There was a very dramatic change in the 2005 Social Security Trustees Report, released yesterday. It was on page 218:
The Trustees have come to the inescapable conclusion that Social Security must undergo substantial changes. It must be changed from a pay-as-you-go system to one that pays it forward, as with a system of personal accounts. Those who believe otherwise are kidding themselves. Paul Krugman, Duncan Black, the Center for Economic and Policy Research, and others are pitiful stooges who should have their keyboards confiscated.
Well, okay, I made that up. But to take seriously various leftist pundits in the last month was to believe something like that would be in the Trustees Report.
Duncan Black, a.k.a. Atrios, stated, "Just a reminder to the press and everyone else -- given that the Trustees include the hackiest of hacks like [Thomas] Saving, one should expect that the annual report, which will presumably come out soon, will be good for a laugh."
Paul Krugman was his usual weasely self, lobbing a non-accusation accusation: "I don't expect to see books that are literally cooked....But it's not out of the question....Even if the numbers aren't fabricated, however, it's a good bet that they will be presented in a way intended to make Social Security's financial outlook seem much bleaker than it really is."
Just three days ago the Center for Economic and Policy Research issued a press release warning:
It is important to recognize that the projections in the trustees' report are not decided by the professional staff of the Social Security Administration (SSA), but rather by the trustees, four of whom are political appointees of the Bush administration (the secretaries of Health and Human Services, Labor, Treasury, and the Social Security Commissioner). One of the two independent trustees is Thomas Saving, who was a member of President Bush's Social Security commission and has been an outspoken proponent of privatization....several members of Congress have asked Social Security commissioner Jo Anne Barnhart to make public the recommendations from the professional staff. Unless this information is available to the public, there is no way of knowing whether the trustees' report is based on expert advice as opposed to political considerations.
Thus, it must have come as a surprise, if not a disappointment, when the 2005 report was released yesterday and it looked remarkably like the report from the previous year. The overview looks much the same and, with the exception of a section on income and cost rates by component, so does the remainder of the report. The numbers have worsened some since last year, but it's nothing that isn't attributable to changes in various demographic variables and the shift of the 75-year period from 2004-2078 to 2005-2079.
Christian Weller, senior economist at the Center for American Progress, tried to downplay the deterioration in the projections. Doing his best impression of Police Squad's Frank Drebin saying, "Move along folks. Nothing to see here!", he wrote:
This year's report predicted that the trust funds will be exhausted in 2041. Despite a slight worsening in the outlook for Social Security from last year, the direction over the previous twelve years has been one of an improving outlook for Social Security, rather than a worsening one (figure 1). From 1994 to 2004, the exhaustion date rose from 2029 to 2042, after it had declined from 2048 in the 1987 trustees' report.
Weller is trying to convey the impression that this year's report is just a blip in an otherwise improving trend. But a look at the figure Weller provides shows that most of the improvement occurred as a result of the booming economy of the late 1990s, and has been tapering off since 2002. There is a very real possibility that the deterioration will continue.
In addition to the trust fund exhaustion date dropping from 2042 to 2041 in this year's report, the date at which the Social Security system begins paying out more in benefits than it collects in taxes declined from 2018 to 2017. Using data from the 2004 report and 2005 report also reveals that the date at which the Social Security surplus (the amount that payroll taxes exceed benefits) begins to decline was moved up to 2008 from 2009.
There was some improvement in the cost of Social Security as a percentage of both taxable payroll and gross domestic product. For example, in the 2004 report the cost of Social Security was projected to be 16.83% of payroll and 6.3% of GDP by 2030. In the 2005 report those numbers improved to 16.74% and 6.1%, respectively. But the data belies the improvement. The better numbers were not due to lower costs of Social Security (in fact, costs went up slightly). Rather, the improvement was caused by increases in taxable payroll and GDP.
Finally, our old friend the "present value" of the 75-year shortfall also worsened. It went from $3.7 trillion last year to $4.0 trillion this year. The cumulative cost--the cost to the taxpayers, over a 75-year period, of paying off all the treasury bonds in the Social Security trust fund plus meeting all the obligations of Social Security once the trust fund runs dry -- increased as well, from $24.9 trillion in 2004 to $25.2 trillion now.
All this leads me to wonder whether the left's real concern wasn't the report's potential politicization, but, given recent trends, that this year's and future reports would show that Social Security's long-term finances are worsening. Obviously, such reports won't do much for their case that Social Security doesn't need reform. Perhaps their objective in raising the books-are-cooked specter was to kick a little dirt on the report and thereby begin a long-term process of tarnishing it. If so, we'll surely see more attempts to discredit the Trustees' report in the future.
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