Co-authors include Dartmouth professor Samir Soneji.
By Raif Karerat
WASHINGTON, DC: While the Social Security Administration (SSA) has projected that its funds will have run dry by 2033, new studies from Harvard and Dartmouth researchers find that the SSA’s forecasts have been consistently overstating the financial health of the program’s trust funds since 2000, reported CNBC.
“These biases are getting bigger and they are substantial,” said Gary King, co-author of the studies and director of Harvard’s Institute for Quantitative Social Science. “[Social Security] is going to be insolvent before everyone thinks.”
Once the trust funds are drained, annual revenues from payroll tax would be projected to cover only three-quarters of scheduled Social Security benefits through 2088.
“After 2000, forecast errors became increasingly biased, and in the same direction. Trustees Reports after 2000 all overestimated the assets in the program and overestimated solvency of the Trust Funds,” wrote the researchers, who include Dartmouth professor Samir Soneji and Harvard doctoral candidate Konstantin Kashin.
King and the studies’ co-authors interviewed current and former Social Security Administration actuaries involved in the forecasting process in a bid to determine why the forecast bias has happened since 2000.
“Actuaries worked really hard at being unbiased,” he said. “We find no evidence that they bend to political pressure.”
But the agency’s attempts to be unbiased have created a bunker mentality, he told CNBC, which makes it easier to ignore the fact that the American life expectancy has risen more significantly than they projected and how that could be detrimental Social Security’s funding.
“The issue is not the people,” King said. “If you swap out the people and kept the same procedures, you would very likely get the same result.”
He is now urging president Barack Obama’s administration to openly share their data and methods with the public so outside researchers are able to contribute to and improve on the existing forecasts.
“Fair, transparent and accurate forecasts give Congress more of a chance to consider of all the policy proposals to preserve the solvency of Social Security,” King explained to CNBC. “And it’s easier to make changes to Social Security now than in the future,” he continued.