Since I noticed that payments from the Social Security Disability Trust Fund have reached near stasis, I've been wondering about that projection from Social Security's Chief Actuary that the Disability Trust Fund will be exhausted in 2016. If you look at that projection, one of the first things you notice is that there isn't just one prediction. There are three. The one commonly cited is the "intermediate" prediction that the Disability Trust Fund will run out of money in 2016. Another is the "high cost" or pessimistic prediction that the Disability Trust Fund will run out of money in 2015. Another is the "low cost" or optimistic prediction that the Disability Trust Fund will not run out of money. That's right. The optimistic projection is that even though the Disability Trust Fund is losing money now, that this situation will turn around before the Disability Trust Fund ever runs out of money.
How do the three projections look given the actual results so far in 2013? Let's compare:
2013 Actual -- through May:
Income 2013: $48.1 billion, an increase of 4.7% over the equivalent time period last year
Outgo: $58.4 billion, an increase of 3.0% over the equivalent time period last year
Pessimistic Projection:
Income total for 2013: $110.2 billion, an increase of 1.0% over 2012
Outgo total for 2013: $147.0 billion, an increase of 4.8% over 2012
Intermediate Projection:
Income total for 2013:$111.4 billion, an increase of 2.1% over 2012
Outgo total for 2013: $144.8 billion, an increase of 3.2% over 2012
Optimistic Projection:
Income total for 2013: $112.5 billion, an increase of 3.1% over 2012
Outgo total for 2013: $142.8 billion, an increase of 1.8% over 2012
Thus, the increase in income so far in 2013 is much greater than even the optimistic projection while the outgo is a little better than the intermediate projection, suggesting that the optimistic projection would probably be the closest of the three projections to what has happened so far in 2013. Even that may understate how good these numbers are. I was comparing the first five months of 2012 with the first five months of 2013 to get that 3.0% increase in actual benefit payments but if you look at the last nine months, there's actually been a 0.6% decrease in disability payments!
There's another, simpler way of looking at this which confirms the trend line shown above. The pessimistic projection was that the Disability Trust Fund would go down by an average of $3.1 billion per month in 2013, the intermediate projection was $2.8 billion per month and the optimistic projection was $2.5 billion per month. So far in 2013, the Disability Trust Fund has gone down by an average of $2.3 billion per month, which is significantly better than even the most optimistic projection of the Chief Actuary.
Of course, what happens over the course of five months won't necessarily tell us what will happen over the course of the next few years but unless you're expecting a new economic downturn or a big increase in disability claims, things are looking pretty good for the Disability Trust Fund at the moment. If you're a Republican don't get excited about the prospect of using the exhaustion of the Disability Trust Fund as a means of forcing major cuts in Social Security disability benefits. That may never happen. If it does happen, it probably won't happen until after the 2016 election and that's a long way off.
How do the three projections look given the actual results so far in 2013? Let's compare:
2013 Actual -- through May:
Income 2013: $48.1 billion, an increase of 4.7% over the equivalent time period last year
Outgo: $58.4 billion, an increase of 3.0% over the equivalent time period last year
Pessimistic Projection:
Income total for 2013: $110.2 billion, an increase of 1.0% over 2012
Outgo total for 2013: $147.0 billion, an increase of 4.8% over 2012
Intermediate Projection:
Income total for 2013:$111.4 billion, an increase of 2.1% over 2012
Outgo total for 2013: $144.8 billion, an increase of 3.2% over 2012
Optimistic Projection:
Income total for 2013: $112.5 billion, an increase of 3.1% over 2012
Outgo total for 2013: $142.8 billion, an increase of 1.8% over 2012
Thus, the increase in income so far in 2013 is much greater than even the optimistic projection while the outgo is a little better than the intermediate projection, suggesting that the optimistic projection would probably be the closest of the three projections to what has happened so far in 2013. Even that may understate how good these numbers are. I was comparing the first five months of 2012 with the first five months of 2013 to get that 3.0% increase in actual benefit payments but if you look at the last nine months, there's actually been a 0.6% decrease in disability payments!
There's another, simpler way of looking at this which confirms the trend line shown above. The pessimistic projection was that the Disability Trust Fund would go down by an average of $3.1 billion per month in 2013, the intermediate projection was $2.8 billion per month and the optimistic projection was $2.5 billion per month. So far in 2013, the Disability Trust Fund has gone down by an average of $2.3 billion per month, which is significantly better than even the most optimistic projection of the Chief Actuary.
Of course, what happens over the course of five months won't necessarily tell us what will happen over the course of the next few years but unless you're expecting a new economic downturn or a big increase in disability claims, things are looking pretty good for the Disability Trust Fund at the moment. If you're a Republican don't get excited about the prospect of using the exhaustion of the Disability Trust Fund as a means of forcing major cuts in Social Security disability benefits. That may never happen. If it does happen, it probably won't happen until after the 2016 election and that's a long way off.
5 comments:
It's good that the find is projecting well now, even more reason to reform some of the policies so that hopefully the next "downturn" won't hurt as much.
Hope for the best, prepare for the worst.
So the good news is that the trust fund may never run out of money.
The bad news is that only from an accounting perspective, it may never run out of money.
From a cash perspective, there is no money in the trust fund, so what, exactly, would it be running out of?
Don Levit
I wonder if Don would be surprised to learn that every cent he has on deposit at his bank/credit union is not actually present at any given moment in some account with his name on it, never to be touched by anyone but him...Cash is fungible, the U.S. Gov't budget is mammoth, and accounting for something so big/complex is exceedingly complicated. FICA money doesn't (and shouldn't) get collected and sit--physically sit--in its own special account. That may be how you and I budget and account our savings/income/debt, but that isn't how it's done by even small businesses, let alone something the size of the federal government.
Please stop using your personal financial practices as a benchmark for what the U.S. Gov't should be doing accounting-wise. Maybe then you wouldn't speak about normal accounting practices as if you had discovered some perverse and unusual goings on.
Anonymous at 11:06
Let's cut to the chase.
When trust fund Treasuries are redeemed, what effect does this "reserve fund" have on the budget?
What effect would using proceeds from an insurer's "reserve fund" have on its budget?
Don Levit
The truth of the matter is that disability MIGHT still face cutbacks in 2016. No one can tell what will happen in the future, so cutbacks are still a very real possibly. I worked my entire life to be able to get monthly disability checks and I am in poor health and that is why I need them.
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