Media Matters ran an article
yesterday slamming CNN for not challenging Senator Grassley’s
regurgitation of the $11 trillion infinite-horizon shortfall in Social
Security. Among other pieces of evidence submitted for that number
being bogus is a
letter from the American Academy of Actuaries to the Social Security
Trustees.
The quote most often used to criticize the infinite horizon estimates
is:
[T]he new measures of OASDI’s unfunded obligations included in the
2003 report provide little if any useful information about the
program’s long-range finances and indeed are likely to mislead anyone
lacking technical expertise in the demographic, economic and actuarial
aspects of the program’s finances into believing that the program is
in far worse financial condition than is actually indicated.
…which is a criticism that goes along with actuarial standards of
practice which essentially say that an actuary shouldn’t release
information in a form (i.e., without appropriate commentary to educate
the likely readers) likely to be misunderstood or misused by the
audience.
The catch is that the quote isn’t criticizing the accuracy of the $11T
deficit; it’s instead saying that citing the $11T figure on a
standalone basis is misleading, because of all the uncertainties
involved. It is an appropriate best guess, but it probably ought to
be phrased more as “$11T, give or take $10T”. (Note: I’m not sure of
the exact size of the variance about that estimate, but that degree of
variability smells about right to me.)
The gist of that is, if you just fix the 75-year problem traditionally
pointed out by Social Security trustees, you haven’t actually fixed
the longer term problem that is believed to exist (but which may not
materialize depending on what happens in the next 75 years).
The magazine put out by the Academy has lots of stuff on Social
Security in the current issue. Also on the Academy website is a
“Social Security
Game”, which appears to be based upon this
factsheet put out (barely legibly) by the AAA.