Saturday, November 20, 2004

Trust Fund Ratios under the Three Alternatives

((Author's note. In February 2006, the Social Security Administration took down the HTML versions of the 1997 to 2000 Reports. Those links will no longer work. The Reports are still available in PDF form and it is possible that we will get them mirrored somewhere else on the web, at which point I will fix the links.)
The Trust Fund Ratio is the measure by which the Trustees measure the health of the Trust Fund. It represents the amount of years that the Trust Fund could fund Social Security without any other income. Given that there will always be some income flowing in in the form of payroll taxes any persistant positive Trust Fund ratio means that Social Security is "fixed" under that projection. Contrawise just because the Trust Fund ratio goes to zero doesn't mean checks stop. It just means that some external form of funding must be found to continue benefits at the projected level.

What we have here are graphic representations of the Trust Fund ratio under the three alternatives from all Reports 1996 to present.


Two important things to note here. First alternative I, the Low Cost Alternative always, magically, results in a positive yet flat Trust Fund ratio. That is it shows the classic Goldilocks scenario: Social Security funded with a steady level of reserve. Not too hot and not too cold. Too hot is unthinkable, the notion that we may actually be overfunding Social Security would require too drastic a narrative change. Too cold is left to the Intermediate and High Cost alternatives. Second the date of Trust Fund exhaustion under the Intermediate and High Cost alternatives is steadily being pushed out. The 1996 Report shows it running dry in 2030 under the Intermediate Cost alternative, the 2004 Report sometime in 2041. (The 2005 Report shows it being pulled back by about five months into 2040, the result of simple surrender on 2005 numbers, see discussion at that post).

There is a word for a problem that improves itself eleven years over a nine year period after being neglected. That word is not "Crisis".

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