January 25, 2005

On Friday, January 21^st, Centrists.Org and the Alliance for Worker Retirement Security co-hosted a luncheon discussion on the financial future of Social Security.  The event featured presentations by Social Security Administration Chief Actuary Steve Goss, Congressional Budget Office Director Doug Holtz-Eakin, and United States Comptroller General David Walker.  The event was moderated by Howard Gleckman, senior Washington correspondent for Business Week.

EVENT TRANSCRIPT (Coming Soon)

All three panelist agreed that Social Security faces financial challenges that should be addressed sooner than later.  Although there has been considerable attention to the differences in the projections put forward by CBO compared to the estimates by the Social Security trustees, Goss and Holtz-Eakin stressed that their respective estimates tell the same basic story.  Holtz-Eakin stated that the difference between CBO and SSA's numbers did not represent “a substantial difference in any way.”  He noted that the primary reason for the difference between the CBO’s projection of trust fund exhaustion by 2052 compared to 2042 under the Trustees estimates date is that CBO assumes that the bonds held by the Social Security trust fund will earn a higher interest rate than the Trustees assume.

Steve Goss noted that acting sooner would provide "many more options" for fixing the problem, allow changes to be phased in gradually, and give workers "more advance notice" of the changes in retirement benefits.

CBO Director Doug Holtz-Eakin and Comptroller General David Walker both noted that beginning in 2008 the Social Security surpluses begin to decline and, by the end of the next decade, the Social Security system will begin to run cash deficits that will place a burden on the general Treasury, require tax increases, cuts in other government programs or increased borrowing.  Walker noted that the existence of trust fund balances have moral and legal significance, but no economic significance.  They don't answer the question of how the government will obtain the cash needed to pay benefits in the future.

 

The panelists problem is driven by demographics and future labor supply.  The deterioration of the financial condition is a direct result of the increase in the dependency rate.  In response to a question, Goss stated that changes in immigration don't have a significant impact on the estimates, though increased immigration would make a slight improvement in the outlook.

 

Holtz-Eakin noted that rates of return will continue to decline under a pay as you go system as long as the dependency ratio continues to increase.  He added that rates of return will always be better under a system with advance funding under those conditions.

 

Goss also pointed out that the declining labor supply is the reason for the assumption that GDP growth will be lower in the future, because GDP growth is a function of labor supply and productivity.  When the lower rate of growth in the labor supply are taken into consideration, the Trustees  estimates for economic growth are consistent with historical patterns.

 

In response to several questions the panelists agreed that Medicare poses a greater problem to the nation’s financial outlook, but that does not mean we shouldn’t address SS first.  Holtz-Eakin pointed out that policymakers at least know the options for dealing with the challenges facing Social Security, which is not the case for Medicare and Medicaid, which will need to be addressed as part of a broader solution for health care costs generally.   Walker added that an agreement on changes to address the financial challenges facing Social Security could serve as a confidence building measure that could make the task of dealing with Medicare and Medicaid somewhat easier.

EVENT TRANSCRIPT (Coming Soon)

Presentation by Dave Walker, Comptroller General of the US. 
Presentation by Steve Goss, Chief Actuary of the Social Security Administration. 
CBO Report.  Doug Holtz-Eakin, Director of the Congressional Budget Office.

AWRS / Centrists.Org Joint Press Release Regarding the Event