Social Security Trustee Report
From tne NY Times this afternoon, the Social Security Trustees have released their report on the financial status of Social Security and Medicare.
Here's what the report stated:
The
trust fund for Social Security will go broke in 2041 — a year earlier
than previously estimated — the trustees reported Wednesday. Trustees
also said that Medicare, the giant health care program for the elderly
and disabled, faces insolvency in 2020.
The
new projections made in the trustees annual report were certain to be
cited by both sides in the massive battle to overhaul Social Security,
which [Bush] has made the top domestic priority of his second
term.
The go-broke date for Medicare was delayed by one year, compared to the estimate that trustees gave a year ago. Now,
if you have some passing familarity with running “what-if” scenarios
(such as family budgeting) you're familiar with the notion of making
assumptions in the model you use to calculate that budget.
Atrios has a few notes on changing that model.
If the economy is improving by leaps and bounds (as we've heard over
and over – right?), the lifespan of the Social Security Trust Fund
should be increasing. However, according to this report the lifespan is decreasing.
What
this means: evidently, some model assumptions have been changed –
but not to truly 'drastic' effect. (Atrios states that the
changes have largely to do with the mortality tables and slightly
different assumptions about wages.)
To see the effect of changing assumptions, there is a section labeled “Uncertainty of Projections”.
Here's the graph, showing three different projections of the solvency of the trust fund:
What
this shows us is that by differing the model projections, there can be
several assumptions made that either exhaust the trust fund, or make it
solvent forever.
The
point here is that the “solvency crisis” rhetoric is far from the truth
and the state of the Social Security system is far from requiring
massive overhauls of the basic structure away from a defined benefit
pension account to a defined contribution 401(k) style savings account.
For those with more time and patience than I have, you can read the entire report here.
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