The annual report of the Social Security Board of Trustees, released on March 30, indicates that the long-range financial picture for Social Security has improved since last year. The report shows that Social Security trust fund assets will last three years longer than reported last year and that trust fund expenditures will surpass tax revenues a year later than previously estimated. At the same time, the report calls for immediate legislative action to restore long-term fiscal balance to Social Security.
How accurate is the report? How dependable are the long-term projections it cites? Does the report make reasonable assumptions about long-term trends in mortality and fertility? Does it adequately take into account the impact of improving productivity in the economy? What are the broad budgetary implications of the report and how should they impact policy? These are some of the questions experts on Social Security and fiscal policy sought to answer at an Urban Institute roundtable in early April. The session was hosted by Institute president Robert Reischauer and moderated by Howard Gleckman of Business Week magazine.
Highlights | Full Transcript
Highlights
Opening comments on the process of creating the Social Security Trustees Report:
Steve Goss, Deputy Chief Actuary, Social Security Administration
"(The report shows that) things are a bit better, but the significant problems for the more distant future are still very much out there. We did, for this year's Trustees Report, have some improvement, first of all, in the date at which the cost of the program will first begin to exceed the tax revenues. In the '99 report, that was 2014; that's one year further out this year to 2015. And the year in which the trust funds are projected in the intermediate assumptions to be exhausted and no longer be available to augment those tax revenues to pay benefits will be the year 2037, three years further out in the future than was projected in last year's trustees report."
Marilyn Moon, Urban Institute Senior Fellow, former Social Security Trustee
"I was very impressed in the process of all five years that I worked on the trustees reports that contrary to what I've sometimes read in the press, there was really not a lot of political discussion at all. It was really wrangling over the numbers and looking at them, usually each assumption separately first, and then thinking about the total package.... The other thing I would say is that this is a process in which we could probably take some satisfaction that we've done somewhat the right thing because we've been criticized both for being either too optimistic or too pessimistic."
Gene Steuerle, Urban Institute Senior Fellow, Member of the Technical Panel on Assumptions and Methods for the Social Security Advisory Board
"We made a few recommendations with respect to... intermediate assumptions. That's really not where we spent most of our time, but that's what got most of the attention ... mainly because one recommendation we made with respect to mortality ended up affecting the long-range cost estimates and increasing costs somewhat. ... If you actually look at what we recommended, and what the trustees did, they actually moved a significant degree in directions we had suggested. They did move in the direction of improving mortality. They did move in the direction of saying that productivity was increasing. We also said that you should take it slow and adjust over time, which they did."
Stan Ross, Chair, Social Security Advisory Board
"I would put one problem on the table.... I think at the level of the people around the table here, the process works very well, not a lot of big changes from year to year. People understand it.... But as I sit here and listen to all this, it seems to me that the place where attention ought to be put is how to get from here to something that the public can really understand: whether there has been much difference, or does it make any difference, or what the hell is going on with all this arcanery."
Dan Crippen, Director, Congressional Budget Office
"Certainly, these models are not going to take the variants out of forecasts for 75 years from now. But they may help enlighten the debate. In 1982 and '3 when many of us, or at least some of us, were involved in the Greenspan Commission effort, we didn't ask very many questions other than what effect does this have on the Trust Fund balance. That is, any policy proposal generally was aimed at restoring some sense of solvency, because we were looking at impending insolvency. It turns out that's one question, but only one of many, and we didn't ask many of the others then. Hopefully, as we improve our capabilities, we will be able to address some of the more potentially important economic questions."
Harry Holzer, Visiting Scholar, Urban Institute
"(I worked with the trustees as a representative of the Department of Labor and) I was very active in an argument about the hours-worked assumption, which went on over several meetings.... And the reason we kept arguing about that was that I think there was at least one agency in the process that was very frustrated that we weren't making much more optimistic assumptions.... And many of the rest of us were trying to fend off using this variable or that variable to make it. But it does become this juggling act of not just uncertainty over one variable, but when you have a dozen variables all of which have a lot of uncertainty, and you aggregate across those variables."
Comments on issues raised by the report:
Howard Gleckman, Moderator, Business Week magazine
"I think now that we've got a pretty good sense of the process, let's see if we can drill down a little bit and talk about some of the assumptions ... (particularly about) the new economy. My magazine, among others, is, of course, madly in love with the new economy. And one of the great criticisms one always hears about not just the Social Security report but the Congressional Budget Office (CBO) forecasts and the Office of Management and Budget (OMB) forecast is, you know, what's the matter with these people, don't they understand that productivity has reached a new plateau? Don't they get it?"
Barry Bosworth, Brookings Institution
"What we found on the new economy ... if you look at the last five years, it's unambiguous, I think, that there's been a dramatic improvement in rate of growth of productivity in the U.S. economy. The five years prior to that, though, is pretty damned bad ... somewhat below the historical average. So, do you want to take a five-year average? Do you want to take a 10-year average? If you take a 30-year average, it looks awful, because then you're back to the 1973. If you want to do 50, it starts to look a little bit better again. And so it's very difficult to know with these short-run trends how much to factor them in."
Rosemary Marcuss, Deputy Director, Bureau of Economic Analysis
"One thing I want to mention is that the word 'new' can mislead. I mean, we all know that economies morph all the time. Everything changes, things are new. But here we don't mean just new. When people talk about the new economy they're talking about something that is excellent beyond all generally accepted assumptions up to a few years ago. That's a higher-risk bet. It is still a hypothesis.... By taking the last five years, where we've clearly got things booming along, and projecting that for 75, you're really not minimizing the variants of your assumptions. You're making your life a little bit harder."
Bert Seidman, National Council of Senior Citizens
"The thing that I think is unfortunate ... is the assumption that policy doesn't change. Whereas, we know that over and over again the policy of Social Security has changed when we saw problems with the status of the trust fund. And to have figures come out every year on the assumption that the policy doesn't change when we know that the policy will change, it seems to me, also detracts from the credibility of the report."
Rudolph Penner, Urban Institute Senior Fellow
"In the ideal world we'd like to know, what does the Social Security system do to savings, what does it do to work effort? These are the real measures of the economic costs of the system. But there isn't much academic consensus on these matters, unfortunately. So the report tends to focus on relatively unimportant things, when we should be striving to know a lot more about the really important economic phenomenon connected to the system."
Tom Matzzie, Campaign for America's Future
"The public does not think about what the system costs society and the economy. They think about the Social Security system in terms of their retirement, their parents' retirement, their family's retirement, survivorship, disability. And I think that they are willing to tolerate some economic inefficiencies.... They're willing to let Social Security budgets soar, even if the federal budget is not balanced. And those perceptions, I think, are important to understand for policymakers and also for those of us around the table who influence the perceptions of the system."
Heidi Hartmann, President, Institute for Women's Policy Research
"I think it's kind of a mistake not to have benefit improvements on the table, partly to make adjustment for changes in family structure.... We're going to see not less in the future but more never-married women, more divorced women. Right now most women's benefits are based on their husband's earning records. That's not going to work for women in the future. So there are a lot of reasons to be talking about enhancing benefits, particularly for single women, the group that has the highest poverty rate right now."
Lawrence Thompson, Urban Institute Senior Fellow
"The trustees report is projecting a world that cannot happen, as soon as the Trust Fund becomes exhausted. And as we begin to lay more and more criticisms on this, we run the danger of losing sight of the original purpose (of the report), which was to just project these trends and make the Congress and the people focus on where the current policies would take us and whether they're consistent or inconsistent, not how the inconsistency gets resolved."
Wendell Primus, Center on Budget and Policy Priorities
"I'd like to improve benefits for some elderly widows, and reduce poverty... but I hope that when we do those things, we do them on at least a 'pay as you go' basis, or maybe at the same time improve the solvency of Medicare or Social Security as we do those political sweeteners. But I'm not so sure that will even happen. I like to make sure there's kind of a 'pay as you go' rule, if you will, within the system, in both systems, so that when we do those legislative changes that are obviously going to cost money, we do nothing to hurt the solvency."
William Niskanen, Chairman, Cato Institute
"This report ... is a conscientious, professional attempt to come up with an actuarial estimate. I find it wholly unhelpful, however, in guiding anybody on policy issues. In the immediate case it has the effect of deferring attention to Social Security, because it looks like we've got another year of grace between now and the time that we have a negative cash flow. This report over the years has contributed to the illusion that we have assets in the Social Security trust fund. It is still bound in the trust fund rhetoric, and arithmetic, which is quite irrelevant to anything in the world, other than the perceptions of some people."
Spencer Rich, National Journal
"I think most reporters who cover this take the Trustees Report as the gold standard. If you look in the Times, and other publications that cover Social Security regularly, you will not find them taking some just off the wall projection made by some junior member of Congress who has studied it for about three weeks and decided he wanted to be an anti-privatizer or a pro-privatizer. I would much more trust the Congressional Budget Office to do this kind of stuff, or an advisory panel...."
Julia Kosterlitz, National Journal
"I would just like to add onto that, that at National Journal where our motto is Dare to Be Dull, we did, in fact, mention the implications of (what would happen) if the trustees were to include some kind of benchmark for measuring these various proposals. And, in fact, that would be very useful to journalists, I think, even if they didn't write about the proposal. If you went ahead and did it, they would be more than happy to have it, because it would clear a lot of things up."
Susan Tanaka, Congressional Budget Office
"It seems to me that (this report is) kind of like using a thermometer to tell what time it is. It's measuring something, but it's not terribly relevant when you try to think about the overall budgetary pressures and the programmatic needs that the federal government is going to face in the future. So somehow with all this collective brainpower, and all this understanding of the uses and the limitations and abuses of this information, it seems to me we ought to be able to come up with a better measurement to help the politicians so they can come up with a better goal besides save the Social Security surplus, or extend the solvency of the trust fund. We need to find something that guides them and provides them with a structure to make more informed policy decisions."
Robert Reischauer, President, Urban Institute
"Let's keep in mind that CBO puts out a long-range budget forecast book that takes the whole budget—Social Security, and everything else—and looks forward under a couple of different assumptions, as does OMB in the budget appendix. And nobody pays any attention to either of these publications, none of these things. Maybe if that's what we want, it really shouldn't be loaded on the (Social Security) trustees. There should be, every five years, a commission or something that would do this with some high-level visibility and say—putting together the trustees reports, and the other information we have—this is what our future looks like."
