Well nothing like a conflicting report to come out and to make you question what shape SS is in.
False-Alarm: Personal Finance News from Yahoo! Finance
Yep. Obviously, all sides in most issues will spin the data as best they can.
I'll try to avoid the politics still write out my opinion.
We "know" that the ratio of active workers to retirees is going down, and will drop quickly if baby boomers retire on schedule.
(1) This is a problem for our entire economy (not just SS) because all economic goods are produced by active workers, but we have a culture that thinks former workers should be able to continue to consume (I like this culture). For example, returns on stocks could go down if a "shortage" of workers means that workers are able to get a higher share of corporate income, leaving a smaller share for owners and lenders. Somehow, workers will need to contribute more of their output for the care and feeding of retirees, or retirees will need to get along on less.
(2) The Trustees report includes three dates, but economically these are just milestones. The stress comes on gradually.
(3) The "Trust Fund" is a political agreement, pretty much like the "Highway Trust Fund". It's a spreadsheet that lets us compare the revenue from a certain tax, which was supposed to be dedicated to a certain program, to the money we're actually spending on that program. For SS, we've had more tax money than expenses for the last 20 years, so the spreadsheet shows a pretty big balance.
(4) The "Trust Fund" also has legal standing under current law. The Treasury has the legal authority to continue sending SS checks even when the annual SS benefits exceed the annual SS taxes. However, the Treasury does not have the authority to continue to send checks after the spreadsheet says the Trust Fund has run out of money.
(5) The "Trust Fund" doesn't exist in macro-economic terms.
(6) Note that the date the trust fund runs out is very sensitive to the imputed interest in the spreadsheet. Again, the interest has legal but not economic significance.
(7) The article focuses on when the Trust Fund runs out. This is a crude indicator of how future SS taxes and future SS benefits are related, but "crude" is an important word. Better milestones would be the first year that benefits exceed taxes, or the ratio of benefits to taxes at some fixed point such as 2040. These numbers are more stable from one report to the next.
(8.) The author claims that the "low cost" or "optimistic" set of assumptions are more realistic than the "intermediate" set. He provides only one reason - projected GDP increases are less than past GDP increases. In the actuaries model, GDP is not an input. It is the result of: (number of workers) x (productivity per worker).
The number of workers is the output of a bunch of demographic assumptions. If you look at growth in the labor force from 1960 to 2005, you'll see the the entire baby boom generation moving into the workforce. You'll also see a major increase in the percent of women who work outside the home. These two things increased the labor force and therefore increased the GDP. The actuaries don't believe these two factors will repeat over the next 40 years (duh). Therefore, it's not surprising that the intermediate numbers have slower growth in the labor force, and this generates slower growth in the GDP.
(One thing that could happen is a lot more immigrantion. However, note that we want "highly productive" immigrants if we are going to increase the GDP in a way that's really beneficial. Our current immigration policies seem to produce a high proportion of low-skill workers.)
So my opinion is that people who say SS's projected financial difficulties are just the imagination of overly-conservative techies aren't making a persuasive case.
OTOH, I'd say that the people who say SS is "going bankrupt, and should be replaced with private accounts" have an even weaker case, but that's another post.
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