Social Security Versus CBO – Who Do You Trust?

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The 2014 Social Security report to Congress is finally out (Link). The report was released four-months later than permitted by law; this is the sixth year in a row that the Report has been late. The word ‘sloppy’ comes to mind; Treasury Secretary Lew gets a ‘D’ for timeliness.

I’m blown out by this year’s report! It was just 13 days ago that the Congressional Budget Office released its numbers for SS (Link). There are very significant variances on key metrics for SS. The inescapable conclusion comparing the two reports is that either: (1) CBO is misrepresenting numbers with some kind of political agenda in mind, or (2) SS is sand bagging its numbers for reasons that have to be political as well.

There are a few key metrics to consider. The first is the Immediate and Permanent (I&P) payroll tax increase necessary to ‘fix’ SS for the next 75 years. CBO says that the I&P is 4%, while SS claims it is only 2.88%. One might look at the two numbers and say, “What’s the big dif?, the two #s are only 1.12% different!” Actually, the 1.12% comes to very big bucks. Over the 75 year period it comes to trillions of dollars. For 2015 the difference in the I&P calculation comes to $75B. That’s a lot of Billions.

[Listen to: Laurence Kotlikoff: Social Security Is Grossly Unfair, Insolvent, and Needs to Be Retired]

Another data point is the estimate for the year in which the SS Trust Funds become depleted. CBO has this date as 2030 while SS thinks it will be delayed until 2033. One could drive a truck through the different estimates.

A critical milestone for SS will be the year in which the SSTFs top-out and begin the rundown to zero. CBO has this happening in 2017, while SS says it will not happen until three years later in 2020. A three year difference in something that is only 2 1/2 year away? How could the models differ so widely?

It’s my opinion that SS has warped its numbers. What SS has provided is:

Ho Hum, nothing has changed from last year. No need to think about SS today, and certainly do not to make this an election issue. We wouldn’t want Conservative folks to have something to talk about this fall.

CBO, on the other hand, is saying:

Red Alert! America’s biggest single expense is running amok. In less than 15 years there will be a crisis, and it will be very expensive to ‘fix’ it. For heaven’s sake, please, let’s have a dialog about this before it’s too late!

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