Tuesday, March 25, 2008

Social Security Looking in Better Shape

The Social Security Trustees released their annual report today. Even though Bush has appointed people like Andrew Biggs of Cato, a confirmed privatizer and hysterian, to be Deputy Director during a Congressional recess, the current report moves to a somewhat more reasonable and less hysterical position. It is available at

The inimitable and careful Bruce Webb has pointed out to me personally that even though they are still projecting by their intermediate projections program exhaustion in 2041, the consequences and longer run gaps are now reduced. So, the projected 75-year deficit is now to be 1.70 percent of taxable payroll rather than 1.95%, a decline of 0.25% and total actuarial deficit over 75 years is now supposed to be $4.3 trillion rather than $4.7 trillion, down $400 billion. Also, if the system were to go "bankrupt" in 2041, the payments would be cut to 78% of then existing receipts rather than 75% (this number was 71% back when Bush gave his doom scenario in his SOTU speech in 2005 when he made his push to "reform" SS). So, bit by bit, the reality that social security is really not in such bad shape is creeping in.


rosserjb@jmu.edu said...

BTW, according to Mark Thoma at Economists View, what has changed in the projections is a better accounting for immigration, in particular, illegal or "other" immigrants, who, big surprise, help the balance on all this, whatever else one is assuming. I cannot help but point out that some of us have been harping on how the earlier reports were ridiculously pessimistic about projections of immigration, indeed, I suspect that is still true, despite these revisions.


PGL said...

Krugman has more on this. Kevin Drum attributes the favorable change to immigration. Dean Baker and this Angrybear beat up on the Steno Sue press coverage.

rosserjb@jmu.edu said...

Actually, as near as I can tell, the intermediate projection still has overly pessimistic projections about immigration, which is set to fall to about half its current rate in the near future, although Bruce Webb or somebody more on top of this can correct me if I am wrong. What is different in this report is that they have now decided to acknowledge and include illegal immigrants in their projections, which makes it a bit better.

BTW, I have learned from reading WaPo this morning that Andrew Biggs is no longer at the Social Security Administration, where his title was Deputy Commissioner. I am not sure when he left, but he is now at the American Enterprise Institute, at least that is where he was identified as being when WaPo quoted him dumping on Obama for being a "left wing tax and spend liberal," blah blah blah.


Bruce Webb said...

Well I dug into the Report and the changes in immigration assumptions represent .30 of the actuarial difference, which combined with the -.06 explain the entirety of the .25 point improvement. The detailed discussion is in section 7 of this portion of the Report 7. Reasons for Change in Actuarial Balance from Last Report
The language is a little opaque but most of this is not due to particular numeric increases in immigration (the total change attributed to demographic factors is actually -.02) but instead in a better model of how illegal immigrants contribute to solvency while they are here. The dollar figure being tossed around is $12 billion a year, which not only hardly seems enough to explain a .30 change in current actuarial deficit given that 2007 Income was $784 billion, but actually represents money already hitting the books. What it may explain is why receipts for 2005-2007 exceeded IC projections even though economic numbers came in at or below IC projections. The dollar differences are in the right order of magnitude with that $12 billion.
Barkley, Biggs left SSA in February .
The 2008 Report shows ultimate immigration to level out at 1.025 million with 275,000 of that due to 'other immigration' i.e. illegals and the decline is a lot less steep than it was in the 2007 Report when ultimate immigration was picked to hit 900,000 by 2030
Interestingly enough while total immigration figures were ratcheted up significantly over the near to medium term, long term they actually suggest that illegals will drop in absolute terms. Where the 2007 Report projected ultimate illegals at 300,000, the 2008 projects them at 275,000.

And for what it is worth the totals for legal immigration still don't make sense. In 2007 the total was 900,000, this report reports that dropping to 750,000 by 2010 and staying there. This just bucks all historical trends since World War II

Bruce Webb said...

"Well I dug into the Report and the changes in immigration assumptions represent .30 of the actuarial difference, which combined with the -.06"

Hmm what Bruce? -.06 what? Oops, that is the change due solely to the change in actuarial period.

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