FDR signing the 1935 SS Act (click image for person key)

Saturday, May 31, 2014

2014 Social Security Trustees Report is Just Around the Corner

And about time, because under the statute if is due "no later than April 1". But I am told on good authority that it will be out this week or maybe next. But eventually.

So I am setting up a new resource at a Google Page attached to this account which has the URL:

It is underdeveloped right now but does have links to two different Public Folders on the Social Security Defender Google Drive. One of which will be the repository for a whole series of Excel spreadsheets containing the various Tables of the 2014 Report extracted from the PDF and HTML versions released by the Office of the Actuary. Already there is a sample there of a single Excel Workbook with five Worksheets containing five different Tables from the 2013 Report.

While the files should be read only, there should be no limit on them being imported or copied into your own Excel spreadsheet or for that matter Google Sheets or Apple Numbers. If anyone actually stumbles accross this message and tries it and for some reason it doesn't work feel free to e-mail me at the contact e-mail on the linked page.

Hopefully I will be populating the Google Drive folders and so the Google+ Page with new material soon after the Report release.

Wednesday, November 20, 2013

New(?) and Improved(???) Social Security Defender Blog

Well I am going to try to build out the Social Security Defender account to integrate some of the new possibilities for sharing info on the defense. But first the components.

socsec.defender@gmail.com is the underlying Google Account and the main e-mail for all things Social Security by account/blog owner/admin Bruce Webb

Like all G-mail accounts there is an associated Google Drive cloud storage. And a Google+ site. But also I set up a SocialSecurityDefenders Google Group. Along with this Social Security Defenders blog. And in principal all of this can be combined and cross authorized with varying levels of permissions. But all of that is devilishly difficult to coordinate.

My inclination is to use the SocialSecurityDefenders Group to grant the fullest access to the account Google Drive and to use a subset of that as Editors of the Social Security Defenders blog.

Presumedly all Group members would also be in a Circle on the Google+. And then both the Google Drive and the Google+ site would have some parts and folders shared with the Public.

But getting everyone in at the right level might mean some getting unwanted e-mail traffic and others getting the equivalent of an 'un-friending' So apologies in advance as things get sorted out.

Bruce, aka Social Security Defender

Saturday, January 5, 2013

Trust Funds, Chained CPI and Debt Limits

(Cross posted from dKos) Well let's start where my last diary ended up: Debt Toolkit: Public, Subject to the Limit, Social Security Trust Fund and put those tools to work starting from the same screen shot from Treasury's Debt to the Penny web application.
To recap: by law since their foundation in 1939 (OAS) and 1956 (DI) the Social Security Trust Funds have been required to hold all income in excess of current cost in the form of financial instruments fully guaranteed as to principal and interest by the federal government, which in practice means Treasuries. The specific Treasuries held by the Trust Funds are called Special Issues and have some unique features but are legal obligations of the U.S. fully backed up by Full Faith and Credit of the United States. As such the $2.6 trillion in the Trust Funds are held on the books at Treasury as just over half of the $4.8 tn of 'Intragovernmental Holdings' in the screen shot and so right on 1/7th of the $16.4 tn of Total Public Debt Outstanding. And importantly, and as shown in the last diary, an equal amount of Debt Subject to the Limit, that same $16.4 tn. Since Trust Fund assets are over half of Intragovernmental Holdings and those Holdings are included in Debt Subject to the Limit it follows that ANY increase in Trust Fund assets puts pressure on the Debt Limit. Now Trust Fund assets grow in any year where income from all sources, including interest credited to the existing TF assets, exceeds current cost. For example in 2011 Social Security operations on a combined basis were as shown in this linked Table from the 2012 Social Security Report: Table III.A3.—Operations of the Combined OASI and DI Trust Funds, Calendar Year 2011 The literal top line shows cumulative assets of $2.608 (fixed typo) trillion as of Dec 31, 2010, the bottom line $2.678 trillion on Dec 31, 2011. This difference of $69 billion in assets added directly to Intragovernmental Holdings and so directly into Total Public Debt Outstanding and Debt Subject to the Limit. Now it is a fact that this increase in assets is net of interest credited, on a cash flow basis Social Security was actually negative as a portion of the $114 billion in interest earned on existing Trust Fund assets had to be paid in the form of cash. Now one can argue whether this is a problem for taxpayers or not, after all the money comes from somewhere, but for the purposes of deficit and debt scoring that cash flow fact is irrelevant. In 2011 Social Security ran a surplus of $69 billion which subtracted directly from the unified budget deficit. At the same time that $69 billion flowed right to the bottom line of Total Public Debt. Meaning that as regards Social Security the common sense idea that debt is simply the sum of deficits is totally reversed. Social Security surpluses add to debt and don't subtract from it. And of course the reverse is true. If you want to reduce the pressure exerted by Intragovernmental Holdings on Debt Subject to the Limit you would want to REDUCE Trust Fund Assets. And given that growth in those assets is directly the result of income from all sources exceeding cost, the only way to reduce that growth is to either cut income or increase benefits. Which leads to the rather astonishing result that over the short run and in specific regards to Debt Limit calculations proposals to means test Social Security and/or impose a new COLA formula via Chained-CPI are arithmetically COUNTERPRODUCTIVE, they tend to put pressure on the Debt Limit and not relieve it. Now this doesn't mean that it is totally irresponsible to address long term solvency issues in Social Security, but dragging them into a specific debate over the Debt Limit is pure blackmail, the 'solutions' the Republicans are demanding have literally less than zero to do with the vehicle which they are using to demand them. Now it is not true (as some supporters would have it) that Social Security has no effect on deficits or in our case debt, because it does. But in ways that go against 'common sense'. Cutting Social Security cost does less than zero to reduce either short term or long term Public Debt, instead any such cuts either increase that Public Debt or in some formulations (which personally I don't agree with, but are pushed by people smarter than me) leave it unchanged on net. On the other hand Social Security benefit cuts or alternately revenue increases do serve to reduce so called unfunded liability. But unfunded liability is not debt. And for that matter is not legally a liability. Instead it is a purely theoretical calculation of the Present Value of the gap between Scheduled and Payable benefits under Social Security, something I discussed in my diary from Monday Social Security Rashomon: an Actuary, a Defender and a Reformer Meet Now I am perfectly happy to talk for hours and days about Unfunded Liability over either the 75 year actuarial window or even over the (God Help Us) Infinite Future Horizon. Fun stuff!!! But neither that 'Liability' or that Horizon have any direct relevance to either 10 year budget windows or the current Debt Limit. And only fools or liars will tell you different. Or to summarize: House Republicans.

Thursday, January 3, 2013

2013 Debt and Deficit Toolkit: Part 1

(Crossposted from Angry Bear All of the terms in the post title have at least two usages, some of which map upon to common sense ideas from business or household budgeting, some not. Unfortunately the usages that don't tend to be those used in federal budget reporting, and the result is untold confusion. Now one way out would be to listen to me. Then again the relevant line on my CV under 'Budget Reporting' reads 'Some Guy', 'U of Intertoobz'. So really the only way out is to start to build your own Budget, Debt and Deficit Toolkit. And this post is intended to give you a start using sources provided by the official scorekeepers of such things: the U.S. Treasury, the Congressional Budget Office (CBO), the President's Office of Management and Budget (OMB) and the Joint Committee on Taxation (JCT).

First stop is the U.S. Treasury Department's Bureau of Public Debt and their web application Debt to the Penny. This handy application allows you to track Total Public Debt and its two components Debt Held by the Public and Intragovernmental Holdings to the literal penny as of the close of the daily books the last business day but one. That is if you check the site on Tuesday it will give you final numbers for Friday. And a search today gave me the results for Monday the 31st (since Tuesday was a Federal Holiday) with Total Public Debt of $16,432,730,050,569.12 . This number is almost exactly the same as Debt Subject to the Limit differing only in the last seven or eight digits, which change so fast that you wouldn't be able to see the difference. Debt Subject to the Limit is set by Congress and under current law is $16.394 trillion. With the result shown in the following official graph Debt Subject to the Limit Graph which shows total Public Debt Subject to the Limit (dark blue) passing through the Limit (orange) on the 31st.

Without comment (we are just building a toolkit here) we can move from Debt to Deficit. Here things get more complicated but probably the simplest tool available to us from official sources is found in CBOs annual The Budget and Economic Outlook: Fiscal Years 2012 to 2022 and the literal top line numbers from that is Summary Table 1 (click to embiggen)
Note that in this Summary table the bolded words Deficit (-) or Surplus unmodified by any adjective are unequivocably the sum of 'On-budget' and 'Off-budget' surplus/deficit. This isn't the only usage of 'deficit' in CBO reporting, and in a weird twist of terminology is NOT the same as what they call 'primary deficit', but it is a fair equivalent to what both CBO and the MSM term 'THE deficit'. For example take a standard news story from just today FY2011 Federal Deficit = $1,299,000,000,000 or just a minor update of the figure from the Table.

I'll flesh out some of the implications of this in Comments and in later posts but will leave with two points. One almost the entirety of the 'Off budget' surplus of $67 billion is the result of an increase in assets of the Social Security Trust Fund. It is NOT a measure of cash flow nor does cash flow measure into it. Two the claim that 'Social Security doesn't contribute to the deficit' is not quite right. It can and does contribute to the bottom line. But in either positive (surplus) or negative (deficit) directions. And in 2011 a cash flow negative Social Security Trust Fund ran a surplus for the purposes of THE federal deficit as defined.

More tools and more discussion later.

Monday, December 31, 2012

Social Security Roshomon

My first Daily Kos Social Security diary in a while:

Social Security Roshomon: an Actuary, a Defender and a Reformer Meet it begins to explore the implications of the following two figures from CBO

Bottom line: while Chained CPI would be an act of betrayal towards seniors who fully deserve current law scheduled benefits it still would produce a result in the dark gray of Figure 3, meaning a better basket of goods than current retirees get today. And this would likely be still be true after the reset at Trust Fund Depletion shown in Exhibit 4. That is 'Catfood' is simply a useful metaphor for Defenders, it isn't to be taken literally.

Sunday, December 30, 2012

Scheduled vs Payable Benefits: three definitions of Solvency

As usual click to embiggen.

When it comes to Social Security there are three definitions of 'Solvency', one used by the 'Actuary' another by the 'Defender' and the third by the 'Reformer'. And it is this difference that lays at the heart of the policy disagreements on how to achieve it. Something ostensibly all three seek.

For the 'Actuary' 'Solvency' is mostly a value free concept. Social Security is solvent when all income from all sources equals all costs leaving Trust Fund assets equalling 100% of the next years projected cost. This is known as having a 'Trust Fund Ratio' of 100. If the Trust Funds are projected to be solvent for the upcoming 10 year window Social Security is judged to be in 'Short Term Actuarial Balance'. If the Trust Funds are projected to maintain that solvency, or at least end up with it without going into the hole over a 75 year period it is judged to be in 'Long Term Actuarial Balance'. And since 2003 the Trustees added an additional measure of solvency measured over the 'Infinite Future Horizon'.

Under current law Social Security has a 'scheduled benefit' which is the arithmetic result of a formula calculated ultimately on the course of Real Wage increases over the worker's lifetime. It also has a 'payable benefit' based on a formula that is calculated by a combination of Real Wage setting the initial benefit, inflation setting the continuing benefit, and total wages driving the income. The details are not important for the present purpose, suffice it to say that 'scheduled benefit' is the measure of Cost while 'payable benefit' is the measure of Income minus Cost. And as such 'involvency' represents that point here Cost exceeds Income to the extent that Trust Fund assets are driven below a TF Ratio of 100. Or in an alternative formulation when those assets are driven to zero. At which time we have a scenario as depicted in the above figure: a sudden reset of payable benefits from the schedule (where they were topped off by asset redemptions) to the new payable equal to then current income from taxation.

In percentage terms that sudden reset amounts to right on 25% of then current scheduled benefits and it is that discontinuity that defines 'solvency crisis'. But here is where 'defenders' and 'reformers' depart.

For Social Security Defenders the crisis is one of a cut in benefits and the solution is putting in place policy that would maintain the scheduled benefit. For Social Security 'reformers' the crisis is more political, the risk that a reset in benefits from 'scheduled' to 'payable' will result in demands that the schedule be maintained via transfers from outside the dedicated income stream of FICA and tax on benefits. As a result the proposed solutions to this same 'solvency crisis' via benefit reset are diametrically opposed with defenders advocating measures to maintain current scheduled benefits while reformers see their task as reconciling future retirees to accepting then payable.

The key here, and the stopping point for this post is that either the prescription of the defender in saving scheduled or the reformer in reconciling retirees with payable will, if accomplished by appropriate changes in current law, satisfy the actuary's test for solvency. As will outcomes in between. From a purely technocratic standpoint any set of policies that has scheduled and payable share the same ultimate projected line with no discontinuity meets the 'solvency' test. Meaning that each has 'fixed' Social Security by 'preserving' benefits in a 'sustainable' fashion. Without at any point addressing the question of whether the resulting benefits actually meet any standard of societal inequity.

Are cuts to scheduled actually the 'Road to Catfood' or a 'Concession to Reality'? Well interestingly neither question has anything to do which the metric of 'Solvency'. The question, while of course of the utmost importance in real terms, is somewhat orthogonal to discussions revolving around 'actuarial balance'. Because from the latter perspective the 'crisis' IS the 'discontinuity' and not the real world implications thereof. And a 'fix' is a 'fix'.

Saturday, December 29, 2012

CBO: SS Scheduled vs Payable Benefits (Rosser's Equation illustrated)

'Rosser's Equation' is something between an in-joke and tribute to Prof. Barkley Rosser, Jr of JMU, an economist friend of mine who pointed out a surprising result: real payable benefits after projected Trust Fund depletion and subsequent 25% cut will still be higher in actual basket of goods terms than those of current retirees. This is because the scheduled benefit formula delivers something like 160% of the current benefit and as Prof Rosser pointed out to me long ago 75% of 160%=120%.

The above  Exhibit 9 from CBO's 2012 Long Term Projections for Social Security resolves Rosser's equation for selected demographic cohorts and income quintiles. And the results show that the retiree born in 1947 who reached FRA (Full Retirement Age) in 2012 would see an initial benefit ranging from $10k to $25k and representing 100% of the schedule. On the other hand the retiree born in 1970 and who will reach FRA at age 67 in 2037,  that is after TF Depletion would see initial benefits in 2012 dollars ranging from $12k to $33k.

Now there is no doubt that an overnight 25% cut in benefits at Trust Fund Depletion would represent huge sticker shock for then retirees. And there are very good reasons based in societal equity for scheduled benefits to rise at the real rate the formula delivers. As such we should make every effort to find ways of closing the gap between payable and scheduled from the bottom up rather than forcing scheduled down simply to avoid the shock of of cut. Because the risk is that the 'cure' might deliver a worse result in real terms than the 'crisis' left unaddressed.

Which is why I have been maintaining for years that 'Nothing' IS a Plan. Not as good a plan as it was when Prof Rosser and I started corresponding five plus years ago, circumstances have changed. Still it represents the "First Do No Harm" alternative, after all a check in 2040 20% better in real terms than an equivalently situated retiree gets today doesn't exactly meet the definition of existential crisis for Social Security.