WASHINGTON — Social Security costs in coming years will be much higher than official projections because the federal government has vastly underestimated lifespans, according to a new study.
In the Sunday New York Times, Gary King and Samir S. Soneji summarized their recent article in "Demography," asserting that Social Security is more imbalanced than supposed, not just because the worker per retiree ratio is falling, but also because old-fashioned calculations assume people will die sooner than they are.
"In the first presidential debate," the authors wrote, "Mr. Obama described Social Security as 'structurally sound,' and Mitt Romney said that 'neither the president nor I are proposing any changes' to the program. It was a rare issue on which both men agreed — and both were utterly wrong."
The authors laid out the flawed data graphically, including an amusing graph of a strange anomaly that predicts "everyone who happens to be 55-59 in 2028 would die" that year.
"With considerable help from the actuaries and other officials at the Social Security Administration, we unearthed how the agency makes mortality forecasts and uses them to predict the program’s solvency," King and Soneji wrote. "We learned that the methods are antiquated, subjective and needlessly complicated — and, as a result, are prone to error and to potential interference from political appointees. This may explain why the agency’s forecasts have, at times, changed significantly from year to year, even when there was little change in the underlying data."
"I find this entirely plausible," wrote Megan McArdle at the Daily Beast, "not because the government bureaucrats who calculate this stuff are stupid, but because institutions like the Social Security Administration are inherently conservative in their methodologies for calculating figures like this."
McArdle notes that when she began writing about Social Security in 2002, "the trust fund was projected to run out in 2041. Now it's projected to run out in 2033. If King and Soneji are right, it will run out in 2031. Which means that over 10 years, the projected time-to-exhaustion will have fallen by just about 1/2, to 18 years."
But other commentators were less impressed by the numbers, noting that for all the drama in the headline, the analysis only bumped the trust fund depletion up two years.
Also, as the Center for Economic and Policy Research observed, the greater longevity could also come with better health and longer productivity over a longer working life, thereby improving the finances of the system.
"For example," CEPR noted, "the disability portion of the program currently accounts for almost 18 percent of the program's cost. If better health reduced disability rates then this could go a substantial portion of the way toward offsetting the higher costs associated with a longer period of retirement."
Eric Schulzke writes on national politics for the Deseret News. He can be contacted at [email protected].