'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