Dean Baker on the 2016 Social Security Trustees Report

Dean Baker of the Center for Economic Policy and Research released a statement following the publication of the 2016 Social Security Trustees Report. As (almost) always, I don’t agree with all of it, but Dean always has something different and interesting to say.

"The 2016 Social Security Trustees Report is little changed from the 2015 Report. It shows a small decrease in the projected 75-year shortfall of 0.02 percentage points. Changes in the disability program, along with small changes in projections more than offset the increase of 0.6 percentage points due to shifting the projection period by a year. (The new projection adds 2090, a year with a large projected deficit, and loses 2015, a year with a surplus.) While reporters and politicians routinely focus on the projected shortfall, what will matter far more to the people covered by Social Security is the projected growth in real wages and their distribution. As has been pointed out, almost 40 percent of the projected shortfall in the program is attributable to the upward redistribution of income over the last four decades. This has pushed a larger share of wage income over the taxable maximum. For this reason, the finances of the program are directly affected by the distribution of income.

"More importantly, the growth in real wages will have an enormous impact on future living standards, since the vast majority of the working-age population receives the overwhelming majority of their income from their work. The extent to which projected gains in productivity are seen in wages and compensation will have much more impact on workers’ living standards than any plausible increase in the Social Security tax.

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