CBPP: Bush's plan fails on solvency

A preliminary Center on Budget and Policy Priorities analysis of President Bush's proposals for Social Security shows that the combination of private accounts and progressive indexing would close only 30 percent of the 75-year actuarial deficit, move the date of trust fund exhaustion forward by 11 years, and add trillions to the national debt. Here's the key table:

Table 1:  Impact on President’s Plan on Social Security Financing and Solvency
	Current policy	President’s sliding-scale benefit reduction, by itself	Sliding-scale benefit reductions plus the  President’s accounts
Year when Social Security benefits first exceed receipts	2017	2017	2011
Year of Trust Fund exhaustion	2041	2047	2030
Size of 75-year shortfall, as a percentage of taxable payroll	-1.92%	-0.78%	-1.34%
Percentage of 75-year shortfall that would be closed	0%	59%	30%

This about phaseout, not solvency. That much is clear.

Comments

[John Thacker]

But the private accounts also reduce the future obligations past the "insolvency date" as well. It decreases the size of the 75-year shortfall that would be closed because some of the money is getting diverted from the first 75 years to reducing benefit obligations in the 25 and 75 years beyond that.

It's really bad accounting to pretend that Social Security has absolutely no problem until the "insolvency date" that the costs finally exceed revenue, and then that once that date is reached the problems are absolutely insurmountable. But that's what your chart does.

Private accounts merely rearrange the debt-- they reduce future promised benefits (even outside that 75 year window) by also reducing current revenues. It can't be said to have a long term effect on insolvency-- except so far as they prevent the government from further cutting benefits later to make things solvent. If you're in favor of further benefit cuts past the President's plan, then I can understand being opposed to the accounts.

Your chart, and the CBPP's study, is more misleading than anything that the President has proposed.