Each year the Social Security Trustees issue a report that contains 4 scenarios, Intermediate Cost, High Cost, Low Cost, and a Stochastic Model. In 1998 Economist Dean Baker wrote an article entitled Nine Misconceptions About Social Security. In the article Dean writes:
Social Security projections are based on extremely pessimistic economic assumptions: that growth will average just 1.8 percent over the next twenty years, a lower rate than in any comparable period in U.S. history; that growth will slow even further in later years, until the rate is less than half the 2.6 percent of the past twenty years; that there will be no increase in immigration even when the economy experiences a labor shortage because of the retirement of the Baby Boom generation; and that this labor shortage will not lead to a rapid growth in wages. Both possibilities excluded in these projections—increased immigration and rapid wage growth—would increase the fund's revenues. These projections are genuinely a worst-case scenario.When discussing the projections of the SS Trustees one should understand that the Office of the Chief Actuary publishes the SS Trustees report, runs and directs "a program of actuarial estimates and analyses relating to SSA-administered retirement, survivors and disability insurance programs and to proposed changes in those programs".
Actuaries have a responsibility to provide "conservative statutory accounting reporting provides a reasonable level of assurance that an insurer’s resources are adequate to meet its policyholder obligations at all times", according to the US Insurance Financial Solvency Core Principle 4, of theNational Association of Insurance Commissioners.
6 Political Appointees are the SS Trustees: Executive Summary is a political document.
The Political appointees are the ones who issue the Executive Summary, they have little to do with the actual Actuaries and Economists who assemble the projections, charts and tables. The Executive Summary is a purely political document, and that's all the average person hears about. The Social Security Trust Fund will be depleted by 2030 and can only pay 76% of benefits. OMG the sky will fall in 2033 ! ! !
Hey you with the sourpuss face, this party is just getting started ! !
Recently I have conducted a poll, I asked Kossacks how much the economy would grow over the next 20 years. The average of the 91 responses was .86% GDP growth. Well I guess the Doomers were well represented. In actual reality GDP growth from 2009 to 2012 averaged 1.45% during the Great Republican Recession. From 1960 to 1999 we averaged 3.48%, from 2000 to 2007 2.55%.
Now Remember the Low Cost Scenario says SS is good thru 2090.
When we look at 2 scenarios, Low Cost (2.8%), Intermediate cost 2.1% and compare GDP the low cost should not be thought of as unattainable. Much conventional wisdom say 3% to 3.5% is about the best we can do with Energy and Resource constraints. Once we reach 20% from Solar and 20% from Wind, renewables will dominate the market. And be cheaper. And help the Economy.
And what happens to the labor market as the Boomers retire, the labor market tightens up and employers will start competing for workers, this will help drive wage growth, which means more FICA.
If GDP grows at 2.6% over 20 years, but inflation is a it less than predicted in the low cost scenario, we can still get to 2090. Or if inflation is worse than expected, but Wage growth and job creation are real good, we still can get to 2090. (Remember real good job growth coupled with real good wage growth will spur some inflation.)
This one is easy, the Intermediate scenario Assumes .4% to .5% workforce growth from 2021 to 2050. But the Bureau of Labor Statistics says .7% thru 2050. The Low Cost Scenario uses .7% too. Currently workforce growth is about 1.0% to 1.1%. To assume workforce growth will drop by over 50% in 8 years and then stay relatively flat thru 2090 is a bit hard to believe.
Can we expect Immigration Reform with some form of Amnesty soon? I think most would agree in the next 2-4 years it will happen. If it does, this will increase the workforce, which would be better for Social Security.
What this whole issue comes down to, if we have good job creation, the CBO said last year, over the next 4 years the Country will create 12 million jobs if we do nothing, and good wage growth, the 2090 scenario is quite possible, even probable.
But we won't know that for at least 10 years, if not 12-13. But until then - hands off Social Security.