Press release is here, and the monograph itself is here.
Th monograph contains one of the more balanced explanations for the OASDI trust fund’s existence:
Social Security trust fund assets are invested almost entirely in non-marketable special-issue U.S. government securities that represent loans to the U.S. Treasury’s general fund. Thus, one result of the trust fund build-up has been that Social Security is financing a portion of the deficit spending from the general fund. When the trust funds are drawn down, the Treasury will need to find an alternate source for this financing. For this reason, some individuals are troubled by the large trust fund accumulations and are resistant to program changes that may increase Social Security financing of the rest of the government.
I still say that functionally, the trust fund is a piece of “accounting magic”. Even though there are accounting entries that say that Social Security has a positive trust fund, the reality is that the money has been spent to shore up other branches of the government that would otherwise contribute to the deficit.
The trust fund is available to Social Security….but funding will have to be diverted from other purposes or deficits increased to access it.
The punchline of the monograph can be found in its conclusion:
the American Academy of Actuaries’ Social Insurance Committee believes that preventive maintenance of the program by changing it now is preferable to waiting until changes are forced by circumstances. For example, consider a worker who is age 45 when the program is changed. When this worker reaches the Social Security retirement age of 67, he or she will have been paying increased taxes, or saving more to compensate for lower expected benefits, for 22 years. Each year reform is delayed means this worker will have fewer years to be part of the solution, and fewer years to prepare for the changes that reform will inevitably bring.
There are numerous potential reforms that could address Social Security’s financial problems. Options within the current defined benefit structure include increasing the tax rate, reducing benefits by changing the benefit formula, reducing benefits by changing the way they are automatically adjusted for inflation, reducing benefits to dependents, changing the way trust fund assets are invested, and raising the age at which unreduced benefits are paid. Alternatively, the system could be fundamentally changed so that all or some of the benefits are paid from individual accounts. This report presents the committee’s analysis of these and other options, without the endorsement of any particular change.
A couple of weeks ago, I was up on my soapbox discussing the merits of actuarial activism. The monograph is an example of what I think some actuaries should feel free to engage in — saying “here’s a problem; here are several ways you could address it; and here are those methods’ pros and cons”.
I wouldn’t mind hearing about a few actuaries publicly expressing preference for particular solutions of their choice… debate can distill ideas into a better solution, after all… but that would detract from this excellent committee-written document.