Green Room

Graphic of the day: Thanks to government stupidity, Social Security is in worse shape than thought

posted at 1:02 pm on January 6, 2013 by

It’s not just that life expectancies are increasing while the number of workers is declining. Turns out the government’s been relying on outmoded actuarial assumptions that fail to accurately estimate when the, ahem, “trust fund” will run out. It’s one thing to run a Ponzi scheme, it’s another to muck up the math so badly that the scheme goes bust before you were expecting it. Read it and weep.

Those facts are widely known. What’s not is that the Social Security Administration underestimates how long Americans will live and how much the trust funds will need to pay out — to the tune of $800 billion by 2031, more than the current annual defense budget — and that the trust funds will run out, if nothing is done, two years earlier than the government has predicted.

We reached these conclusions, and presented them in an article in the journal Demography, after finding that the government’s methods for forecasting Americans’ longevity were outdated and omitted crucial health and demographic factors. Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for. (While obesity has rapidly increased, it is not likely, at this point, to offset these public health and medical successes.) More retirees will receive benefits for longer than predicted, supported by the payroll taxes of relatively fewer working adults than projected.

Remarkably, since Social Security was created in 1935, the government’s forecasting methods have barely changed, even as a revolution in big data and statistics has transformed everything from baseball to retailing.

The fact that Obama’s campaign team ran one of the most successful, sophisticated data-crunching operations in modern history while the federal government’s retirement caretakers were running with numbers like this is a spectacular lesson on incentives and self-interest. If his reelection depended upon making Social Security solvent, Team Hopenchange would probably have the program running a surplus by now.

Meanwhile, as Tom Maguire notes, an $800 billion shortfall by 2031 amounts to a $40 billion deficit each year. The GOP’s aborted attempt to amend the fiscal-cliff deal to add spending cuts would have produced only $30 billion in savings annually over the last decade. So meager is Washington’s will to reduce outlays that even an “ambitious” proposal can get instantly swallowed up by a mathematical tweak to our entitlement leviathan.

Take three minutes to look over the NYT’s graphic on why the feds’ current Social Security projections are so screwy. Do not miss number 4.

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Default, or bust!

tom daschle concerned on January 6, 2013 at 1:08 PM

but but Dingy Harry Reid says Social Security isn’t a problem at all.

gsherin on January 6, 2013 at 1:13 PM

So the New York Times admits we have a massive entitlement problem?

steebo77 on January 6, 2013 at 1:24 PM

Obamacare and the Death Panels IPAB will take care of the problem.

PattyJ on January 6, 2013 at 1:30 PM

Fortunately, mortality will soar under ObamaCare.

Attila (Pillage Idiot) on January 6, 2013 at 1:30 PM

Obamacare and the Death Panels IPAB will take care of the problem.

PattyJ on January 6, 2013 at 1:30 PM

Great minds, etc.

Attila (Pillage Idiot) on January 6, 2013 at 1:30 PM

Obamacare and the Death Panels IPAB will take care of the problem.

PattyJ on January 6, 2013 at 1:30 PM

Oh PattyJ – you stole my thunder!!

My thoughts exactly. People living to a ripe old age? – Not a problem, just deny them the healthcare they need. Soon, the government will introduce the US version of the Liverpool Care Pathway – after all, it’s so caring.

Hill60 on January 6, 2013 at 1:39 PM

It’s not just the miscalcuation on life expectancy. It’s also the miscalculation on birth rates.

In the 1930s, people had much larger families, so more workers entered the workforce to keep the Ponzi scheme going.

Now, given contraceptives and abortion, there are fewer and fewer young workers to support the aged. (Japan is finding this out earlier than we are.)

Wethal on January 6, 2013 at 1:52 PM

I had a liberal argue with me on Twitter that government “invests” (his words, not mine) in people better than the private sector.

Yeah.

Had someone in the private sector done what government has done to Social Security s/he would be in prison. Probably for life. For financial crimes.

englishqueen01 on January 6, 2013 at 2:10 PM

Fact: There were 159.4 workers for each Social Security recipient in 1940.

Fact: There were 16.5 workers for each Social Security recipient in 1950.

Fact: There were 5.1 workers for each Social Security recipient in 1960.

Fact: There were 3.7 workers for each Social Security recipient in 1970.

Fact: There were 3.2 workers for each Social Security recipient in 1980.

Fact: There were 3.4 workers for each Social Security recipient in 1990.

Fact: There were 3.4 workers for each Social Security recipient in 2000.

Fact: There were 3.3 workers for each Social Security recipient in 2005.

Fact: There were 1.75 workers for each Social Security recipient in 2010.

“Lies” About Social Security and Medicare Pandering Politicians Never Told You

M2RB: Bob Dylan, live

Resist We Much on January 6, 2013 at 2:23 PM

Had someone in the private sector done what government has done to Social Security s/he would be in prison. Probably for life. For financial crimes AGAINST HUMANITY.

englishqueen01 on January 6, 2013 at 2:10 PM

;-)

Resist We Much on January 6, 2013 at 2:24 PM

Thats what comes from 40 SS payout hikes, with recipients getting 1200% return in 1980, still getting 250% return on contributions as late as 2010…..all when the return on fictisous lock box funds in the 1% range when a minimum of 8% was needed…..

Left wing math…..based on emotions as always.

sbark on January 6, 2013 at 2:33 PM

Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for.

Obamacare will eliminate these improvements, and be deemed a success, since it will “help” the “trust fund” last longer by reducing the number of pesky seniors that will be around to collect their benefits. Isn’t it wonderful when a plan comes together?

djtnt on January 6, 2013 at 2:39 PM

One problem we are having is that while people’s bodies are living longer, raising the retirement age isn’t really going to help. People are living with things like Alzheimer’s and various other physical problems that make it difficult for them to work in a regular job but they can putter around the house just fine.

One thing we ARE seeing is that increases in minimum wages are locking out young people from entry level jobs and we are seeing these jobs increasingly filled by seniors who have work experience. Notice how many seniors we see working in fast food and other lower end jobs today. My city recently passed a $10/hr minimum wage. Are you going to hire a kid who has never held a job in their life and try to teach them the importance of coming to work on time and sober for that kind of money or hire a senior who wants that job that you can rely on?

crosspatch on January 6, 2013 at 2:41 PM

Every president from Truman on had only to keep the lies alive until his successor came along, safe in the knowledge it didn’t fail on his watch. Time to radically alter the scheme

LizardLips on January 6, 2013 at 2:43 PM

“Just print more money…

… Geez, do I have to do everything around here?” - The Preezy

Seven Percent Solution on January 6, 2013 at 2:54 PM

One problem we are having is that while people’s bodies are living longer, raising the retirement age isn’t really going to help. People are living with things like Alzheimer’s and various other physical problems that make it difficult for them to work in a regular job but they can putter around the house just fine.

crosspatch on January 6, 2013 at 2:41 PM

If social security had purely contingent on disability instead of an arbitrary age, then it wouldn’t have developed into to decades-long payed vacation it is today (though the bureaucracy cost of that would be beyond my ability to conceive).
My mother, who has been looking for a job for two years but hasn’t accepted one because they all pay less than her unemployment benefits, is planning to jump to SS early to pay her bills.

Seniors may assume that they have “earned” their endless vacation after 65, but we really can’t afford it.

Count to 10 on January 6, 2013 at 3:28 PM

One thing we ARE seeing is that increases in minimum wages are locking out young people from entry level jobs and we are seeing these jobs increasingly filled by seniors who have work experience. Notice how many seniors we see working in fast food and other lower end jobs today. My city recently passed a $10/hr minimum wage. Are you going to hire a kid who has never held a job in their life and try to teach them the importance of coming to work on time and sober for that kind of money or hire a senior who wants that job that you can rely on?crosspatch on January 6, 2013 at 2:41 PM

Not only that, the longer it takes for the young to enter the workforce, the longer it takes for them to increase their earning power — less revenue for SS and taxes in general. In the decades to come given the trajectory, not as many will ever reach peak earnings compared to their parents and grandparents. That’s the real crime – robbing our children’s prosperity to fuel our current unearned spending.

AH_C on January 6, 2013 at 3:40 PM

I feel bad for anyone planning to be 55-59 years old in 2030. Our new marxist overlords appear to be planning to murder everyone in that age group that year. Are there more conservatives in that demographic?

SteveThomas on January 6, 2013 at 3:45 PM

I think we should encourage more smoking: repeal the cigarette taxes and give tax credits to those who take the habit up.

Tzetzes on January 6, 2013 at 4:41 PM

Thanks to government stupidity

Gee, AP. I figure that particular dependent clause could begin 16 trillion sentences, or so.

John the Libertarian on January 6, 2013 at 4:58 PM

Can we once and for all exert a total ban on politicians, bureaucrats, and anyone else for that matter, talking about government “trust funds”. These creations are purely mythological. They do not exist, except as bookkeeping entries. There is no money there. The Social Security “trust fund” consists of “special” Treasury bonds. When payroll taxes don’t cover the outgoing checks, as has been going on for several years already, the SSA calls over to Treasury and says “hey we need to cash out a bunch of those T-bills”. The problem being the Treasury doesn’t have any cash to send them. As with every other creditor we have, they need to go out and sell more worthless T-bills to a bunch of other pigeons, nowadays it’s mostly to the Fed, in order to keep the Ponzi scheme from crashing. Sooner or later the world will wake up to the fact that we are hitting them up for a fresh loan so that we can have enough cash to make the interest payments on all the old loans they gave us. I’d put my money, if I had any, on Sooner

djaces on January 6, 2013 at 5:04 PM

It was all based on a lie, right from the get go:

Ms. Ida Mae Fuller, a retired legal secretary from Ludlow, received the first Social Security check issued. She worked her entire life and paid a total of $24.75 in Social Security taxes during the two years she contributed to the Social Security system. When she retired in 1939 the Social Security tax rate was 2%. She received her first check on January 31, 1940, for $22.54.

She didn’t do too badly under Social Security, living to the ripe old age of 100 when she died in 1975. She collected a total of $25,000 – 1,000 times more than she contributed.

Fallon on January 6, 2013 at 5:28 PM

Fact: There were 1.75 workers for each Social Security recipient in 2010.

Resist We Much on January 6, 2013 at 2:23 PM

Wouldn’t it be easier and cheaper to have them just move in with each of us?

Fallon on January 6, 2013 at 5:29 PM

The solution is simple…soylent green!

AUINSC on January 6, 2013 at 5:49 PM

Obamacare and the Death Panels IPAB will take care of the problem.

PattyJ on January 6, 2013 at 1:30 PM

Fortunately, mortality will soar under ObamaCare.

Attila (Pillage Idiot) on January 6, 2013 at 1:30 PM

Assuming point 4 AP pointed out isn’t “flawed” in some way, Renewal is on its way.

To the Carrousel!

Steve Eggleston on January 6, 2013 at 6:44 PM

So the New York Times admits we have a massive entitlement problem?

steebo77 on January 6, 2013 at 1:24 PM

Independently-written op-ed, steebo.

Steve Eggleston on January 6, 2013 at 6:49 PM

As for the underlying thesis, I’m nowhere near well-enoughed versed in demographics trends to properly evaluate the Harvard crew’s version versus the SocSecurity OACT version (a little help here, Charles Blahous?). However, I will note that it appears that the Harvard crew compared against the pre-2011 OACT demographic assumptions, and that the post-2011 assumptions are closer to, but not exactly, Harvard’s.

I will also note that the Trustees have missed the last several years rather badly, though they’re pretty close on the 2012 OASI shortfall.

Steve Eggleston on January 6, 2013 at 6:58 PM

The problem has been known for 66 years when the Baby Boom began that the pig-in-the-python generation (as one sociologist described the situation of a larger-than-typical birth rate) came into being. Schools were over-croweded and getting into college was a scramble for the fittest. Flooding the job market at one time and now leaving it are more problems that the nitwits never paid attention to.

The article was written by a demographic sociologist who knocks the work of actuaries. Duh, actuaries pay attention to death rate statistics and the health issues that affect them. That is how life insurance is figured out.

Here is a kicker sentence lifted from this piece:

We learned that the methods are antiquated, subjective and needlessly complicated — and, as a result, are prone to error and to potential interference from political appointees.

Which party has been in denial over the problem for decades? One guess.

onlineanalyst on January 6, 2013 at 7:39 PM

Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for. (While obesity has rapidly increased, it is not likely, at this point, to offset these public health and medical successes.)

Start handing out coupons for Big Mac’s and cigarettes with every government check?

sharrukin on January 6, 2013 at 7:58 PM

Reid and Pelose are proven liars again. And congress as a whole is incompetent and ought to be run out of the capitol, tarred and feathered and on a rail.

ultracon on January 6, 2013 at 7:59 PM

You youngsters need to find a second job so I can continue in the lifestyle to which I have become accustomed.

davidk on January 6, 2013 at 8:41 PM

when the Baby Boom began that the pig-in-the-python generation

onlineanalyst on January 6, 2013 at 7:39 PM

Can you squeal like a pig?

davidk on January 6, 2013 at 8:44 PM

I feel bad for anyone planning to be 55-59 years old in 2030. Our new marxist overlords appear to be planning to murder everyone in that age group that year. Are there more conservatives in that demographic?

SteveThomas on January 6, 2013 at 3:45 PM

Hey, think positively – perhaps it’s “The Rapture”.

mdenis39 on January 6, 2013 at 11:09 PM

I feel bad for anyone planning to be 55-59 years old in 2030. Our new marxist overlords appear to be planning to murder everyone in that age group that year. Are there more conservatives in that demographic?

SteveThomas on January 6, 2013 at 3:45 PM

That’s my demographic. Coincidence?

Steve Eggleston on January 7, 2013 at 7:20 AM

Ponzi Schemes do not become more solvent over time no matter who runs them… including the US federal government.

There are a few of these schemes that people adore, and they are all heading towards insolvency on a massive scale. They cannot be saved because of demographics and the very nature of the schemes involved. Just because it makes you feel good, safe and secure doesn’t mean that you will actually have a good end, be safer and more secure… in fact once the money runs out and the scheme is exposed, you might as well wear a sign saying: ‘I AM THE MARK, FOOL ME, PLEASE’

ajacksonian on January 7, 2013 at 7:32 AM

(While obesity has rapidly increased, it is not likely, at this point, to offset these public health and medical successes.)

Interesting timing, Our Absurd Fear of Fat:

But a new meta-analysis of the relationship between weight and mortality risk, involving nearly three million subjects from more than a dozen countries, illustrates just how exaggerated and unscientific that claim is.

Fallon on January 7, 2013 at 9:06 AM

It was my understanding that there would be no math.

/Democrats

Good Lt on January 7, 2013 at 9:11 AM

Had someone in the private sector done what government has done to Social Security s/he would be in prison. Probably for life. For financial crimes.

englishqueen01 on January 6, 2013 at 2:10 PM

Our masters break all kinds of laws that would have a private citizen bunking with Bubba.

Because they’re worth it.

CorporatePiggy on January 7, 2013 at 9:38 AM

Lost in the whole discussion and article is that the “trust fund” is not cash. It is ENTIRELY made up of treasury IOU’s, which Treasury has to turn around and sell more debt to pay. At some point on our current trajectory we will not be able to issue more debt.

Until we get spending and revenue to the point that we are running a surplus and start actually paying down our debt, the biggest threat to SS is not the trust fund running out, it’s our inability to borrow anymore to meet the IOU’s in that “fund”.

Forget 2031. If we continue to run deficits even half the current size the whole freakin’ country will be insolvent, and SS will be only one of the victims.

PastorJon on January 7, 2013 at 9:45 AM

So the New York Times admits we have a massive entitlement problem?

steebo77 on January 6, 2013 at 1:24 PM

Now that the election is over! We’re going to get article after article in liberal newspapers, this year only so as not to help the GOP in 2014, basically saying that the Tea Party is right, without giving them credit.

Then, to follow it up, in 2014 the stories will start about how the GOP has failed to allow these things to get fixed by our glorious Democrap proletariat.

PastorJon on January 7, 2013 at 9:56 AM

As I mention to my liberal relatives, if SS isn’t a pyramid scheme, why shouldn’t I have the option of taking my SS tax payments and putting it into my 401K? (And the same thing with Medicare and an HSA account.)

You should see the stunned look on their faces…

dominigan on January 7, 2013 at 10:27 AM

No one under the age of 70 should get a check from Social Security. Start there, it’s that simple. We need a moratorium on giving social security/federal money to a federal disability program that is RIFE with abuse. No new Customers. If you are disabled, that is not elderly, you are not old enough to collect your pension.

65 is not elderly for people who did not already have health problems. The age for EVERY government retirement plan should be raised to 70 years old, except for those which contain ONLY the employees own money, and have real cash vested.

Any person who completes their government service at 55 in a local, state or federal job, and the military, should be reassured that their money will be their for them when they are elderly. You can’t take retirement money at 55 anymore. That is not an Old Age Pension.

Mitt Romney and Paul Ryan ran on entitlement reform, and were not elected by 5%-age points. Will the media ignore the strife as people see their SS contributions jump back up to Democrat-Congress set levels? Somehow they will have to blame it on George Bush, and I am waiting to see how…

Fleuries on January 7, 2013 at 10:39 AM

In the first presidential debate, Mr. Obama described Social Security as “structurally sound,” and Mitt Romney said that “neither the president nor I are proposing any changes” to the program. It was a rare issue on which both men agreed — and both were utterly wrong.

#1: Riiiiiiiiight

#2: where was this reporting in, oh, say October?

besser tot als rot on January 7, 2013 at 12:37 PM

government stupidity

That statement is redundant.

woodNfish on January 7, 2013 at 2:55 PM

Graphic item #4 states the current trust fund balance is $2.678 trillion.
Yep, all that money is just sittin’ in some account somewhere, unused and unusable for any other purpose…

HAHAHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAAAH!

(Hack… wheeze…) Sorry, just had to get that out of my system…

Marcola on January 7, 2013 at 5:52 PM

Start handing out coupons for Big Mac’s and cigarettes with every government check?
sharrukin on January 6, 2013 at 7:58 PM

ObamaPhones have a microwave generator aimed directly at the cerebral cortex. It’s low-power; takes about 20 years to cause a fatal stroke or hemorrhage.

Marcola on January 7, 2013 at 5:57 PM