I’ve never understood why so many people think the Social Security actuaries have always been innumerate morons, but perhaps that’s just a result of the decades of propaganda about government workers. The fact is that from the very beginning the SSA accurately predicted the rise in life expectancy and population growth. The baby boom was unanticipated, but once it happened they were not so stupid that they didn’t take into account that bulge in the population. And they have always factored int the obvious fact that the worker to retiree ratio would shrink once everyone came into the system. But that doesn’t stop everyone from acting as if they have no idea how to do their jobs and have consistently missed the mark, causing the system to nearly implode until someone comes along as saves it by cutting benefits and raising the retirement age.
The most recent attack was this recent NY Times op-ed suggesting that they had made a horrible mistake and that the system was actually going broke much sooner than expected. I’m sure Pete Peterson had an orgasm. But today the Social Security Administration issued a little report that basically rips that piece to shreds:
In their op-ed, King and Soneji state that the combined Social Security Trust Funds will deplete their reserves in 2031, which is two years earlier than shown in the 2012 Trustees Report under intermediate assumptions. They assert that this difference is attributable to the Office of the Chief Actuary’s use of mortality projection methods that “were outdated and omitted crucial health and demographic factors.” These are serious charges and deserve exploration.
The essence of King and Soneji’s assertion is their misimpression that the Office of the Chief Actuary’s mortality projection methods do not reflect the effects of smoking and obesity. In fact, both smoking and obesity are already reflected in historical data and the actuaries’ projection methods. King and Soneji develop a projection they refer to as “Crazy Death Rates” by, in some way, adding their estimated effects for smoking and obesity to the actuaries’ projections. This addition therefore “double counts” the effects of smoking and obesity and yields truly “crazy” results. Panel 4 below shows both
these “crazy” results and King and Soneji’s own projections, which they call “better forecasts.” This panel is copied directly from material accompanying the op-ed.
The comparison provided in Panel 4 is highly misleading and inaccurate. For example:
- The left panel of mortality projections bears no resemblance to the mortality projections the actuaries developed for the 2012 or prior Trustees Reports.
- The label for the data values is “chance of death in one year.” However, the values presented are probabilities of death in five years.
- Values shown for historical years of “better forecasts” do not agree with actual historical data.
These people are very good at their jobs. And none of the problems that confront Social Security over the course of the next quarter century have been unanticipated. The problem isn’t the Social Security administration. It’s the political system which insists on pretending that the system is always in crisis and fighting over how much and who to cut. If it wasn’t such an ideological battle ground, we could deal intelligently with whatever problems arise. For instance, the one facing the brief period of anticipated shortfall 25 years from now could easily be dealt with by a hike in the payroll tax cap on earnings.