As the New York Times reports with a mixture of shock and disgust, Social Security is a whole lot more unsustainable than we had originally thought.
Apparently, the feds use outdated, inaccurate, and oftentimes overly-complicated math.
From the New York Times [emphases added]:
… the Social Security Administration underestimates how long Americans will live and how much the trust funds will need to pay out — to the tune of $800 billion by 2031, more than the current annual defense budget — and that the trust funds will run out, if nothing is done, two years earlier than the government has predicted.
We reached these conclusions, and presented them in an article in the journal Demography, after finding that the government’s methods for forecasting Americans’ longevity were outdated and omitted crucial health and demographic factors. Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for. (While obesity has rapidly increased, it is not likely, at this point, to offset these public health and medical successes.) More retirees will receive benefits for longer than predicted, supported by the payroll taxes of relatively fewer working adults than projected.
Remarkably, since Social Security was created in 1935, the government’s forecasting methods have barely changed, even as a revolution in big data and statistics has transformed everything from baseball to retailing.
First, despite the leaps and bounds made in statistical analysis since, oh, the end of the Great Depression, the feds are basically using the same methods they started out with in the 1930’s.
Second, you read that correctly: Due to outmoded analysis, the feds have committed an $800 billion error in calculating the sustainability of Social Security.
“It’s one thing to run a Ponzi scheme, it’s another to muck up the math so badly that the scheme goes bust before you were expecting it,” writes Hot Air’s Allahpundit.
And in case you’re having a difficult time wrapping your head around just how inaccurate the fed’s Social Security projections are, head over to the Times and look over their infogprahics on the topic (pay special attention to “table 4.” It’s astonishing).
“As currently constituted, the government’s math assumes that all Americans between the ages of 55 and 59 will die in the year 2028, even as millions over the age of 60 live on,” Townhall.com’s Guy Benson explains.
“Wiping out an entire age bracket would obviously diminish the program’s liabilities, but this scenario is completely untethered from reality,” he adds.
But should we really be shocked that the feds would be so wrong on Social Security? After all, it’s not like this is the first time that the U.S. government has been woefully inaccurate with financial predictions.
In fact, just last Friday we learned that the Congressional Budget Office whiffed in the most spectacular fashion on its original calculation for the Senate’s “fiscal cliff” bill.
“Their initial estimate of a $4.0 trillion budget increase was wrong,” writers at Zero Hedge note, “and when one factors in the fact that this incremental spending would have to be funded by, you guessed it, debt, debt which has interest, the full impact of the Obama tax cut rises deficits by 15% to $4.6 trillion over the next decade.”
An $800 billion miscalculation here, a $600 billion foul-up there. Now that we have figured out the whole “fiscal cliff” thing, there’s nothing to worry about, right?
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