you tend to tug on my shirt tail telling me not to get lost looking at the Lights of the Big City and instead just get back to Plowing the Ground for the NW Plan.
Well I get a little tired tilling and retilling the same field. Particulary when Uncle Dale does it over and over himself leaving me not much for my plowshare to turn over.
Yet all I ever hear is this:
“go back to thinking in terms of eighty cents per week per year”
It is not exactly an “Attaboy, you go get ’em!”
I always defer to you guys, but tinkering directly with social security is both scary and difficult in todays highly polarized and politicized environment. It is scary because it is easier for the left to say “social security is fine, do not mess with it” than “it needs just a few tweaks–ie the “Northwest Plan”. Once that concession is made, the right has a narrative to try and gut the program. It is difficult because there is at least half of Congress who is unwilling to do the “right thing” unless it squares with ideology and we all know what the right’s ideology says. Soooo… Bruce in terms of more jobs at better wages, do I understand that raising the minimum wage–which a majority of Americans support and which most economists agree would have a negligible impact on employment at least in the short run–would go toward bolstering the longevity of social security? Personally, I think it would also serve to decrease illegal immigration–more citizens would do jobs currently held by illegal immigrants and businesses would get less benefit employing illegals. Any sane government would have had it done by now as it is a win-win-win for everybody except the 1% and it would not hurt them much either.
my comment was not addressed to you but to anyone else who might be listening.
as for support… you need to read the words “more than ‘assume’…or ‘say'”
I don’t expect you to plow the ground for “Northwest.” I’ll do that if I can. I hope you won’t mind too much my pointing out the dangers of “counting on” low cost or more jobs at higher wages.
Dale if you don’t intend to be directive or personally critical then stop using directive language using me as the target.
For example it is a little difficult to not take myself as the implied subject of the comment when it begins with “Bruce W”. Just say’in.
Terry any increase in the total wage base helps Social Security, and certainly in the short to medium term and minimum wage would do that. At least I don’t think anyone seriously suggests that any potential negative employment effects would result in the same net wage base across all current minimum wage workers. Maybe on some whiteboard in Chicago or the Mercatus Center but not in real life.
On the other hand over the longer term more immigration is better for Social Security, So more of a win-kinda win thing here.
I am not aware of any place in this thread or anywhere else that i have used “directive language with [you] as the target.”
I address you directly to respond directly to something you said, and god help me i am always exceedingly careful to try not to offend you.
my eyes are getting old, and “Excel” is not intuitive for me, so it’s taking a little longer than I expected. But so far, barring typos and a few tweaks it looks like there is no change in the one tenth of one percent solution between the 2013 Report and the 2014 Report.
Bruce @ 12:54: “That is not all fixes have to come right from increases in FICA or changes in the Cap formula. The American economy and hence the financing of Social Security are hugely dynamic. Who knew? -”
Dale: @ 1:11: “The American economy may be hugely dynamic
but anyone waiting for the economy to bail out Social Security is living in a fool’s paradise.”
Your use of ‘dynamic’ clearly rhetorically links your comment to mine and to any reader (except maybe you) clearly makes my comment the specific thing to which you are responding. As such your final line:
“go back to thinking” will to that same reader be clearly referring to me, or me as some sort of Socratic stand-in stooge for your intended audience. And is by anyone’s definition ‘directive’. Or to put a schoolteacher hat on in the Imperative.
I understand that you rarely if ever MEAN to intend offense to anyone but the actual bad guys. But your rhetoric tends to come more from a scatter-gun than a sniper rifle (and I am not the only one grazed by more than one pellet in past exchanges).
this is not the best place for this kind of argument. i did not mean to point that thing at you. but the fact seems to be that as long as you are advocating some form of “do nothing” I will be advocating “increase the tax a tiny amount just in case.”
i think we can both manage to avoid taking that personally. in my case i admit that i am not very good at diplomatic language. i’ll leave you to evaluate your own.
thing is, though, as i have always said, when the janitor bursts into the faculty lounge and says “The goddam school is on fire, get your asses out of here!” it’s probably not the time to try to teach him manners.
thing is the right already has the narrative to try to gut Social Security. Us pretending there is nothing there to see does not seem to be gaining us any credibility in the press vis a vis the “Social Security is going to destroy America as we know it!” crowd.
I, modestly, think that showing people the 10 Trillion Dollar Unfunded Deficit! ™ amounts to a need to raise the tax eighty cents per week per year… until the economy fixes itself… would take the wind out of their sails.
but it does mean that the workers who pay the tax and will need the benefits would have to show some willingness to pay the eighty cents.
i would also suggest that calling for “scrap the cap” is a way of shouting Social Security needs to be fixed… by a huge tax increase on the rich! Talk about giving the right a narrative to try to gut SS.
by all means, raise the minimum wage. I am all for it.
but meanwhile we can walk and chew gum at the same time.
In fact, i think we better walk while we are chewing gum or we won’t get anywhere.
WHAT THE 2014 TRUSTEES REPORT AMOUNTS TO:
The “10.6 Trillion Dollar Unfunded Deficit!” tm could be paid for by the worker’s themselves by raising their own “tax” (insured savings) one tenth of one percent per year from 2017 to 2027 reaching a total tax increase of one percent (for each the worker and the employer).
another one percent over the next forty years (that’s one quarter of one tenth of one percent per year, or about 20 cents per week per year) and another two tenths of one percent over the next 23 years… that’s less than one tenth of one tenth of one percent year, or about eight cents per week per year.
all of which money they will get back more than doubled when they need it most.
this is not a “plan”, it is just math.
or you can make the rich pay it for you.
or you can make the economy get better.
those aren’t “plans” either. but the math is easier.
Dale I think we got it. Math and all.
If not it isn’t because of any lack of effort and persistance by you.
It is at least a good plan. And it deserves better than it is getting. I should not be the only person out here trying to tell the people.
This is not a faculty seminar. It is quite literally a matter of life and death for about fifty million people in every generation.
You would get me to apologize for being persistent.
National Academy of Public Administration (NAPA) has advised SSA that its future public service delivery system should not include local field offices. Instead, people would be able to communicate with SSA only via telephone and the internet for claims (and other simple actions.) And, if they had more complex problems, they could use Skype or temporary teleconference sites set up for face-to-face communications in hearings or other appeals. Right.
If you want to abolish a program, you close up shop and make the agency’s people and services they provided disappear. Then, even though the Trust Fund and the Social Security Act still exist, people cannot exercise their right to benefits. Seems to me that this is as great a threat to SS as solvency disputes.
Now, I can imagine asking the National Academy of Social Insurance (NASI) or the Social Security Advisory Board (SSAB), or any number of other concerned parties like Social Security Works, AARP, NARFE, among others for input on dealing with longstanding budget shortfalls affecting SSA’s service delivery. But I never thought SSA would consult this obscure think tank on a matter of such importance. Well, wrong again.
Solvent or not, SS it has much to fear from a Congress which refuses to fund its services. This is not a trivial matter. The financial structure of SS is under attack and should be defended. But, it will all come to naught if there are no SSA offices out there serving the public. FYI. NancyO
I have found the local offices are as busy as the VA. I have done the phone bit, filled out form S512 asking for an informal meeting, and finally went down there and parked there until someone answered my questions on Medicare. It was only then did the issue get fixed and I walked away with a phone number and name. The field offices are short-handed and lack resource the same as the VA. They are just as conscientious as the VA; but, they do not have enough resource to meet the needs of the baby-boomers.
I think Nancy’s point is that SSA would have the resources if Congress was not denying them the use of their own money to do the job the money was collected for them to do.
The money to run SSA comes from the “taxes” the beneficiaries paid themselves. About one percent of SS income goes to pay for running the program. A bit more efficient than anything else either congress or the financial industry can manage.
Which may be why they are trying to kill it.
Coberly ,I certainly agree that scrap the cap is not a good strategy–if the rich pay in more they should get more or else it is “welfare”. I also think your Northwest Plan is a sensible remedy, but when was the last time Congress did anything sensible? I think we are all agreed that absent a more dynamic economy some minor tweaks to social security should be undertaken before 2033 or whenever, but I simply can not see the ability to engage in minor tweaking in this political atmosphere. There are no statesmen or stateswomen in Washington these days and in an era of playing to one’s base doing nothing may be the best we can hope for.
Evidently the Medicare Trustees Report had some good news – its trust fund depletion was pushed back four years. This is good for Social Security, because people who want to cut Social Security often lump it together with Medicare, give some kind of combined deficit and say that “entitlements” have to be cut.
Nothing is going to be done about Social Security any time soon, but I think that is OK. A gradual increase in payroll taxes might be preferable, but I don’t think waiting until a 1% increase is needed is that bad. Few people are going to worry about 1%. The advantage of waiting is that tax increases have an immediate effect, while benefit cuts will take effect only gradually, and won’t even start for 7 years if current and near retirees are excluded. So the more the politicians wait until there is a crisis, the more they’ll have to accept tax increases (not that some won’t try to get benefit cuts as the price, even if at that point they’re moot).
The only immediate problem is the Disability Insurance Trust Fund, projected to run out in 2016. This has an easy fix (transfer money from the OAS Trust Fund), but who knows whether that will happen.
what you say is reasonable, but if talking about a tax increase is not even on the table… in terms that reveal just how small an increase would actually be needed… no one is going to get a chance to consider it.
meanwhile Our President has been pushing benefit cuts, immediate and permanent, in the guise of “making the consumer price index more accurate.”
the bad guys are accomplished liars. waiting and hoping quietly is not going to do the job.
Coberly – I have no problem with people talking about a tax increase. I just think that right now it is not likely to pass. I don’t think using the chained CPI is likely to pass, either, and of course I’m opposed to it, since it is a cut, which increases with the age of the recipient (about 0.3% per year starting at age 62). Obama proposed it as part of a package that he knew the Republicans would never accept, so it’s unclear whether he really supports it – he might have just been trying to get credit for being “reasonable” without the consequences.
The threats to Social Security right now do not seem to me like they are the most urgent problem in the world or the US. You might have a different judgment, which is, of course, fine with me.
probably not the most serious. i suspect that honor belongs to climate change.
but still, we ought to be able to walk and chew gum at the same time.
i discovered how cheap the fix for SS was pretty much by accident. I was quite astonished when it turned out no one wanted to talk about it. i might have expected that from the Petersons. It was somewhat harder to accept from those calling themselves “progressives.”
so while SS may not be the “most important problem,” it has by default become “my” problem. and the people i am trying to talk to are the other people for whom it is “their” problem.
and of course I have this foolish notion that if all the hundreds of millions of people who are going to be affected by the plans to “fix” Social Security could be made to understand that they can keep SS for themselves just the way it worked for their parents and grandparents by actually just paying for it… the way their parents and grandparents paid for it… at an increase in the cost too tiny to notice… then Social Security would cease to be any kind of a problem whatsoever.
i am dismayed by those who say, well, if we just shut our eyes it will take care of itself. they seem to have forgotten that the hun is at the gate with their own ideas about taking care of it.