Friday

 

Borrowed Social Security Wonkery

DeLong demonstrates that if the Social Security trustees were using the same methodology to project productivity growth that they had been using from 1995-2003, the estimate would have been 1.9% average growth per year, rather than the 1.6% which was actually projected. While this might not sound like much of a difference, the effects are dramatic. The commenters at the site suggest, rather convincingly, that if the prediction was 1.9% there would no funding gap at all. That is, Social Security would end the next 75 years with a substantial surplus if productivity increased at 1.9% per year, and that would have been the estimate under the old methodology. I have nothing to add to this, other than to note that nothing at the site suggests that the old methodolgy is better or worse than the current one, just that the change is under explained.

Oh, and I might as well add that one lesson which we might want to draw from this is that, given the uncertainty about whether or not there is a social security problem at all, it really may be better to wait and see if there is a problem before making any changes, even minor ones. Unless the changes make sense independent of any funding gap, but thats not the situation being argued about.

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