A weather vane for Social Security

WASHINGTON - Each year the Social Security trustees try to figure out where the system is heading.

The publication of the trustees’ annual report on Wednesday will come as Congress is struggling over President Bush’s proposal to give younger workers the option of putting some of their Social Security tax payments into private retirement accounts.

So this year’s report from the six trustees, who include Treasury Secretary John Snow and Social Security Commissioner Jo Anne Barnhart, will get closer scrutiny than the reports usually do.

The Social Security Administration’s actuaries use three different sets of economic and demographic assumptions in preparing the report. The one most often cited is the intermediate set which, according to their report last year, “reflects the Trustees' best estimate of the trust funds' future financial outlook” over the next 75 years.

Here are five variables to focus on in the soon-to-be-released report:

#1 The life-span issue
Life-prolonging medical procedures put more pressure on Social Security. Since Social Security benefits are paid as a life-long annuity, it will make a substantial difference to the system whether people live to age 72 or to age 92.

In 1955, an American woman who survived to age 65 could be expected to live, on average, another 15.6 years.

But today a woman reaching age 65 will live another 19 years. By 2045, the trustees forecast, a 65-year old woman will live, on average, another 21 years, a forecast some demographers say underestimates future increases in longevity.

#2 How soon does the fiscal crunch come?
Sooner than you might think: in 2008, according to Comptroller General David Walker, the non-political appointee who is the government’s chief accountant.

Walker reminded Congress in testimony on March 9 that the excess cash now flowing into Social Security (about $65 billion in 2003) that is not needed to pay immediate benefits is being used to help pay for national parks, beef inspection, medical clinics for poor people, etc.

But due to an increasing number of retirees, that excess “will begin to decline in 2008, and by 2018, the cash surpluses will turn to deficits. Beginning in 2008, Social Security’s declining cash flow will begin to place increasing pressure on the rest of the budget.”

Whether the trustees push that 2008 crunch date forward or move it back in this year’s report, Walker’s warning remains valid. In about three years, the rest of the federal budget will begin to be pinched by Social Security’s declining cash surplus.

While the Social Security system holds $1.3 trillion in Treasury securities, “the trust fund doesn’t have any real money in it,” Social Security trustee Thomas Saving said in February. The securities in the trust fund are a promise to pay benefits, but they aren’t the cash needed to pay benefits.

In 2000, Saving, who teaches economics at Texas A & M University, was appointed by President Clinton to the trustee’s slot reserved for a Republican nominee. He supports private accounts within Social Security.

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