Does Social Security Really Face an $11 Trillion Deficit?

[sherilocks]

"Bush and Cheney say yes. But actuaries say the figure is "likely to mislead" the public on the system's true financial state.

January 21, 2005

Summary

President Bush and Vice President Cheney have told audiences that Social Security faces an $11 trillion shortfall if nothing is done to fix the current system. But they fail to mention that this is over the course of the “infinite future." Over the next 75 years -- still practically a lifetime -- the shortfall is projected to be $3.7 trillion."

<snip>

http://www.factcheck.org/article302m.html

[tjwash]

1. TT said it better than I ever could.....

[sherilocks]

4. TT captured my inner thoughts exactly

Every time I see the chimp railing about the demise of social security, I remember him in the same mode, pre-Iraq invasion, railing about WMDs.

How many times can he fool joe and jane six-pack and the bushbots?

[EVDebs]

2. Maybe in 75 more years !!!! Medicare is the real story since the drug

'benefit' just added $17 trillion to its $62 trillion projected cost over 75 years...

For what it's worth read "Medicare faces cost crisis
Multitrillion-dollar deficits loom over federal programs"

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/11/07/BUG0V9N54U1.DTL

[sherilocks]

6. That was the worst drug plan ever devised

and passed by the most devious repug dealing I've ever seen in Congress. It is a pharmaceutical enrichment program and does little to benefit its recipients.

[EVDebs]

9. ...and on top of that, Bush's plan expounds on 'globalization' with

offshoring jobs and benefits of US workers:

Read "The Benefits Trap" by Businessweek verrrrrrrrrrrry carefully. You will find that stripping US workers of healthcare and pension benefits is the true rationale behind the SS/Medicare "crisis" scare the Repubs are shoving down our collective throats:

http://www.businessweek.com/magazine/content/04_29/b3892001_mz001.htm

""Perhaps most important, in the global economy, long-established U.S. companies are competing against younger rivals here and abroad that pay little or nothing toward their workers' retirement, giving the older companies a huge incentive to dump their plans.""

It's all about 'globalization' and the Race to the Bottom, as Alan Tonelson's book shows. Corporate America deserves to be spanked ! Hard !

[cmd]

3. Yes, when projected to infinity

The fool is playing with numbers again. Do not believe a word that comes from the WH.

[papau]

7. and likely not even at infinity! Where the hell did 11 Trillion come from

- a present value of forever has little meaning- It is a new number that is - at best - a partial truth lie - and needs to be knocked down-

as fact check says


http://www.factcheck.org/article302.html

President Bush and Vice President Cheney have told audiences that Social Security faces an $11 trillion shortfall if nothing is done to fix the current system. But they fail to mention that this is over the course of the “infinite future." Over the next 75 years -- still practically a lifetime -- the shortfall is projected to be $3.7 trillion.

The "infinite" projection is one that the American Academy of Actuaries says is likely to mislead the public into thinking the system "is in far worse financial condition than is actually indicated," and therefore should not be used to explain the long-term outlook.


President Bush

Remarks at Andrew W. Mellon Auditorium, January 11, 2005

Bush: Now, I readily concede some would say, well, it's not bankrupt yet; why don't we wait until it's bankrupt? The problem with that notion is that the longer you wait, the more difficult it is to fix. You realize that this system of ours is going to be short the difference between obligations and money coming in, by about $11 trillion, unless we act. And that's an issue. That's trillion with a "T."

Vice President Cheney echoed this claim in a January 13 speech at Catholic University when he said, “Again, the projected shortfall in Social Security exceeds $10 trillion.”

Vice President Cheney

Remarks at Catholic University, January 13, 2005

Cheney: Another argument against Social Security reform with voluntary personal accounts is that the so-called transition costs would be too high. Yet focusing merely on transition costs is to overlook the greater cost of doing nothing. Again, the projected shortfall in Social Security exceeds $10 trillion; that figure is nearly twice the combined wages and salaries of every single working American last year. There will be no -- there will be costs no matter what we decide.
===============================================================
While the…information is useful, it is difficult to understand. The $10.5 trillion is a large figure, but it needs to be seen in the context of the present value of taxable payroll over the infinite horizon, which is on the order of $275 trillion.

Later, in the 2004 report issued last March, the Trustees updated those figures to a $10.4 trillion deficit and a $295.5 trillion taxable payroll.

This means that for the system to be completely solvent over the next 75 years, without adjusting benefits, payroll taxes would have to go up to 14.2 percent immediately.

And to be solvent for the "infinite future," the $10.4 trillion shortfall equals 3.5 percent of taxable payroll, or a tax increase to15.9 percent of wages.


American Academy of Actuaries: …The new measures of the unfunded obligations included in the 2003 report provide little if any useful information about the program’s long-range finances and indeed are likely to mislead anyone lacking technical expertise in the demographic, economic, and actuarial aspects of the program’s finances into believing that the program is in far worse financial condition than is actually indicated.

The Academy states that there is already much uncertainty using 75-year projections, and that extending estimates into the infinite future only increases that uncertainty, producing results that "are of limited value to policymakers.” They point out that changes which took place over the last 75 years were unforeseeable to actuaries in 1928, such as the Great Depression or the baby boom, and therefore have no reason to doubt that unforeseeable changes will not occur in the future.

Demographic and economic assumptions have always been a controversial issue among demographers predicting the long-term sustainability of Social Security. Significant advances in life expectancy have taken place over the last century, which exert more pressure on the system's finances as people live longer lives. Whether future mortality rates will continue to slow or increase with medical technology, the Academy of Actuaries argues that the inconsistencies which arise from such long-range assumptions are "inevitable" when making projections over the course of infinity. For this reason, they conclude that the infinite-horizon measurement is a “detriment” to the Trustees Report. They write:

American Academy of Actuaries: Thus, we believe that including these values in the Trustees Report is unnecessary and is, on balance, a detriment to the Trustees’ charge to provide a meaningful and balanced presentation of the financial status of the program.



Table IV.B7.- http://www.ssa.gov/OACT/TR/TR04/IV_LRest.html#wp267528 -Unfunded OASDI Obligations for 1935 (Program Inception) Through the Infinite Horizon, "THE 2004 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE FEDERAL OLD-AGE AND SURVIVORS INSURANCE AND DISABILITY INSURANCE TRUST FUNDS," 23 March 2004: 59.

Technical Panel on Assumptions and Methods (2003), http://www.ssab.gov/NEW/documents/2003TechnicalPanelRept.pdf Report to the Social Security Advisory Board. Washington, D.C., October 2003.

[BrklynLiberal]

5. Have Bush and Cheney EVER told the truth before????????????

[gratuitous]

8. When obligations are projected to infinity

Then yes, it would appear that social security is facing an $11 trillion shortfall.

To compare, imagine your monthly expenses projected to infinity. Your monthly food and clothing, rent (or if you don't pay rent, property taxes), entertainment and other expenses projected to infinity, as balanced off against your income.

Now, imagine that your projected expenses are automatically adjusted for inflation, but your projected income isn't so adjusted. In 350 years or so, a loaf of bread could be more than your entire month's salary!

I'll leave it to you whether this analysis represents a "crisis" or an extravagant exercise in meaningless speculation.

[EVDebs]

10. What is the GDP supposed to be in 2079 anyway ? $850 Trillion as compared

to today's $11 trillion annual GDP ?

By 2079 Bush-o-nomics will have so thoroughly trashed the US economy that we will be emulating the Weimar experience in '20-30's Germany. Brother can you spare a dime ?