Friday, August 5, 2011

New Social Security projections from CBO

The Congressional Budget Office release new projections of Social Security's finances. One thing I particularly like about CBO's work is their focus on uncertainty – trying to get a feel for the things we can't easily predict. So, unlike the Social Security Trustees Report, CBO puts its analysis of uncertainty front and center.

For instance, under CBO's alternative baseline (which is considered the most realistic with regard to what will happen), they project that Social Security faces a 75-year actuarial deficit of 2.0 percent of taxable payroll, slightly smaller than the Trustees projection.

But they also state that they estimate an 80 percent probability that the 75-year deficit will be between 1.0 and 3.5 percent of payroll. So you have a 10 percent chance that the deficit will be smaller than 1 percent – meaning that betting on the system fixing itself it's a particularly good idea – and a 10 percent chance of a deficit larger than 3.5 percent of payroll. This gives a good feel for the range of outcomes that are possible.

As always, well worth checking out.

1 comment:

WilliamLarsen said...

A 2% of taxable payroll short fall over 75 years. Does not sound like much, but then the CBO does not identify that it uses in its analysis the sum total of all taxable wages even though more than 2/3 will pay the SS-OASI tax and be too young to collect within that 75 year window.

I would like to see a CBO analysis that is truly upfront with the American People that looks at those who will collect their entire life times versus only those who will collect their benefit during the evaluation period. This would be a relatively short period of time, less than 30 years for those who are beneficiaries now or we could look 60 years in the future, not counting those taxes of those who turn 67 after 2031. I would guess the the % of payroll to climb tremendously.