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Please begin with an informative title:

Priceman touched on the Three Alternatives today: Intermediate Cost, supposed to be the most probable outcome, more optimistic Low Cost, and more pessimistic High Cost. This post proposes  to put some numbers to those alternatives and in passing show why targeting 75 year Solvency (as both the Ryan Budget and the new Durbin Commission proposal do) is lunacy. All of the Tables come from the 2012 Annual Report of the Trustees of Social Security: List of Tables.

First thing to note is that these represent just a sub-set of the Demographic and Economic assumptions, as per footnote 'a' more expanded data can be found in Tables V.A1-A4 & V.B1-B2
Second, and as variously pointed out by Roger and Priceman in previous posts, Low Cost arithmetically projects a fully funded Social Security system, that is 100% of scheduled benefits with no changes in cap formula or retirement age.
Third, and as pointed out by Priceman and to be the subject of an important post by Guest Blogathon Poster Economist Dean Baker, the productivity and real wage numbers of Intermediate Cost are well below historical trend. And while commenters views might vary, I don't see the Low Cost counterparts as unreachable. At all. Particularly if we consciously targeted proposals to increase wages and lower unemployment. For example a return to late Clinton Admin numbers blows all this right out of the water and Social Security actually projects to OVER fund.

More numbers below.

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For detailed explanations of Cost Rates and Income Rates you can see the Report, for my purposes I want folk to concentrate on the result of the difference under the Three Alternatives expressed as Actuarial Balance. The latter is basically the percentage of 75 year payroll lacking to achieve 100% of scheduled benefits expressed in 2012 terms. Or alternately the amount of an immediate payroll increase needed to achieve solvency. In this Table the OAS and DI Trust Funds are reported separately and combined into OASDI, projected under three different intervals: 25 year, 50 year, and 75 year, and for all three of the 'Alternatives' of Intermediate, Low, and High Cost. So LOTS of data points.

Now in the normal course of events the only one of these data points normally reported is combined OASDI over 75 years under Intermediate Cost assumptions. And under both the Ryan Roadmap and the new Durbin Commission we would be locked into that particular data point, at best being able to readjust policy every ten years or so. That is we are essentially told that Social Security HAS a 2.67% 75 year negative Actuarial Balance and that we will be REQUIRED to propose policy to address every bit of that RIGHT NOW.

Well not so quick Mon Frere Durbin, why not target the 25 year number? Not least because the probability range from Low Cost to High Cost is a positive 0.38% to a negative -2.25% with Intermediate Cost at -0.92. Why not propose a 1.00% of payroll fix and then see how we are faring in five or ten years? Maybe while targeting economic numbers that would actually get us closer to that fully funded Low Cost result? Why on Earth would Democrats NOT want to target 4.5% unemployment and 1.75% real wage? And 2.0% productivity? That would get us a long way towards 75 year solvency even as an immediate 1.00% of payroll fix (say by modifying the cap formula) acts as an insurance policy.

Or we could drill down. The Disability Insurance program has been in the news a lot this weeks and an examination of Table IV.B4 shows us why: fully a third of the OASDI 25 year actuarial gap is due to the 0.39% deficit in DI. On the other hand the gap never projects to get worse under Intermediate Cost assumptions and there is even a chance that DI in fact self repairs by 2036 to a positive 0.03% under Low Cost. Since if we really drilled down we would see that DI is underfunded today while OAS is still in 10 year balance by quite a margin, a reasonable policy proposal would be to implement a FICA based fix (across the board increase or cap modification) equivalent to 0.4% of payroll and devote that entirely to DI. BOOM, DI immediately achieves 75 year solvency. Meanwhile we could take a closer look at the variables that differentiate that 0.39% 25 year gap under IC and the 0.03% surplus under LC and target policy accordingly.

That is there are many, many more policy options available to us beyond locking into 75 year OASDI Intermediate Cost modeling. But unless someone exposed you to the actual numbers and variations as revealed in the detailed Tables you wouldn't have a clue.

Consider yourself exposed. And for those who dare more contagion below the photo (for extra credit ID the onlookers. Cheaters can consult the SSA.gov/history site where I stole the picture)

Okay for a change of pace lets look at the Bad Guys favorite Table:
Okay that came out teenie tiny. But it shows a 'unfunded liability' for Social Security of $20.8 trillion! With a 't'! Right now! And you will see this number all the time from the Peterson folks. But with the aid of the Table we can say: "Well yeah, over the 'infinite future horizon', do we really need to use numbers projected to heat death of the Sun". Or less snarkily. "Well yes, but this number assumes Intermediate Cost assumptions and no policy action ever." Or "Well gosh that really is a big, big number but only 1.3% of projected GDP. And not in the scheme of things that much more than the 0.9% number that projects a $8.6 trillion 75 year gap. One that by the way would go to zero if we combined small FICA increases with policy targeted at full employment and better real wages".

See how much fun this can be? And people laugh at me for having pored through these data tables each year since 1997. (Well okay, it IS kind of a weird hobby).



"HandsOffMySS" Blogathon: March 25th thru March 29th, 2013
Diary Schedule - All Times Eastern Standard








  • Monday, March 25th

11:00am:Roger Fox
1:00 pm: Joan McCarter
3:00 pm: Roger Fox
5:00 pm: Jamess

  • Tuesday, March 26th

10:00 am: Roger Fox
11:00am: joanneleon
1:00 pm: joe shikspack
3:00 pm: Arshad Hasan DFA
5:00 pm: Roger Fox

  • Wednesday, March 27th

11:00am: poopdogcomedy
1:00 pm: teacherken
3:00 pm: priceman
5:00 pm: Bruce Webb

  • Thursday, March 28th

11:00am: Jim Dean DFA
1:00 pm: BernardPliers
3:00 pm: One Pissed Off Liberal
5:00 pm: floridagal

  • Friday, March 29th

11:00 am: Economist Dean Baker
1:00 pm: VCLib
3:00 pm: Armando
5:00 pm: Liberal Thinking


Please remember to republish these diaries to your Daily Kos Groups.  You can also follow all postings by clicking this link for the Social Security Defenders Blogathon Group. Then, click 'Follow' and that will make all postings show up in 'My Stream' of your Daily Kos page.

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