Friday, June 6, 2008

Technical Panel releases report

The Social Security Advisory Board's 2007 Technical Panel on Assumptions and Methods has released its final report analyzing and making recommendations to Social Security's Trustees and actuaries. The SSAB appoints a panel every four years, and I've sometimes referred to the reports from the 1999 and 2003 Tech Panels. The 2007 Panel is chaired by Dan Crippen, formerly director of the Congressional Budget Office, and includes a number of experts in a variety of fields relevant to Social Security financing and benefits. Next Friday, June 13th there will be an event at AEI discussing the Tech Panel's report. This will also be webcast for those who can't make it in person.

Following is the announcement of the Report made by the Social Security Advisory Board:

Washington, D.C. (June 5, 2008) – The Social Security Advisory Board is pleased to announce the release of the report of the 2007 Social Security Technical Panel on Assumptions and Methods.

Appointed by the bipartisan Advisory Board, the Panel is an independent, ten member body of experts in the fields of demography, economics and actuarial science whose charter is to review the long range projections of the financial status of the Social Security system as reported annually by the Social Security Board of Trustees.While the report solely reflects the views of the Panel, the Advisory Board believes this effort provides an important national service by subjecting the Trustees’ assumptions and Social Security actuaries’ methods to intense and informed public scrutiny.

In the report released today, the 2007 Technical Panel has made over 50 specific recommendations for changes in the methodology and assumptions used in the Trustees projections. Among the key findings:
  • The Panel recommends that the Social Security actuaries continue to develop and expand the use of state-of-the art projection techniques such as stochastic and micro-simulation modeling.
  • The Panel also recommends specific changes in the methods for projecting immigration and life expectancy and recommends assuming higher levels of immigration and faster improvements in life expectancy.
The 2007 Technical Panel was chaired by Dan L. Crippen, former Director of the Congressional Budget Office from 1999-2003. The other distinguished members include: Mary Daly (San Francisco Federal Reserve Bank); Robert Gordon (Northwestern University); William Hsiao (Harvard University); Deborah Lucas (Northwestern University); Steven Lieberman (The Moran Company); Jeffrey Passel (Pew Hispanic Center); Beth Soldo (University of Pennsylvania); Eric Stallard (Duke University); and Shripad Tuljapurkar (Stanford University).

The Board wishes to thank the members of the Panel for their service and commends them on their efforts to further improve public understanding of Social Security projections and for furthering the dialogue among experts on ways to improve them in the future.

The Social Security Advisory Board is an independent, bipartisan body created by the Congress in 1994 to advise the President, the Congress, and the Commissioner of Social Security on wide variety of matters relating to the Social Security and Supplemental Security programs. It has previously commissioned technical panels in 1999 and 2003.
The Tech Panel reports are a great source of information not only on how Social Security projections are currently undertaken, but on the debates over different assumptions and methodologies and a look into how the process may evolve in the future.


Bruce Webb said...

Thanks for the link. I more or less just skimmed through it and it seems to be a really impressive piece of work.

Of particular interest to me was the way they zeroed in on the dangers of basing current policy on long term outcomes whether that be 75 year or Infinite Future and switching focus instead to a 25 year threshold. This seems reasonable and has the side benefit (for me anyway) of undercutting much of the argument for LMS and similar plans that rely heavily on Infinite Future as the right measure for 'crisis' and 'sooner is better than later' argumentation.

In any event an important resource for discussions going forward. Thanks again.

BTW I put up a post highlighting the release of the Report as Post XVIII of the AB Soc Sec series.

Andrew Biggs said...

The Tech Panel's recommendation to focus more on the shorter term is probably the most controversial item in the report, and something I'll bring up at the AEI event. It's clearly contrary to the 1999 and 2003 Tech Panels, which argued for a longer-term emphasis, as well as the 94-96 Advisory Council, recent Trustees Reports, etc.

I think that if policymakers focus on cash flows (rather than the trust fund balance), which is also one of the Tech Panel's recommendations, then a 25 year time frame isn't all that bad. But since common practice is to look at trust fund balances, I think a shorter-term approach is a real problem.

But this and other points in the Report are worth looking more closely at. Thanks.

Bruce Webb said...

Well I am pretty cynical on this one. From my perspective the shift from a focus on Short Term Actuarial Balance to Long Term in 1999 and Infinite Future in 2003 can be explained by the fact that the system in the short to medium term was looking better, as the date of Trust Fund depletion moved out past 2035 it was harder and harder to sell crisis. The operational result (whether part of a deliberate thinking process) was a rhetorical shift to the date of shortfall rather than depletion and the argument that in any event that 2039 or 2041 (and then later 2083) were not synonymous with 'never'.

Yes the cash flow point was important. I try to stress in my posts and comments that the Trust Fund is perhaps the most misunderstood parts of the system. People tend to think of it as an investment vehicle rather than what it is, a more or less adequate reserve held in a convenient form. This is all the more complicated by the fact that some people advocate a long term strategy that would in fact make it an investment vehicle and present that in a form which compares that future investment vehicle to the current pay as you go reserve fund. To my mind that is to confuse apples and oranges and obscures the fact the Trust Fund is never projected to pay more than 25% of benefits in any future year. (Not to mention that no one has been able to solve the legacy problem for the transition).

I am planning my next post at AB and tentatively am calling it 'the Narratology of Social Security'. I believe that much of 'crisis' is being driven by a series of interrelated narratives and that only by unpacking those narratives can we see what the real story is and more importantly who the story tellers are and why they tell this particular tale.

winnie11400 said...

Thank you for your replys on this issue. First my daughter is 9 she is going to camp this summer but her insurance pays for it. And more about me i am not well my self in march i had my armpit removed because i had staph infection really bad when i came home i still did not fill well i went back to my doctor to find out i had MRSA (SUPERBUG) and my arm is still opened alittle will not heal. I am on 13 medications. I don't want to live like this i want to be part of society and work but i can't due to my illnesses. I didn't have enough work credits to receive SSD. So i was approved for SSI it it is enough to pay the rent and where I live there is no apartments that have section 8. I moved in a doublewide and we have to pay rent, mortage, and property tax's, I moved in with my parents that didn't work out because my dad got very sick he passed away March 20th 2008 the day I had surgery, I moved in to a friends house that didn't work because she had 40 cats and the smell was not good for my children thats why i moved in this. So it has not been easy for my children or I. My son was on home bound all school year and i was running him to school 3 x's aweek and with the gas prices going up that didn't help me. I don't want any pity from anyone but trying to live its been very hard.
But again thank you for your inputs I guess they would rather have us on the streets and living in are car then let us pay the bills that need to be paid.

JG said...

...we believe that for analysis of the trust funds the disadvantages of very long-range forecasts outweigh the advantages, and we recommend that for the annual Trustees Report emphasis be further shifted toward the intermediate term of 25 years. In addition, more emphasis should be placed on the use of annual cost and income rates, and away from long-term measures including the 75-year summarized balance...

Couldn't agree more. To the extent that the cash flow crunch of about 20 years from now results in additional means testing and benefit reductions -- as the far smaller cash flow shortfall of 1983 did -- all the 75-year and longer projections of today will be mere academic exercises.