Saturday, August 30, 2008

Social Security 'Crisis' at a Glance

Reposted from April
This figure shows in graphic form the outcomes of Intermediate Cost (II) vs High Cost (III) vs Low Cost (I)

This figure (II.D6 from the 2008 Report) gives a nice visual summary of the varying outcomes of the three Alternatives: Low Cost (I), Intermediate Cost (II) and High Cost (III). It tracks Trust Fund ratios under the various alternatives.

There is a certain lag between Income falling behind Cost and Trust Fund Ratios starting to decline. Under Intermediate Cost projections total Income excluding Interest falls behind Cost in 2017, at which point the General Fund will have to start transfering real dollars in partial payment of accrued interest. But as long as the remaining unpaid interest remains ahead of projected cost the Trust Fund balance will continue to grow. On the other hand the TF ratio peaks at some point before that as projected costs increase at a greater rate than the balances do. So as we can see in Table IV.B3.—Estimated Trust Fund Ratios, Calendar Years 2008-85[In percent] the rate of growth of the TF ratio slows around 2010, essentially stalls in 2012, and stops in 2014 even as Income excluding Interest continues to exceed cost. We can contrast this to the dollar figures as seen in Table VI.F8.—Operations of the Combined OASI and DI Trust Funds, in Current Dollars, Calendar Years 2008-85 [In billions] where you see the dollar value of Income excluding Interest falling behind Cost in 2017 (Shortfall) while balances keep increasing until 2023 (peak).

This explains why so many critics of Social Security place the date of crisis at different points. You can look at the absolute value of the TF ratio or balance in which case the key dates are 2014 and 2023 respectively, or you can look at the rate of change in which case the key dates become 2010 and 2017. Supporters of Social Security need to keep a sharp eye on exactly what the opponent is citing as support for 'crisis' and what the real world implications are.

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