Weekend Economists Study How to Get Lucky July 24-26, 2015

[Demeter]

77. Sharp Pencils vs. Sharp Politics: The 2015 Social Security Trustees Report

http://www.perrymehrling.com/2015/07/sharp-pencils-vs-sharp-politics-the-2015-social-security-trustees-report/

The long run balance of the U.S. Social Security system has improved, but almost all of the improvement comes from improved methods and data. That’s the sharp pencil part, explained in Section IV.B.6, pages 74-79. Put another way, Social Security is in better shape than we thought last year not because of anything that has changed in the world but just because we weren’t thinking exactly right back then.

But the Disability Insurance bit is quite definitely in short term trouble, as the DI Trust Fund is projected to hit zero in 2016. The Trustees recommend changing the law so that the DI Trust Fund can draw from the larger OASI Trust Fund, which seems reasonable on its face, whereupon the next moment of trouble is reached only in 2034 when the joint Trust Fund hits zero. The fix for that one requires either increased income (meaning taxes) or decreased cost (meaning benefits) or a bit of both. Is that the sharp politics part?

Not really. Something that is only projected to happen twenty years from now is unlikely to focus political decision making in the coming year. Normally we would expect this particular can to be kicked down the road.

Maybe not.

The closing Actuarial Opinion by Stephen Goss (255-257) points to a more immediate point of likely political conflict, concerning the way the Social Security system is treated in unified budget accounting, which differs from the trust fund accounting in the Report. His concern, apparently, is that Congress will ignore the sharp pencil Trustees Report and apply instead their own accounting framework...

MORE