SOCIAL
SECURITY:
CAN THE TRUSTEES BE TRUSTED?
By Mark
Weisbrot
The debate over Social Security has never really been about the
numbers. Almost all of the participants have chosen to accept
the projections of Social Security's Trustees, and make their
arguments from there. It's hard enough to straighten out the massive
confusion that Social Security's enemies have sown for all these
years without your audience starting to look oxygen-deprived.
So who wants to challenge the Trustees' intermediate cost projections,
or get bogged down in the boring details of their methodology?
But serious questions have recently been raised about
the Trustees' numbers, and some members of Congress are demanding
answers. Let's start with their 1999 Annual Report, released last
month [April]. In this report the Trustees make their projections
for the Social Security program's revenue and expenses over the
next 75 years. It is only because these projections show a shortfall
beginning 35 years from now-- however tenuous that may be-- that
there is still talk of "reform."
In their latest report, the Trustees made changes that
lowered the projected rate of wage growth over the 75-year planning
period. Since 1996, these changes have made Social Security's
financial problems appear about five years earlier than they otherwise
would.
These changes are very hard to defend, since both wages
and productivity have shown considerably higher growth over the
past few years than previously. So why would the Trustees move
their projections in the opposite direction? Their annual report
does not explain. The Social Security Administration's deputy
chief actuary, who is responsible for the projections, was questioned
about these changes by Senate staff two weeks ago. He surprised
everyone in the room by noting that the actuaries' recommendations
to the Trustees are actually secret, even from members of Congress.
And so is any record of the Trustees' deliberations.
In other words, the actuaries come up with their projections,
and the Trustees, who are political appointees, decide what the
report will say. And the public has no right to know about any
back and forth that may have changed the results. Among the Trustees
is Treasury Secretary Robert Rubin, who announced his resignation
last week. He is one of the Administration's most powerful spin
meisters on a variety of economic issues.
If this sounds fishy to you, that could be because it
is. After all, we're not talking about nuclear secrets here. The
Chinese government isn't going to pick up any new military technology
from the wage projections made by Social Security's actuaries.
How significant are the Trustees' unexplained changes
in estimating wage growth? Consider this: in just the last two
years the program's year of financial shortfall has moved from
2029 to 2034. Without these changes, we would be looking at 2039.
This would put Social Security's problems 40 years away, with
the distance having increased by a full decade over the past two
years. Many more people might refuse to take the whole "problem"
seriously. At the very least it would seem reasonable to wait
a few years and see if the shortfall, which is pretty small and
uncertain to begin with, disappears of its own accord.
The Social Security Administration has also raised serious
concerns over its evaluation of legislative proposals currently
before Congress. For example, in considering the most recent plan
from the House Republican leadership, the Archer-Shaw plan, the
SSA has assumed a 7% annual real rate of return on investment
in the stock market. This rate of return is logically inconsistent
with the actuaries' other assumptions, most notably their assumption
of very slow economic growth (less than 1.5% a year over the next
75 years, or about half as much as the economy has grown in the
past).
This is a serious problem: the actuaries do not actually
make projections for stock returns, but when someone proposes
legislation that would put Social Security money in the stock
market, they have accepted the inflated returns alleged by the
proponent. This has misled the media and most of Congress into
believing, for example, that the Archer-Shaw plan would balance
Social Security's finances over the next 75 years. The media has
reported it this way, even though neither the actuaries nor the
Trustees have produced any numbers that could support such a conclusion.
The whole movement for Social Security reform has run
out of steam lately, which is certainly a good thing for the survival
of America's largest and most successful anti-poverty program.
But if the Trustees can fudge the numbers and hide the whole process
from the public, then maybe we do need some reforms-- at the Social
Security Administration and its Board of Trustees.
Mark Weisbrot is research director at
the Preamble Center, in Washington, D.C. He is co-author, with
Dean Baker, of Social Security: the Phony Crisis
(1999, University of Chicago Press). May, 1999. Reprinted with
his permission. Distributed by Knight-Ridder/Tribune Media Services.
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