Because human longevity is improving in the United States, the Social Security Trust Fund is going to run out of money sooner than expected.
Why should it be a financial and economic disaster for the United States that people are living longer?
One word: pensions. Our nation’s pension is known as “Social Security.”
CNBC reports, “Social Security’s in worse shape than you thought: Study.”
The Social Security Administration projects that its trust funds will be depleted by 2033—not an optimistic forecast. But it may be even bleaker than that.
New studies from Harvard and Dartmouth researchers find that the SSA’s actuarial forecasts have been consistently overstating the financial health of the program’s trust funds since 2000.
“These biases are getting bigger and they are substantial,” said Gary King, co-author of the studies and director of Harvard’s Institute for Quantitative Social Science. “[Social Security] is going to be insolvent before everyone thinks.”
Interestingly, the problems seemed to have begun with the Presidency of George W. Bush:
Researchers examined forecasts published in the annual trustees’ reports from 1978, when the reports began to consistently disclose projected financial indicators, until 2013. Then, they compared the forecasts the agency made on such variables as mortality and labor force participation rates to the actual observed data. Forecasts from trustees reports from 1978 to 2000 were roughly unbiased, researchers found. In that time, the administration made overestimates and underestimates, but the forecast errors appeared to be random in their direction.
“After 2000, forecast errors became increasingly biased, and in the same direction. Trustees Reports after 2000 all overestimated the assets in the program and overestimated solvency of the Trust Funds,” wrote the researchers, who include Dartmouth professor Samir Soneji and Harvard doctoral candidate Konstantin Kashin.
This finding is significant for several reasons. One of those reasons is that it means we are not only heading for a problem but we are likely going to be caught by surprise by the problem. The government’s impulse to make the populace believe that all is well causes them to not prepare for disaster in the appropriate way or acknowledge how close it is.
Crisis is always safely far away in the future until it is already here.
At that point, the usual government spin spins around us. “There is no point in pointing fingers.” “We can’t afford to blame anyone because we need to fix the problem.”
And then, because the problem is an emergency the government quickly sets up stupid solutions that no one is permitted to question because, “We don’t have time to debate! We have to act quickly.”
But it is also interesting why these calculations have been inaccurate. King and his co-author, Dartmouth professor Samir Soneji
found the Social Security Administration underestimated how long Americans will live and projected that the trust funds would be depleted by 2031, two years earlier than the government has estimated.
Get that? American’s are living longer than the government finds convenient.
So when everyone tells you how great Social Security was for the nation, remember that. Remember that big government invented a system where living longer causes a national crisis.