Chief Actuary for SS -
Raid the Retirement Fund!
Submitted by Bruce Krasting on
03/20/2013 12:52 -0400
‘Stephan Goss, the chief actuary for Social
Security (SS) provided a detailed report on the status of the SS Disability
Fund (DI) to the House of Representitives. The short story is that DI is going
bust in a few years. The options to fix this problem were spelled out in the
report. The extremes of the required "fix" range from an immediate
cut in DI benefits of 16%, or an increase in DI payroll taxes of 20%.
Nothing
new there. But, there is a "Plan B" for the
DI Fund. The solution is to raid the SS Retirement Fund for the deficits at
DI:
A simple tax-rate reallocation between OASI and DI, as was done in 1994,
could equalize the financial prospects of the trust funds avoiding reserve
depletion until 2033.
Note:
"Simple tax-rate reallocation" means $40+b a year....
Bingo!
The raid on the retirement fund results in no cuts in benefits, and no new
taxes. What's not to like about that result? The gutless wimps in D.C. would
love to kick the can down the road a decade, therefore the Raid solution is an
obvious choice. (The consequence of the Raid would be to reduce the expected
life of the Retirement Trust Fund by as much as five years,.)
This
is not the first time this has come up. The Congressional Budget Office, in its
2/5/13 report on the SS Trust Funds had these words in a footnote:
CBO’s baseline assumes that the Commissioner will pay DI
benefits in full even after the trust fund is exhausted.
Note:
For a discussion of the CBO report, see my article from 2/10/13 (Link).
Okay,
we now have two legs of the government who have (functionally) suggested that a
raid on the OASI fund is a possible fix for DI. Lightening does not strike
twice in the same place very often, especially in Washington. The idea of
raiding one fund to preserve another, has just gotten another big supporter. If
the folks at AARP understood what was being proposed - they would flip their
wigs!
++
The True Cost of the Disability Program
I
have a list, (it's pretty short) of the folks who I think are "doing the
right thing" in Washington. Stephen Goss was on that list. I'm
disappointed with him and his presentation of the "Facts" about the
DI program.
Mr.
Goss's report to the House ran nineteen pages; there are 14 charts. (Link) Everything a Congressman (or the
public) could ever want to know about the DI program is spelled out in detail.
But,
Goss completely left out the most critical cost of DI. The Chief
Actuary failed to identify a cost directly related to DI. The numbers are big -
$80b in 2012. The estimate is for more than a trillion of over the coming
decade. If you look beyond that time horizon, the costs that Goss failed to
identify are in the mega-trillions.
Goss
failed to provide the full picture when he did not disclose the DI costs to
Medicare. Every individual who gets DI benefits ALSO
gets Medicare.
In
a report dated 3/14/2013 (Link), the Congressional Budget Office
(CBO) accurately described the real costs of DI:
I
give Stephen Goss an "F" for failing to provide all of the
information needed to evaluate the DI program. How do you sweep a trillion
dollars under the carpet?
