More on the Trustees Report

Thu, 27 Mar 2008 18:59:52 +0000

Brad DeLong linked to my post on Social Security yesterday, which set off the usual round of criticisms of a non-liberal's views of Social Security and its reform in the comment section. Here's a summary and the next installment in the conversation.

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1) Isn't the 3.2% projection good news?

As Bruce Webb points out, the projected imbalance of 3.2% is down from earlier years. Social Security's estimated financing gap has been falling year-to-year as projections are revised due to updated data or methodology. That's particularly good news for a small-government advocate like me. It means that the fix can be accomplished with smaller benefit cuts or smaller tax increases relative to current law.

2) Why not quote the 75-year gap of 1.7% rather than the Infinite Horizon gap of 3.2%?

Again, in reference to a comment by Bruce Webb, I think it should be those who truncate the horizon to 75 years who have to explain their reasoning. Truncating the horizon at 75 years ignores the persistent deficits after the 75th year. Why do that? Why count the taxes that a worker pays during that period but not the benefits that worker will receive in retirement after that period? We should choose a measure of the system's solvency that is as comprehensive as possible. That the uncertainty in the projection increases with the horizon is not a reason to treat the projected deficits as if they are zero.

3) Social Security is only one part of fiscal policy, and not necessarily the one in the most dire straits. Why focus on it?

I focus on Social Security because the fiscal imbalances in the long-term projections have been apparent for decades. Critically, I do not focus on Social Security to the exclusion of other aspects of fiscal policy. Nor do I dismiss the implications of reform on the intra-generational distribution of taxes and benefits in the population. Here's a blog post from about a year ago that summarizes my views.