Social Security Replacement Rates as Reported by the CBO

Brian Faler warned us a year ago:

Republicans on Friday named Keith Hall head of the Congressional Budget Office, installing a conservative Bush administration economist atop an agency charged with determining how much lawmakers’ bills would cost. Hall, who served on George W. Bush’s Council of Economic Advisers, is a critic of the Affordable Care Act who shares Republican skepticism of government spending and regulation.

Keith Hall just admitted:

After questions were raised by outside analysts, we identified some errors in one part of our report, CBO’s 2015 Long-Term Projections for Social Security: Additional Information, which was released on December 16, 2015. The errors occurred in CBO’s calculations of replacement rates—the ratio of Social Security recipients’ benefits to their past earnings.

Who were these outside analysts and what was this about? Alicia Munnell explains:

CBO suggests that Social Security is getting more generous every day. The stage is being set for cuts in Social Security, and the Congressional Budget Office (CBO) has become a major player in this effort. The agency's most recent report shows not only a huge increase in the 75-year deficit, but also an enormous increase in the generosity of the program as measured by replacement rates -- benefits relative to pre-retirement earnings. None of the changes that increase the deficit -- lower interest rates, higher incidence of disability, longer life expectancy, and a lower share of taxable earnings -- should have any major effect on replacement rates. CBO has simply been revising its methodology each year in ways that produce higher numbers

. Alicia provides the details and concludes:

Putting out such a high number without any effort to reconcile it with the historical data is irresponsible. And those waiting for an opportunity to show that Social Security is excessively generous have pounced on the new CBO replacement rate number and publicized it in op-eds from coast-to-coast. Social Security is the backbone of the nation's retirement system. Its finances need to be treated more thoughtfully.

Agreed. My only question is whether anyone in Congress can the courage to demand that Mr. Hall explain this irresponsible reporting.