Do We Have To Have an Annual Report Every Year?

Tue, 13 Jul 2010 18:56:53 +0000

Jagadeesh Gokhale and Mark Warshawsky speculate on the reasons why this year's Social Security Trustees Report has been delayed from its usual spring release:

Given the lead times necessary to prepare the trustees' report, it is highly likely that a final draft report was readied by early March to meet the April 1 legal deadline. But the trustees' decision to table that report was clearly unopposed because Social Security currently has no confirmed public trustees. All of its current trustees are ex officio members of the Obama administration, leaving no one to register concern that delay would prevent the public from knowing how rapidly Social Security's finances are deteriorating.

The excuse for the delay is to take account of the effects of the new health care laws, passed at the end of March, on Social Security's finances--with the expectation that ObamaCare will restore a semblance of financial viability to the program. The new health care laws create the possibility of offsetting the recession-induced decline in payroll tax revenues if many employers substitute higher taxable wages in place of health insurance coverage for their employees.

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The correct procedure under such circumstances would be to issue the report on time (or in this case, immediately) excluding the effects of ObamaCare and reissue an update when revised estimates become available. But that would reveal too much information--for example, someone could calculate the effective Social Security payroll tax increases on middle-income families levied under the new health care laws--and that would be poor politics.

What will the public eventually learn once the report is released? Only the effect of official assumptions about how ObamaCare--combined with the many other economic and technical changes that occur every year--will affect Social Security. Whatever those assumptions, the system finances excluding those effects won't be made public. There will be strong pressure to make optimistic assumptions this year. If they turn out to be incorrect, subsequent years' estimates of Social Security's finances would be gradually adjusted and no one would be any the wiser.

 I think theirs is the right course of action.  The Republicans ought to be making an issue of this.