From a Social Security press release (emphasis added):
By the way, back when the Disability Trust Fund balance was going down, I kept saying that it was coming closer and closer to being in balance, that it might survive even without a legislative fix. We had a legislative fix to temporarily shunt more money into the Disability Trust Fund but I still wonder whether that was necessary. Would the Disability Trust Fund have ever run out of money if nothing had been done?
The Social Security Board of Trustees today released its annual report on the long-term financial status of the Social Security Trust Funds. The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to become depleted in 2035, one year later than projected last year, with 80 percent of benefits payable at that time.
The OASI Trust Fund is projected to become depleted in 2034, the same as last year’s estimate, with 77 percent of benefits payable at that time. The DI Trust Fund is estimated to become depleted in 2052, extended 20 years from last year’s estimate of 2032, with 91 percent of benefits still payable. ...
View the 2019 Trustees Report at www.socialsecurity.gov/OACT/TR/2019/.The change in the estimate for the Disability Trust Fund must be the most massive correction every made by the Chief Actuary in Social Security's long history. That correction tells me that the Disability Trust Fund projection is nearly meaningless. The Chief Actuary doesn't know what's going on. Nobody does.
By the way, back when the Disability Trust Fund balance was going down, I kept saying that it was coming closer and closer to being in balance, that it might survive even without a legislative fix. We had a legislative fix to temporarily shunt more money into the Disability Trust Fund but I still wonder whether that was necessary. Would the Disability Trust Fund have ever run out of money if nothing had been done?
Page 60 appears to be the reason for the new estimate, that being the generation following the baby boomers is having far less children than the baby boomers. The real question is why that was not taken into account already as the lack of subsequent "booming" has been seen for decades.
ReplyDeleteAs to why the old age and survivor trust fund is being presumed to only last until 2034, that roughly aligns with the year in which the last of the baby boomers reach retirement age, 2031. I assume the three year difference is the estimate of how many assets will remain when the worker-beneficiary ratio reaches peak weakness. But, the average life span in US is ~80 years, and since the baby boom started in 1946, the ratio should start correcting in 2026.
In sum, I expect an estimate around 2027 saying the old age and survivor trust fund is solvent until 2052, because apparently the Chief Actuary's office cannot do simple extrapolation from census data.
The previous projection was that after 2032, the DI trust fund could cover 96% of scheduled benefits. If it was only 4% away from 75-year solvency before, the minor changes in projections this year, including a slight decrease in projected disability incidence rate, make a big change in the number of years the program will be fully solvent. The introduction to the report explains this. I wouldn't say it indicates the estimates are worthless or the actuary and trustees don't know what they're doing. If you think that, you play right into the hands of people who don't agree with statistics and "just know" we need lots of cuts to Social Security. We have enough of those working in Congress and at SSA already.
ReplyDeleteThe past and future DI Trust Fund Ratios are shown in Figure IV.B3 here:
ReplyDeletehttps://www.ssa.gov/OACT/TR/2019/IV_B_LRest.html
(gray lines). You can see that there is a huge difference between the three estimates they do (low, intermediate and high cost), with the trust fund becoming depleted around 2025 under high cost, but growing rapidly under low cost. So I agree that the projections aren't worth much. (There was a large spread in the previous reports also, indicating a high sensitivity to the assumptions.)
But I don't think the Trustees (or actuaries who actually do the report) were being stupid. They know a lot about demographics and take that into account. But disability costs have been decreasing by more than expected based on demographics. When something drops unexpectedly, they tend to predict that it will gradually return to its previous long-term average. However, disability costs have continued to go down. I wouldn't be surprised if next year's report has the DI Trust Fund depletion date as "never."