CBO Letter to Rep. Ryan re Stimulus Debt Service

by Bruce Webb
Reader Movie Guy suggest that the following letter and table merit some discussion. It seems to speak for itself but the whole thing is short enough simply to post (I deleted some returns and added some commas to save space, the original PDF is here CBO Letter to Rep. Ryan). Please add any contributions in comments.

Honorable Paul Ryan, Ranking Member, Committee on the Budget, U.S. House of Representatives

Dear Congressman:

As you requested, the Congressional Budget Office has estimated the costs of additional debt service that would result from enacting H.R. 1, the American Recovery and Reinvestment Act of 2009. Such costs are not included in CBO’s cost estimates for individual pieces of legislation and are not counted for Congressional scorekeeping purposes for such legislation.

Under CBO’s current economic assumptions and assuming that none of the direct budgetary effects of H.R. 1 are offset by future legislation, CBO estimates that the government’s interest costs would increase by $0.7 billion in fiscal year 2009 and by a total of $347 billion over the 2009-2019 period (see enclosed table).

If you would like any additional information, we would be happy to
provide it. The CBO staff contact is (redacted).

Sincerely, Douglas W. Elmendorf, Director

CBO Tables: Bigger Images

CBO Estimate for HR 1: Jan 26th, 2009: the Tables

For some reason the outlay/revenue tables vanished from the PDF. Which has led to more tin foil hats. In the interest of sanity I have put up a version here:

It can't happen here(?)

Prescient Young Blogger Did What S. Korea Couldn't -- Foresee Global Financial Crisis

He had been a so-so student who studied communications at a so-so junior college in a backwater town south of Seoul. Thirty-one years old and single, he spent much of his time alone in his room. As his father noted, "He can't even get a job."

But he knew a global economic smack-down when he saw one.

Minerva saw it coming last fall, far earlier and with far more acuity than the South Korean government, which his blog has humiliated and angered.

Besides getting mad, the government got even. In a move widely perceived by the public as a chilling echo of the 1970s, when a military dictatorship ruled South Korea, the government detained Park this month, invoking a seldom-used telecommunications law that charges him with harming the public by spreading "false rumors."

Well I doubt that any Angry Bears needs to fear being locked up. On the other hand the following from Sec 802 of the Patriot Act could be pretty broadly interpreted.

5) the term `domestic terrorism' means activities that--
`(A) involve acts dangerous to human life that are a violation of the criminal laws of the United States or of any State;
`(B) appear to be intended--
`(i) to intimidate or coerce a civilian population;
`(ii) to influence the policy of a government by intimidation or coercion; or
`(iii) to affect the conduct of a government by mass destruction, assassination, or kidnapping; and
`(C) occur primarily within the territorial jurisdiction of the United States.'

.That is if Larry Summers thinks that your comments have the appearance of being intended to influence the policy of the government and decides he is in some way 'intimidated' you could be picked up and detained just like poor Mr. Park.

I'll admit the concept is kind of far-fetched. But then again just three days ago former NSA analyst Russell Tice dropped a bomb shell on CountdownNSA Whistleblower. What he alleges there couldn't happen either, not here. Except maybe it did.

January 2008: A flurry of Social Security Posts at Angry Bear

Hoo boy, Social Security is back in the news with the MSM trying to whip up the idea that Obama is going to prove Bush right by going after Social Security (similar narratives are floating around about Iraq and torture all in an effort to prove that Bush was never, never actually wrong about anything). I do some push back.
Social Security Monthly Balances: Nov update
Social Security 'Reform': the Undead Return
Bruce Webb and Barkley Rosser and Social Security Not actually by me, but if you think I am going to pass that title up you are nuts. My Mom reads the site.
Obama and Social Security: why NOT to worry
2008 Social Security Balances: Projections vs. Actual
Recalculating 'Nothing': Social Security in a Time of Recession
Social Security?: It's Stochastic!!
Social Security: Goldilocks curves, Not too hot, not too cold
Is Obama echoing Bush on Social Security?
Orszag (and Diamond) Flunk Reading & 'Rithmetic: SS Legacy Debt
Unleash Your Inner FDR: Social Security as Political Opportunity

Even More Posts from Angry Bear: late Aug to Dec 2008

In late August I stopped numbering my Social Security posts, because it had gotten increasingly pretentious And cut them back somewhat. Which made them harder to distinguish as a block. So as a public service (?), I'll try to gather all the links here.
AUG: CBO: Updated Long-Term Projections for Social Security
Social Security 2027: A date for action?
Backwards Transfer is Back: Social Security's Unfunded Liability
SEPTUnfunded Liability Bookended
Intergenerational Equity, Unfunded Liability and Selfish Boomers
R.I.P. Social Security Crisis: "We hardly knew ya" This was the point I thought the series would go on hiatus. Who could have known that the MSM would blow up some post-election comments by Obama and get this issue right back on the table? I thought the Wall Street meltdown would put an end to all this. But clearly not.
Social Security Actuaries score the Warshawsky Plan
OCTSocial Security Checkup: Monthly Trust Fund Reports
NOVWhy Conservatives Hate Social Security
Social Security: Inter and Intra-Temporal Contingency
DECSocial Security Monthly Balances: Oct update
Is it true that foreigners finance American debt?What does this have to do with Social Security? Well nothing. But an interesting topic.
2008 Financial Report of the United States
Why does Santa hate poor kids?Nothing about Social Security here either. I rant on how we use things like Santa to teach the poor that life is just unfair, suck it up and accept the fact that rich people get a better deal from Santa, the Easter Bunny and the Tooth Fairy.

I skipped some non-financial posts, but I think this includes all the relevant ones for this site.

Unfunded Liability, aka Legacy Cost

This graph is being used in a forthcoming post on Angry Bear called 'Orszag and Diamond Flunk Reading'

Alternative Shapes

(Update. Commenter RDF points out that these graphs mean nothing for those who don't have the context. And I plead guilty. Some of my posts here are just prep pieces for longer work over at Angry Bear. For example these graphs were incorporated into Social Security: Goldilocks Curves, Not Too Hot, Not Too Cold. And for the record the 2004 and 2007 curves were originally reversed, something I fixed Jan 18.)
1997 II.F6

2000 II.F6

2004 II.D7

2007 II.D7


2008 II.D6

Trust Fund Monthly Reports: 2008 Preliminary

OAS::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$2.023 trillion // $2.216 trillion //$193 billion// $2.221 trillion// $198 billion

DI::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$214.9 billion//$218.7 billion//$3.8 billion//$221.3 billion// $6.4 billion.
Per IV.A2 the opening balance for DI was $214 billion, projected year end under IC $218.7 billion, under LC $221.3 billion

June 30th/Mid-year: OAS $2.140 trillion// DI $220 billion

Aug 31st/Two-thirds: OAS $2.164 trillion// DI $219 billion

Sept 30th/Q3: OAS $2.177 trillion// DI $219 billion

Oct 30th/Five-sixths: OAS $2.187 trillion// DI $218 billion

Nov 30th/Eleven twelvths: OAS $2.197 trillion//DI $217.5 billion

Dec 31st/Year End: OAS $2.203 trillion//$215.8 billion

Social Security: 'Crisis' and 'Reform'

In a rational world there would be no need to talk about Social Security. The combined OASDI program is currently running a surplus and is projected to be in Short Term Actuarial Balance (the legal test for solvency) until at least 2028. Yet Dean Baker at Beat the Pressis constantly having to stamp out fires lit by people at the NYT and the WaPo. Fires which are serving to light up the blogosphere. The other day their was a dKos diary on Obama and Social Security that had nearly 600 comments. And David Sirota had a similar thing up on Open Left. And just this morning Digby talks about CNN bloviation on 'Entitlements'. To understand why they are so persistent you have to start with the language. So in this post I want to talk a little about the various definitions of 'Crisis' and 'Reform' as they apply to Social Security.

Social Security 'crisis' has typically been framed as crisis at Trust Fund Depletion. Rarely are the specifics spelled out, instead there is a lot of loose talk using terms like 'bankrupt' and 'flat broke' which naturally has led many, many people to translate as 'no check', 'Social Security won't be there for me'. Now a few seconds of reflection on the mechanics of Social Security shows this to be nonsense, as long as the FICA payroll tax exists Social Security can be paid out at some level, the real question is what will that level be and do we need to do anything about it. But instead of diving into that lets just stipulate that a gap between projected revenue and cost is the definition of 'crisis at depletion'. And right now that gap is projected to be 22% starting in 2041, or to turn it around a 78% payout of the scheduled benefit.

In more recent years a new definition of 'crisis' has surfaced. This is 'crisis at shortfall' which is the point at which revenue from taxation fails to meet costs. Now while it is really, really odd to call this a crisis given that Social Security is projected to have about $5 trillion in US Treasuries when this event is projected. But for the purposes here we will simply grant the crisismongers the point and pretend that the Trust Fund doesn't exist.

So that is the two 'crises' we are dealing with: 'crisis at depletion' which at root is defined as inability to pay benefits and 'crisis at shortfall' which is defined as inability to finance benefits, two slightly different concepts.

When we turn our attention to 'reform' we once again see two different frames. One would think that the goal of any 'reform' would be to fix the crisis. But that assumes we all share the same goal and the same interpetation of what the crisis is, something that as it turns out is not true at all among reformers.

When I look at 'crisis at depletion' I see it as a potential for a benefit cut that would be if not fatal be certainly painful to retirees in whatever year it occurs and for whatever years it persists. If the gap can be avoided altogether or mitigated at a reasonable cost I would prefer to try to close the gap as much as possible. But certain reformers don't see that benefit cut as a problem in and of itself, instead they see it as a threat and a call for a bailout. Thus you get a certain tension between people like Coberly who insist that the cost of the fix is cheap and people like FA who don't even like what they are paying now and certainly don't want to pay a penny more, not now and not in 2041. Now we know what the Coberly cost would be, a 1.7% point payroll increase now or roughly double that if we simply let 'crisis' run its projected course and avoided a tax increase until the last minute. But this assumes that we stick with the scheduled benefit which itself is based on a formula where initial benefits are based on real wage increases and subsequent benefits by CPI. Alternatively we could alter the schedule by changing the formula and so close the gap from the opposite direction. That is we can simply lower people's expectations about the replacement value of their retirement check in the interests of avoiding any need for a sudden bailout down the road. Now this approach is not inherently cruel, there are ways of doing it right and ways of doing it wrong, a lot of it comes down to achieving a good faith consensus on what our targeted outcome should be. If 78% after 2041 is not enough, what compensating benefit reduction between now and 2041 would place Social Security back on a pay-go basis under existing rates with permanent outcomes better than 78%. But whether we are talking a tax increase or some sort of benefit cut the goal here is to provide a fix for that sticker shock. This is 'reform' as 'fix' for 'crisis at depletion'.

On the other hand there are those who define 'reform' quite differently, instead of a 'fix' they look for a 'transformation'. If that transformation supplies a fix then great, but for some of these guys 'crisis' translates to 'opportunity'. That is there is a substantial group of people who hate Social Security for reasons that have nothing fundamentally to do with solvency. And while many of them may sincerely believe that their preferred system will out perform Social Security as currently configured, that belief is clearly secondary to their policy preferences. This becomes apparent when you look at plans like LMS whose outcomes for most seniors are not much better than simply letting the system go and whose interim costs are much higher than a simple Coberly-like fix would be. Now I suspect there are some mixed motives going on. Some free-market purists simply prefer privatization as an end in itself, the anti-socialist solution as it were. Other supporters of privatization seem more motivated by a desire for tax avoidance down the road, the no-bailout solution in this case. But neither group is really focused on maximizing retirement security for all, although they recognize that paying lip service to it may be politically unavoidable. When evaluating 'reform' plans you need to see if the reformers are really looking for a 'fix' or just a 'transformation'.

Okay that is 'reform' as it applies to 'crisis at depletion'. Fix Social Security or transform it. But what about 'crisis at shortfall'?

Well this one is a lot more cynical. After all at least at depletion we have an undoubted event: benefits and revenues have to be brought into line one way or another, there is a real imbalance internal to the program. Shortfall is different. A plan was put in place in 1983 designed to mitigate the impact of future revenues falling behind future costs. And that plan wasn't free, instead future retirees who were then working took on an additional tax burden in order to postpone benefit cuts for as long as possible. And those additional taxes, which are still being collected, have grown with accumulated interest to $2.3 trillion today and are projected to total more than $5.6 trillion by the peak in 2023. An amount sufficient to pay full benefits until 2041 (SSA) or 2049 (CBO) or potentially through some sort of reform continue to pay out some benefit better than 78% for the foreseeable future. But for some people 'crisis at shortfall' simply means being unwilling or perhaps unable to pay back the money they borrowed and their proposed 'reform' comes in the form of short to medium term changes in taxes, benefit levels or retirement age. In this case 'reform' pretty much boils down to 'tax avoidance' with 'fix' meaning 'not with my dime pal'. Note that in this case there is no immediate appeal to private accounts, no one even pretends they could be a solution to a cash shortfall projected to happen in less than ten years. This can't be excused as just an exercise in preferences for free market solutions, it is just out and out theft. Some will argue that they have no choice. Which doesn't change the moral equation.

Social Security 'Reform': the Undead Return

They won't give it a rest.

Dean Baker in his post The Post's Jihad against Social Security points to this article Obama Predicts Years of Deficits over $1 trillion and notes that they don't hesitate to single out the usual suspect. Is it the cost of the war? The cost of the bailout? The cost of the stimulus package? Nope apparently those are just short term problems. Instead as always the first stop for deficit reform is Social Security.

WaPo: The mounting debt has raised an alarm on Capitol Hill, where some Republicans and moderate Democrats are pressing Obama to tackle the looming challenge of skyrocketing Medicare and Social Security spending, and to adopt tough new budget rules to prevent future deficits from ballooning.

Which leads Dean to reply with some exasperation:

The article includes a comment about "the looming challenge of skyrocketing Medicare and Social Security spending. " Of course Social Security spending is not projected to skyrocket. It is projected to increase gradually, and its costs are fully covered by its own tax stream until 2048, according to the Congressional Budget Office's latest projections.

In a related note Paul Krugman poses the question in a Jan 5 post A Bullet Dodged

What would have happened if George W. Bush had actually succeeded in his plan to privatize Social Security?

and suggests an answer 'Ask the Italians' Bloomberg News: Italian Pensions Sapped by Private Funds Bush Backed

In my view it is practically criminal for policy makers to be wasting a second talking about Social Security given the very real possiblity we are headed for a new Great Depression. And so equally criminal for opinion makers to be twisting current events to pursue this old vendetta. It is a shame that people like Baker and Krugman still have to keep a vigilant eye out for the zombies intent on eating the flesh of Social Security. Maybe we can make a deal. If the Right will simply stop taking every possible opportunity to take a bite at Social Security then I promise to shut up. And then maybe we can let Krugman and Baker continue the really important discussion.

"Social Security 'reformers'! Report back to your graves!"

Italian Pension Privatization: a Cautionary Tale

Krugman: A Bullet Dodged

What would have happened if George W. Bush had actually succeeded in his plan to privatize Social Security? Ask the Italians.

Italian Pensions Sapped by Private Funds Bush Backed (my extract is a little different than Krugman's)

Jan. 5 (Bloomberg) -- Italy did for retirement financing what President George W. Bush couldn’t do in the U.S.: It privatized part of its social security system. The timing couldn’t have been worse.

The global market meltdown has created losses for those who agreed to shift their contributions from a government severance payment plan to private funds meant to yield higher returns. Anger is rising both at the state, which promoted the change, and money managers such as UniCredit SpA and Arca Previdenza, which stood to profit.

Prime Minister Silvio Berlusconi’s administration is now considering ways to compensate as many as 1.2 million people who made the switch, giving up a fixed return for private plans linked to financial markets. It’s also letting people delay redemptions on retirement funds to avoid losses after Italy’s benchmark stock index fell 50 percent in 2008, destroying 300 billion euros ($423 billion) in wealth.

“The reform didn’t help anyone,” said Gabriele Fava, who heads the Fava & Associati law firm in Milan and writes about labor law. “Not the government, which was hoping everyone would make the switch to take the strain off its coffers, nor the workers who have not resolved the problem of needing a supplement to their social security pensions.”

Are Economic Arguments just Beards for Ideology?

Right now the United States is either near the trough of a recession that will yield to recovery sometime at the end of this year, or it is just at the beginning of a multi-year recession not much different than other post-war ones, or it is on the verge of a Second Great Depression. And if you are not worried about which of these paths the country is on then you just are not paying attention because it is really important that we get this right. So why would anyone even be concerned about a government program that is currently in surplus and whose problems (if any) are ten to twenty years down the road? Yet against all odds the issue of Social Security 'crisis' simply refuses to die, you think you have driven a stake through its heart and it just rises again.

In the wake of the "There is no Social Security crisis" struggle of 2005 a commenter at DeLong asked this question in re Social Security 'reform'

"What puzzles me is energy and persistence of this propaganda campaign with scant positive results."

. Well I made a stab at answering that question in that much different economic environment: Why are they so insistent? and then made the same case at greater length at AB with What does Lenin have to do with it? in May 2008. Yet in comments on my previous AB post Social Security Monthly Balances, a dry as dust reporting of some not really interesting numbers, the whole argument blew up again this time in the context of a dollar meltdown. Those interested can follow the more heat than light discussion which rapidly broke down (as almost always) in ad homs and accusations of ad homs. Personally I would advise you not to waste your time. But it does raise the same question posed by that commenter at DeLong's three-plus years ago. Of all of the possible political and economic crises that we are well and truly facing why would anyone (except obsessives like me) even enter in on a discussion of Social Security? Well I suggest it is for many of the same reasons that Congressional Republicans are threatening to derail the current stimulus package in the face of near consensus from both left and right economists that something needs to be done and that currently the federal government is the only entity with the means (and hopefully the will) to do that something. These people would rather lose the battle and take all of the resulting collateral damage than give up the war.

What follows below the fold is just a reprise of my May 'What does Lenin' post, and really just is intended as a case study to illustrate the following question. Can we ever truly separate an economic argument from the underlying ideologies? Or are we doomed to simply fight the old politico-ideological battles in new economic uniforms? Or you could ask a parallel question. Why is Amity Shlaes et all still trying to beat up on FDR?

What does Lenin have to do with it?
It is clear to me that most of the people who are pushing privatization are fundamentally opposed to Social Democratic solutions generally. There is a large group of people who never liked the New Deal, continue to argue against historical evidence that it was a fundamental failure, they hated Social Security from the start, and indeed ran against it as their central platform plank in the election of 1936. They expected it would fail, they see the various rounds of tax increases over the years as proof that it will fail. The 1983 reform was particularly bitter to them, to the point that they gathered all the anti-Social Security folk to a conference in DC organized by Cato. The results of that conference were published in the Fall 1983 issue of Cato Journal under the title Social Security: Continuing Crisis or Real Reform but which might as well been called "Never again! We'll get you next time FDR!"

You can get a flavor of this by reading through the introduction. There is zero interest expressed in the idea that worker retirement be in any sense a social responsibility long term, instead Social Security is described entirely in terms of diluting investment and retirement planning and of increasing the ratio of labor costs to capital. Most telling is point 2 of their 8 point conclusion:
"2. Social Security is ultimately a manifestation of the welfare state. Real reform, therefore, may require constitutional change that effectively limits the taxing and spending powers of government."
The Cato types see it as welfare, they disagree with government welfare programs in general, and would like to see all of them vanish over time. To use the words of Newt Gingrich to see them "wither on the vine"

Now in reading this from 1983 you can see that these people, while a little bitter at missing their shot in 1982 when Social Security crisis hit, were convinced they would get another shot at some point. But they also saw they needed more than hope. They needed an alternative vehicle and they needed a plan. They had the alternative vehicle, the IRA-the Individual Retirement Account, and they got busy pushing those. But they also understood they needed to win the message war, and so they turned to strategy crafted by Stuart Germanis and Peter Butler. On the title page of the journal the article title was softened somewhat by prefacing it with 'Social Security Reform: but the article itself's title page was more blunt Achieving a "Leninist" Strategy. While they had the minimal grace to put Leninist in scare quotes a reading of the whole article revels that they meant it. At a certain risk to free use doctrine I am going to quote at some length.

Marx believed that capitalism was doomed by its inherent contradictions, and that it would inevitably collapse—to he replaced by the next stage on the ladder leading to the socialist Utopia.
Lenin also believed that capitalism was doomed by its inherent contradictions, and would inevitably collapse. But just to be on the safe side, he sought to mobilize the working class, in alliance with other key elements in political society, both to hasten the collapse and to ensure that the result conformed with his interpretation of the proletarian state. Unlike many other socialists at the time, Lenin recognized that fundamental change is contingent both upon a movement’s ability to create a focused political coalition and upon its success in isolating and weakening its opponents.

As we contemplate basic reform of the Social Security system, we would do well to draw a few lessons from the Leninist strategy. Many critics of the present system believe, as Marx and Lenin did of capitalism, that the system’s days are numbered because of its contra dictory objectives of attempting to provide both welfare and insureance. All that really needs to be done, they contend, is to point out these inherent flaws to the taxpayers and to show them that Social Security would be vastly improved if it were restructured into a predominantly private system. Convinced by the undeniable facts
and logic, individuals supposedly would then rise up and demand that their representatives make the appropriate reforms.

While this may indeed happen, the public’s reaction last year against politicians who simply noted the deep problems of the system, and the absence of even a recognition of the underlying problems during this spring’s Social Security “reform,” suggest that it will be a long time before citizen indignation will cause radical change to take place. Therefore, if we are to achieve basic changes in the system, we must first prepare the political ground so that the
fiasco of the last 18 months is not repeated.

1. Create a political movement
2. Weaken and isolate your opponents
3. Prepare the public ground
Oh and make it clear that the 1983 Reform was in fact from your perspective a "fiasco"

I would urge anyone really interested in Social Security to read the plan in full. Because you will see that the Economic Right followed it to the hilt, for example you hear clear echoes of Butler and Germanis in every speech Bush has made on this. I am not sure that everyone that draws from the messaging plan created at that 1983 conference is as directly and openly cynical about means and motives as these two. Operationally it doesn't matter much. Butler and Germanis' is a hugely successful marketing scheme and it worked. Brilliantly. The old were reassured, the economic stakeholders were drawn on board, the young were convinced that Social Security just wouldn't be there for them, and all blame conveniently placed on the Boomers. Evil genius to be sure, but marketing genius none the less.

Trust Fund Monthly Reports: Nov update

OAS::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$2.023 trillion // $2.216 trillion //$193 billion// $2.221 trillion// $198 billion

DI::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$214.9 billion//$218.7 billion//$3.8 billion//$221.3 billion// $6.4 billion.
Per IV.A2 the opening balance for DI was $214 billion, projected year end under IC $218.7 billion, under LC $221.3 billion

June 30th/Mid-year: OAS $2.140 trillion// DI $220 billion

Aug 31st/Two-thirds: OAS $2.164 trillion// DI $219 billion

Sept 30th/Q3: OAS $2.177 trillion// DI $219 billion

Oct 30th/Five-sixths: OAS $2.187 trillion// DI $218 billion

Nov 30th/Eleven twelvths: OAS $2.197 trillion//DI $217.5 billion

'Natural Born Citizen' Nonsense: Donofrio v. Wells

Trust Fund Monthly Reports: Oct update

OAS::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$2.023 trillion // $2.216 trillion //$193 billion// $2.221 trillion// $198 billion

DI::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$214.9 billion//$218.7 billion//$3.8 billion//$221.3 billion// $6.4 billion.
Per IV.A2 the opening balance for DI was $214 billion, projected year end under IC $218.7 billion, under LC $221.3 billion

June 30th/Mid-year: OAS $2.140 trillion// DI $220 billion

Aug 31st/Two-thirds: OAS $2.164 trillion// DI $219 billion

Sept 30th/Q3: OAS $2.177 trillion// DI $219 billion

Oct 30th/Five-sixths: OAS $2.187 trillion// DI $218 billion

Galloping Gertie: Tacoma Narrows Bridge Collapse

Trust Fund Monthly Reports: Q3 Update

Sept cash balances for the OAS and DI Trust Funds were just released for September, i.e. Q3. Since Social Security works on a calender year basis and the Federal Budget on a FY basis you could use these numbers to compare directly to OMB projections (and I will) for now here are just some straight numbers.

The web page for all the Trust Fund Reports (including Medicare HI, Highways etc) is Trust Fund Monthly Reports While generally Social Security is reported for convenience as having a single Trust Fund which will go to depletion (or not) in some future year (currently 2041), in reality there are two Trust Funds which are legally distinct and can have different levels of solvency and so different projected depletion dates. The larger by far (about 10 to 1) is the OAS (Old Age Survivors) TF. Its report can be found at OAS Monthly TF Report. Its smaller companion the DI (Disability Insurance) TF can be found at DI Monthly TF Report These can then be cross checked against the relevant tables in the 2008 Report:
Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2003-171 [Amounts in billions] and Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2003-171 [Amounts in billions]
OAS::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$2.023 trillion // $2.216 trillion //$193 billion// $2.221 trillion// $198 billion

DI::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$214.9 billion//$218.7 billion//$3.8 billion//$221.3 billion// $6.4 billion.
Per IV.A2 the opening balance for DI was $214 billion, projected year end under IC $218.7 billion, under LC $221.3 billion

June 30th/Mid-year: OAS $2.140 trillion// DI $220 billion

Aug 31st/Two-thirds: OAS $2.164 trillion// DI $219 billion

Sept 30th/Q3: OAS $2.177 trillion// DI $219 billion

I'll have some more thoughts later and cross-post the expanded post to Angry Bear. But it looks like for the first time since at least 1997 Trust Fund cash balances for the current year will slightly trail projections under Intermediate Cost. Whether this is a 'half full, or half empty' situation depends on how you evaluate 'slightly'.

What do you get for $150,000?

Social Security: Hard Solvency vs Soft Solvency vs Sustainable Solvency

'Sustainable solvency' is a new buzz phrase floating around with 'intergenerational equity' and 'unfunded liability'. But before exposing how the term blurs the real issue we need to examine the concepts of what I call 'hard solvency' vs 'soft solvency'.

'Hard solvency' is used here to describe a Social Security system that can pay 100% of all scheduled benefits over the seventy-five year actuarial window with no changes to current law in the form of tax increases or increases in retirement age. If and when we ever achieve it supporters of Social Security can clearly call 'game over, and we won'. But we are not there, instead the most recent Report would have us being able to pay out full benefits until 2041 and 78% after that. These numbers are subject to change and on balance have been improving (the 2007 Report had a 75% payout at Trust Fund depletion). Still as long as the numbers continue to improve supporters have a good case for pushing a plan consisting of 'Nothing'.

Now 'soft solvency' is conceptually a little more difficult. The current schedule of benefits is set up so that future generations of retirees get a fair share of real wage increases over their working lives, that is it provides improvements in standard of living equivalent to those of people still in the work force. Per Prof. Rosser of JMU this improvement means a benefit in real terms of 160% of what similarly situated retirees get today. And if we use what I call Rosser's Equation we see that 78% of 160% = 125%. Which is to say that after TF depletion future retirees will be able to buy a basket of goods 25% better on average than my mom can today. Now it might be that the future basket will pale somewhat when compared to people still in the workforce or to the basket that retiree was collecting in 2040 but it can hardly be described as some huge crisis. By this standard any time Rosser's equation delivers a result of 100% or better we can say that the overall system is in 'soft solvency'. Another way of describing this would be in terms of 'intergenerational equity'. If the Gen-X retiree of 2041 is still getting a real benefit as good or better than his grandmother did in 2008 there can hardly be any equity issues to resolve.

If we establish soft solvency as a floor and hard solvency as a goal we can say that currently we are 40% of our way home. Whether we really need to take positive steps in the short run to boost the result of Rosser's Equation is a question of policy preference and a balance between current utility of dollars for workers today against future utility for retirees thirty years down the road. And by the way not forgetting that these two populations largely overlap. That is it may be more efficient to hope to close the gap between 125% and 160% by mechanisms outside of Social Security itself.

But in any event both hard and soft solvency look at the outlook from the standpoint of the beneficiary for whom results closer to hard are on balance better than results closer to soft, but not necessarily so much so as to simply accept higher payroll taxes to achieve 'hard', 'soft-plus' might be perfectly acceptable if need be.

When critics of Social Security use language like 'dead broke' and 'bankrupt' all they are really saying is that Social Security is not currently passing the test of hard solvency. Which is fair enough, but it also suggests that any fixes should move the needle away from current levels of soft solvency towards hard, that is getting that 78% number up. Instead they pivot and invoke the concept of 'sustainable solvency'.

'Sustainable solvency' in practice means eliminating 'unfunded liability' which in our terms is the difference between the current projections of soft solvency (78% of 160% = 125%) and hard solvency (100% of 160%), that is it is a gap in benefits. But in their terms 'unfunded liability' is a pure burden on future taxpayers and so seen as a gap in future income vs cost. From that perspective it doesn't matter whether you address the gap on the income side or the cost side, instead the focus is on eliminating it one way or another. What this implicitly does is to kick hard solvency to the curb. Even though in a real sense 'crisis' starts out as a failure to achieve hard solvency, the solutions simply accept that some version of soft solvency is in fact good enough, if that is if it can be used to introduce a system based on Personal Retirement Accounts (PRAs).

So the task for supporters of Social Security as currently configured is to put the privatizers' feet to the fire. Does their solution give a better result then the current level of soft solvency projected? If not why should current workers and near retirees buy in? The system as currently configured is projected to deliver a minimum of soft solvency plus and is trending more and more towards hard solvency. Why should we accept a result that doesn't deliver more solvency at equivalent cost?

Social Security Checkup: Monthly Trust Fund Reports

Near the end of each month the Treasury Dept releases Trust Fund Reports giving balances to the penny for the previous month. By comparing these balances to the projection in the Annual Reports we can get a rough idea of how Social Security is doing year to date. This year's Report was released on October 2. Two caveats:
One, these numbers are not seasonally adjusted and I couldn't tell you the relative impact on total wages of summer employment vs harvest vs holiday. Each are marked by the entry of temporary workers into the system.
Two, Social Security collects FICA on your total check right up to the point you hit the annual cap at which point they stop collecting at all. For example if you have a salary of $200,000 per year you would see full deductions for Jan to Jun, a small deduction for July and nothing thereafter. This should make for the earlier parts of the year seeing relatively higher collections than the latter. But once again I can't quantify the effect.

So this is an imperfect tool. But it is what we have. So lets have some numbers.
The web page for all the Trust Fund Reports (including Medicare HI, Highways etc) is Trust Fund Monthly Reports While generally Social Security is reported for convenience as having a single Trust Fund which will go to depletion (or not) in some future year (currently 2041), in reality there are two Trust Funds which are legally distinct and can have different levels of solvency and so different projected depletion dates. The larger by far (about 10 to 1) is the OAS (Old Age Survivors) TF. Its report can be found at OAS Monthly TF Report. Its smaller companion the DI (Disability Insurance) TF can be found at DI Monthly TF Report These can then be cross checked against the relevant tables in the 2008 Report:
Table IV.A1.—Operations of the OASI Trust Fund, Calendar Years 2003-171 [Amounts in billions] and Table IV.A2.—Operations of the DI Trust Fund, Calendar Years 2003-171 [Amounts in billions]
OAS::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$2.023 trillion // $2.216 trillion //$193 billion// $2.221 trillion// $198 billion

DI::Opening balance//Projected year end balance-Intermediate Cost//Y-O-Y Increase//Year end balance-Low Cost//Y-O-Y increase-Low Cost
$214.9 billion//$218.7 billion//$3.8 billion//$221.3 billion// $6.4 billion.
Per IV.A2 the opening balance for DI was $214 billion, projected year end under IC $218.7 billion, under LC $221.3 billion

June 30th/Mid-year: OAS $2.140 trillion// DI $220 billion

Aug 31st/Two-thirds: OAS $2.164 trillion// DI $219 billion

I had some calculations up but they all got garbled in my head so I deleted them. Bottom line 2008 is shaping up to be a kind of sucky year for Social Security. What was a decent picture for OAS mid-year now is kind of dim, it is unlikely that we will even hit Intermediate Cost projections. What was a really bright picture for DI is now less shiny, from June to August the balance actually shrank, if that continues at the same rate it too will fail to hit IC projections.

Which just goes to show the ultimate truth about Social Security, it prospers in good times, it shares the pain in bad as receipts react to covered employment and real wages. (We have a parallel here with the late seventies, a reform was put in in I believe 1977, it didn't fare well when stagflation simultaneously choked off revenue while boosting cost. The result was a new crisis and a need for a bigger reform in 1983).

Social Security Actuaries score the Warshawsky Plan

(Cross posted at Angry Bear)
Andrew Biggs directs our attention to a new detailed PRA plan by Mark Warshawsky, a member of the Social Security Advisory Board: Notes on SS Reform: Actuaries Score New Reform Proposal The post does not link to the plan itself but instead to a detailed scoring of it by the Office of the Chief Actuary in a memo to be found here (PDF) Estimated Financial Effects of “A Reform Proposal to Make Social Security Financially Sound, Fairer, and More Progressive” by Mark Warshawsky

I just came across this and haven't studied it in detail (and boy is there a bunch of detail) but like any plan it raises some standard questions.

1) Is the rate of return assumed on the PRAs actually reasonable under Intermediate Cost assumptions? (The No Economist Left Behind Challenge).

2) The plan assumes a direct transfer from the General Fund to supplement the PRAs starting in 2012 equivalent to .5% of payroll. Given that one current definition of 'crisis' is 'General Fund transfers starting in 2017 to pay partial interest', adding an additional transfer amount starting even sooner seems to undercut the overall message. How do advocates of the plan address this?

3) The Warshawsky Plan assumes a whole range of cuts and adjustments to retirement age, tax on benefits, and to the benefit formula generally. Each is scored individually as seen in Table A (which follows the actual memo page 14). Any combination of those scored cuts and adjustments that add up to 1.7% of payroll would put current Social Security in Long Range Actuarial Balance. What happens if we just take this cafeteria style?

Provision 3 would modestly raise the cap for a net addition of .15% of payroll. Provision 4 would gradually expose all SS benefits to taxation for an additional .24% of payroll. Provision 6 would bring in all new State and Local government employess for a net addition of .22% of payroll. Provision 7 would increase early and full retirement ages for an addition of .56% of payroll. Provision 8 is a little obscure but it would seem to just reduce lifetime benefits for disabled workers for a net addition of .35% of payroll. For a total combination of 1.52%. I don't really get provision 5 but it would give you an additional .65% of payroll for a new total of guaranteeed tax increases and benefit cuts of 2.17 of payroll. Which is to say .47% more than would be needed to simply fix the program as is.

Now Warshawsky sweetens the plan by reducing payroll tax by 1.0% (presumedly translating to a increase in worker pay of .5%) but offsets that with a new transfer from the General Fund of .5%. Now given the different incidence of Income tax and FICA this means a lower income worker would benefit more by the reduction of FICA by .5% from his first dollar than he would from some theoretical increase in income tax to fund that transfer from the GF. But enough to offset the guaranteed increases proposed?

No one really doubts that you could close the proposed 1.7% gap by some combination of tax increases and benefit cuts and Warshawsky's plan does that up front. But in this scheme where do PRAs come in?


This is where the water gets deep. The proposed FICA tax cuts in provisions 1 & 2 total 1.26% of payroll. Hurrah for workers! But the guaranteed cuts in benefits in provisions 3 to 8 equate to 2.17% of payroll. Which means workers are .91% behind right from the get go. Plus you add in whatever their share of that additional .5% of GF transfer. Then you get the whopper, Warshawsky proposes to change the benefits for everyone by an ADDITIONAL 1.46% of payroll under provision 9, meaning the worker is guaranteed a combination of 2.37% plus of average cuts in the face of a gap now scored at 1.7%. But wait, some of that money was steered into private accounts, surely most people will make up the gap from the equity premium. Won't they?

Well maybe. If the economy grows at a rate that allows for assumed returns and if you are willing to take higher levels of risk some people after 2029 or so get a better deal overall. But not everybody and not anything is guaranteed. The actuaries put it this way

The personal account annuity replaces the smallest portion of the reduction in the scheduled benefit for the married couple with only one earner. The annuity would fall somewhat short of covering the PIA reduction for one-earner couples retiring at 65 in about 2030 or earlier. For single workers and two-earner couples retiring after 2039 with low career earnings, however, this approach would generally be expected to provide an overall increase in retirement income.

Translation: Boomers and most Gen-Xers get less net than they would be leaving the system alone.

This is by no means a complete analysis of the plan, more like a skim, and for those with the chops I encourage you to dig in. But I just don't see how the average worker really benefits under this plan given the risk involved. The benefit cuts are guaranteed, the gains from the PRAs are contingent. Plus we haven't even examined the NELB component, can they really get these projected PRA yields at Intermediate Cost assumptions?

Intergenerational Equity, Unfunded Liability and Selfish Boomers

The newest buzzphrase in the Social Security world is 'Intergenerational Equity'. It is indeed the theme of the new movie IOUSA (to whose webpage I link) which itself is pretty much a documentary of the Concord Coaltion's Fiscal Wake Up Tour. (The fact that Concord was founded by Pete Peterson and rights to distribute the IOUSA film are in the hands of the PGPF: Peter G. Peterson Foundation not being a coincidence at all.)

One of EconomistMom's (who is a/the chief economist at Concord) first posts was entitled The Young People Get It which in turn was plugging the Youth Entitlement Summit 2008 in turn sponsored by Americans for Generational Equity an organization first founded in 2006 and funded by the usual group of conservative foundations.

The idea isn't new exactly, in Googling around today I found this lengthy article from Sept 2003 that probably explains it better than I can (I have only read the first page so far) Generational equity, generational interdependence, and the framing of the debate over social security reform. But before I turn this one over to a discussion of that let me highlight one thing.

If you go to the IOUSA webpage and look for the first part of the description of the overall issue you find it framed as follows (bolding mine) :

I.O.U.S.A. boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. As the Baby Boomer generation prepares to retire, will there even be any Social Security benefits left to collect? Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic proportions.

Sure they go on to talk about military spending and foreign debt but the discussion ALWAYS starts and mostly ends with Social Security and equally ALWAYS with a dig at Baby Boomers.

Having run into this particular article I want to post this now as Part 1 and get some discussion going on the overall topic and then return to the theme of 'Social Security Crisis = Selfish Boomers' in a latter post.

Unfunded Liability Bookended

In the last installment of this Social Security series we kind of dug into some of the details of unfunded liability, what it was and what it wasn't and most importantly where the incidence occured: in the past or in the future. Backwards Transfer is Back. In the course of that I think it became pretty clear that none of that liability really was the consequence of overpayments to what Social Security calls 'past participants' that instead it was all due to a gap between future cost and future income for 'current participants'. But in the course of that discussion the role of 'future participants' fell through the crack when instead the numbers have some surprising implications. But before getting to that I want to back up and consider Unfunded Liability more broadly.

Traditionally Social Security has judged solvency over the short term (10 years) and the long term (75 years). Which seems reasonable enough, 75 years being a period that will capture the retirement years of pretty much any current worker. The metrics of solvency were typically expressed as percentage of payroll or percentage of GDP. In 2003 the Reports introduced new measures of solvency which expressed the gap between income and cost in Present Value dollars over the 75 year window and indeed over the Infinite Future. The first set of numbers just divides this into periods: first 75 years, 75 years to Infinite Future, and total and expresses it in dollars.
2003: $3.5 trillion, $7 trillion, $10.5 trillion
2004: $3.7 trillion, $6.7 trillion, $10.4 trillion
2005: $4.0 trillion, $7.1 trillion, $11.1 trillion
2006: $4.6 trillion, $8.6 trillion, $13.4 trillion
2007: $4.7 trillion, $8.9 trillion, $13.6 trillion
2008: $4.3 trillion, $8.3 trillion, $13.6 trillion
What do these numbers tell us? Well not much really. Generally you would expect the unfunded liability over the first seventy five years to increase simply because of normal population growth, we will have more people overall in year seventy-six than we do in year one, as we drop the latter and add the former we can expect an uptick in liability which right now is about .06% of payroll. The relatively small changes from 2003 to 2004 and 2006 to 2007 can be explained in this way. On the other hand the bigger movements from 2005 to 2006 or 2007 to 2008 turn out on examination to be the result of additional changes in assumptions, in the first case in assumed interest and in the latter changes in assumptions about immigration. But other than that the numbers don't really give us much guidance except perhaps to wonder why the future numbers from year 76 on, representing as they do the Infinite Future are not even larger. To get insight into this we need to move to a more granular analysis. Which comes under the fold.

The Table numbers vary a little bit between reports with what was Tables IV.B7 and IV.B8 in earlier Reports become IV.B6 and IV.7 but all are titled Present Values of OASDI Cost Less Tax Revenue and Unfunded Obligations for Program Participants[Present values as of January 1, 2008; dollar amounts in trillions] People who read the last post may remember that the Trustees break down "Program Participants' in kind of an odd way:
'Past participants' would seem to be that group of people who formerly drew benefits but no longer do. In short the dead.
'Current participants' are defined as everyone fifteen and older and so include all current workers and current retirees.
'Future participants' are defined as everyone under fifteen plus those not yet born. The table assigns dollar figures to these groups as follows:
Row 1 = "Present value of future cost less future taxes for current participants" (Over the next 100 years)
Row 2 = "Less current trust fund"
Row 3 = "Equals unfunded obligation for past and current participants" (Note that in this case the contribution of past participants is likely positive overall)
Row 4 = "Plus present value of cost less tax for future participants for through the infinite future"
Row 5 = "Equals unfunded obligation for all participants through the infinite future"
This result can be expressed as an equation. So what does it look like over the same period as above? (Figures in trillions)
2003: $11.9 - $1.4 = $10.5 -$.0 = $10.5
2004: $12.7 - $1.5 = $11.2 -$.8 = $10.4
2005: $13.7 - $1.7 = $12.0 -$.9 = $11.1
2006: $15.1 - $1.9 = $13.3 + $.1 = $13.4
2007: $16.5 - $2.0 = $14.4 - $.8 = $13.6
2008: $17.4 - $2.2 = $15.2 - $1.5 = $13.6 (rounding is Trustees')

What does this tell us? Well actually quite a bit. The increases in column one are mostly I think to be explained by current demographics, fewer people entering the workforce compared to the large cohort of Boomers leaving. And column two is just showing the effects of a Trust Fund in current surplus with column three being the simple sum.

But it is column four that is most interesting to me. Biggs looks at that and sees future participants paying more in taxes than they are projected to get in benefits. I suggest that is the wrong way to look at it, instead turn it around. In 2003 future participants, then defined as all people born after 1988, taken as a whole could expect their benefits to be fully funded by their taxes. Which is to say that long term Social Security is projected to return to pay-go with a surplus and that all of the problem is in fact confined to the next 100 years.

This has some profound implications for policy. Under current projections Social Security is set to pay out 78% of the scheduled benefit starting in 2041, an amount that will shrink to 75% at the end of the 75 year window. But at that point the very youngest of the 'current participants' of 2008 will be 90 and the impact of that cohort will be fading rapidly and we can reasonably expect it will go to zero right at the end of the hundred year period. Meaning that any fixes we choose to put in over the next couple of decades could be reversed later on with no damage to the long, long term outlook for Social Security. In actual practice there is no way we could limit the impacts of any medium term fixes to the current batch of current participants, some of the earlier cohorts of future participants will no doubt be called to sacrifice along with existing current participants. But there is a light at the end of that long tunnel. And if over the next couple of decades we can beat the current economic projections and so reduce the growth of column one and three we can make that light brighter and brighter.

In the light of the above equations Social Security's unfunded liability is more akin to a fixed term mortgage than an infinite burden. We can and should take some efforts to pay it down quicker while knowing that given regular payments it goes away some time in the next hundred years anyway. As the post title notes, that liability is effectively bookended.

Backwards Transfer is Back: Social Security's Unfunded Liability

(Cross posted at Angry Bear)
Awhile back we had a series of posts at AB about the causality of Social Security's 'unfunded liability' in response to a comment by Jim Glass over at Andrew Bigg's. The first post was XXXVI: $17 Trillion Backwards Transfer. Andrew answered back with Responding to Angry Bear: Where does the $17 trillion deficit come from? to which I replied with XXXVII: Backwards Transfer: Biggs Responds

Well clearly Andrew was not convinced because he is now back with some new charts with More on How Future Deficit is Caused by Over-Generosity to Past Participants. I am still not convinced, he is trying to stick a $15 trillion dollar future tab on past extra benefits collected by a past group that only collected a portion of a total of $999.7 billion paid out by 1980. My response is over there. Feel free to add to it or contrawise explain to me in comments why I just am just not getting it.

If you want to start with the basic numbers they will be found in Table IV.B7.—Present Values of OASDI Cost Less Tax Revenue and Unfunded Obligations for Program Participants[Present values as of January 1, 2008; dollar amounts in trillions] and Table IV.B6.—Unfunded OASDI Obligations for 1935 (Program Inception) Through the Infinite Horizon[Present values as of January 1, 2008; dollar amounts in trillions] along with some definitions in the associated text. For extra credit you might consider what the implications of adopting the new CBO: Updated Long Term Projections for Social Security does in this context. Because by lowering the payroll gap going forward from 1.95% (Trustees 2007) to 1.06% (CBO 2008) you end up with trillions slashed off of future unfunded liability. Since this effect cannot in any way be attributed to new actions by past and mostly dead participants it seems to be hard to attribute those unfunded liability effects back to start with. There seems to be a fatal confusion of past and future going on here.

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.

The Basic Vocabulary & Concepts

Social Security Trustees: that group of appointed officials responsible for top level oversight of Social Security and so the people who sign the Annual Report. They include ex officio: the Secretary of Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. In addition there are two Public Trustees appointed by the President for six year terms. These six also serve as the Trustees of Medicare.

Social Security Administration: that government organization that administers Social Security. For our purposes the most important component of SSA is the Office of the Chief Actuary (OACT) responsible for developing the economic and demographic models underlying the Reports.

OASDI: combined acronym for the two legally separate insurance plans that make up Social Security. OASI (Old Age/Survivors Insurance) provides limited benefits to minor children and their mothers (typically) should the worker die before retirement age and then converts to an inflation adjusted annuity at full retirement age. This is what most people think of as 'Social Security'. DI (Disability Insurance) provides benefits for qualified workers who become disabled in the years between the disability and full retirement age at which point beneficiaries are switched to OASI.

SSI: not in fact an acronym for Social Security itself, instead it stands for Supplementary Security Income, a General Fund program administered by Social Security to provide supplementary benefits for low income disabled, blind or senior workers, many of whom did not work enough quarters to qualify for regular OAS or DI.

Low Cost, Intermediate Cost, High Cost (the 'Three Alternatives'): the Social Security Reports present not one model of future economic and demographic projections, but instead three with Low Cost representing a more optimistic model for long term solvency, High Cost a more pessimistic one, with Intermediate Cost representing a median outlook. There is in fact a good deal of controversy about whether Intermediate Cost (IC) represents a true probabilistic median or whether outcomes closer to Low Cost (LC) should be adopted. The author of this blog is strongly inclined to the later.

Pay-Go: Social Security is structured so that in any given year benefits are paid out of current taxes paid. While this is not notably different from how other government programs are financed or for that matter how most private insurance plans handle benefits and premiums, it has led to amazing confusion, much of it deliberate, due mostly to the failure to understand the fundamental nature of Social Security as an insurance/annuity plan rather than a defined pension plan.

Social Security Trust Funds: perhaps the most misunderstood component of Social Security and one that will be the subject of a number of future posts. Historically the Trust Funds (because there are two: one for OAS and one for DI) have served as reserve funds and the measure of solvency for the system as a whole. They serve to buffer out temporary divergences between Income and Cost and ideally have a balance equal to one year of projected cost. In recent years the Trust Funds have been allowed to baloon to levels well above that in recognition that current demographics project extra strain as Boomers retire and that is was prudent to PARTIALLY mitigate that by piling up extra reserves. But the idea that the Trust Funds were ever thought to 'pre-fund' Boomer retirement is more or less a myth to be explored later on.

Trust Fund Ratio: the Trust Funds are measured in terms of projected costs vs balances as a function of time with a TF ratio of 100 representing one year of reserves and the statuatory target for the Trustees.

Short Term and Long Term Actuarial Balance: the current measures for Social Security solvency. Short Term Actuarial Balance means the Trust Funds projected to have TF ratios above 100 in each of the next 10 years. As of 2008 both Funds were in Short Term Balance. Long Term Actuarial Balance means the Trust Funds projected to have TF ratios above 100 in each of the next 75 years. As of 2008 the combined funds are not in Long Term Balance and are projected to fall out of Short Term Balance in about 2027. However these dates can and do change and the hows and whys of this will be the topic of some future posts.

Social Security Reports: 1941-2010

The debate over Social Security is rather a curious one in that its infrastructure is or should be entirely numeric. We have various dates when Social Security will face changes, in turn those dates are driven by specific economic and demographic assumptions laid out in tables and figures in the Reports of the Trustees of Social Security. Reports dating back to 1941 are freely available at the link in a variety of formats. Recent Reports are available in HTML, PDF, and in paper (with free first class mailing), older Reports in either PDF or HTML depending on date. Yet
oddly you can go through most Social Security comment threads without a single reference to the underlying data. In a later post I will explore why this is, but for now I just want to give links to the various Reports broken out in a way that affords easy access to the key tables and figures, at least for the Reports from 2001-2010.

The links for 2001-2010 go to pages here that in turn allow access to HTML versions of the Reports
2010 Report
2009 Report
2008 Report
2007 Report
2006 Report
2005 Report
2004 Report
2003 Report
2002 Report
2001 Report
In March 2006 the Social Security Administration took down the HTML versions of the 1997-2000 Reports leaving readers to rely on the PDFs. The whys and wherefores of this remain mysterious. In any event the following links are to the PDFs from the SSA.gov website.
2000 Report
1999 Report
1998 Report
1997 Report
1995 and 1996 are available in HTML
1996 Report
1995 Report
Reports from 1942 to 1994 are available in PDF from the following page
1942-1994 Reports

Relaunch of the Bruce Web

The Bruce Web started first and foremost as a place to stash links to the various Reports of the Trustees of Social Security and more particularly to the the various components of the Reports such as the List of Tables and the List of Figures. This allowed me to quickly add links to the relevant data to comments I was posting to other blogs. I also added some textual posts that allowed me to sort out my thinking. But from its inception in Nov 2004 when Bush through down the Social Security guantlet to pretty much now it wasn't really much of a blog in the usual sense. I wasn't posting regularly and didn't have comments enabled, it was really a resource for and by me.

But then came the May 2008 invite to be a front page poster on Social Security at Angry Bear, which in turn raised my profile a bit and drawing what to be polite I will call 'critics'. There is currently some dispute about comment policy at Angry Bear which led me to bring my more partisan and polemic posts back here. I still expect to be posting more objective things at AB, for example releases of various Reports from SSA or CBO. But anyone who wants to get down and dirty will need to travel over here.

Comments policy. This particular version of Blogger does not allow me to edit comments. It does allow me to delete individual comments or entire blog posts and that process is at my complete discretion. I don't intend to delete anything but pure hate speech, on the other hand if you don't like my editorial policy you can start your own free blog in like ten seconds.

I expect to be putting up a new post every few days, more often if people start leaving comments. I think I will start by essentially recapitulating the blog, that is rather than update and reorganize past posts just more or less start from scratch.

Rounding out the Angry Bear Series on Social Security

My last two front page Social Security Posts on Angry Bear were:
CBO: Updated Long Term Projections for Social Security
Social Security 2027: A date for Action?

Over that same span we saw Social Security posts by Jack, coberly and pgl, so clearly the topic itself is in good hands. On the other hand for a variety of reasons I became sort of a lightning rod in a way that made the comment threads on my posts unattractive for non-trollish commenters. Additionally there was some concern about the ways I felt I needed to push back on the trolls who did comment.

So basically I am declaring victory over there and bringing it back here and eventually to my new blog (supposedly) under development. I still expect to be commenting extensively at AB but maybe without the restraints that come with being a front pager.

Anyway I hope to boost the content level here. Because while the economic argument over Social Security solvency is by and large over the politics resulting from that are just beginning to unfold. Fully expect a regular opening by me of a can of FDR WhoopAss on the privatizers.

The Angry Bear Social Security Series

Social Security Posts on Angry Bear Soc Sec 0-23 (starting May 2008)

More Social Security Posts from Angry Bear Soc Sec 24-44

Even More Posts from AB: late Aug to Dec 2008

January 2009: a Flurry of Social Security Posts at AB

Angry Bear Social Security Blogging: Spring 2009

AB Social Security Blogging: Northwest Plan Edition

Fall 2009-Spring 2010

Social Security: Where's the Report?/Catfood Commission Ed

Fall 2010 Social Security Posts

Unfunded Liability (Tables IV.B6 & IV.B7)

More Social Security Posts from Angry Bear

Rather than risk choking Blogger on too many links, I will start a new list here. The first twenty three can be found at Social Security Posts on Angry Bear
XXIV: Treasury's Social Security Issue Brief no. 5
XXV: Advisor Jason Furman on Obama's Plan
XXVI: Social Security Low Cost and the 100/100 Target
XXVII: Robert Myers and Prefunding Social Security
XXVIII: Infrastructure; or a New Direction for the Trust Funds
XXIX: What Does Patriotism have to do with Social Security 'Crisis'
XXX: 2 Questions not Asked in 2000, or 2004 Either
XXXI: What is Title 1?
XXXII: Means Testing as a Trojan Horse
XXXIII: Medicare Finance
XXXIV: Open Thread/Assignment Desk
XXXV: Monthly Trust Fund Reports
XXXVI: $17 Trillion Backwards Transfer
XXXVII: Backwards Transfers: Biggs Responds
XXXVIII: Financing Shortfall
XXXIX: Pay-Go and Unfunded Liabilities
XL: Double Books and the 'No Economist Left Behind' challenge
XLI: Why Not Assume Low Cost?
XLII: Unfunded Obligation and Transition Cost
XLIII: Solvency: Demographics or Productivity
XLIV: 'We Can't Grow Our Way Out'

My New (and as yet contentless) web site and blog

I have been subscribing for three years to a web hosting service that I never got around to using. Well as of today the beginnings of a new site are up at Unvarnished Webb. For now I see this as being Webb's everything BUT Social Security website and blog.

As of now I just threw up some bare bio info (in case any classmates or ex-coworkers want to track me down) and a picture of my mug as well as one of my brother. Later I hope to get some of my old graduate school papers reformatted and maybe build a geneology page. But as for now this is mostly a notice to myself to not drop the ball and get going.

Update. Just got the blog itself to upload properly. It is called Caught in the Web