Krugman: Early Social Security Projections

[ProSense]

Early Social Security Projections

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You see, in discussions of Social Security it’s often argued that in the program’s early years, nobody could have imagined the increases in life expectancy that have actually occurred, so nobody could have imagined that we’d have as many beneficiaries relative to the number of people of working age. And I thought I knew that this was wrong — that people in the 30s and 40s did know about rising life expectancy, and expected it to continue.

Well, it turns out that Table 9 in the 1945 report (pdf) shows high and low estimates of the population distribution looking forward as far as 2000, which we can compare with the actual population distribution in 2000.

What you can see right away is that the SSA expected a much smaller population than we actually ended up with — the baby boom and immigration weren’t anticipated. But they also expected a somewhat older population than we actually got: their “low” estimate put the ratio of seniors to adults under 65 at 20.8%, almost the same as the actual 21.1%, while the “high” estimate put the ratio at 29.1%. That is, in 1945 the Trustees thought that America would probably be a grayer, older country by 2000 than it actually ended up being.

All this has only limited bearing on the future, as we move into an even older country. But it’s still interesting, at least insofar as it debunks a common Beltway legend.

Fascinating.

[Hannah Bell]

1. kr.

[SheilaT]

2. Thank you for posting this.

The one thing they simply could not have foreseen in the early 40's was the population boom of the late 40's into the early 60's. We also wound up with a lot more immigration after the change in the immigration laws in 1964.

Since illegal immigrants don't collect social security, despite what the Right tries to claim, they don't matter except that many of them do pay in and will never collect.

[OHdem10]

3. Thanks. Important for us all to keep this stashed in our minds

for use as the debate heats up.

[inna]

4. indeed.

[boppers]

5. So, they got it close..... for 10 years ago.

I wonder what's different between ten years ago, and now, and ten years from now?

Oh, that's right. The Boomers.

[Igel]

6. It's also worth pointing out that the numbers don't "work" using current assumptions.

There are far more adults >=65 years of age than there are SS beneficiaries >=65.

Currently, the 65+ group / 18-64 is important. Why? Because most adults work. Most adults collect SS benefits when they retire.

In 1945, a lot of women, it was assumed, wouldn't work. Moreover, a lot of retirees wouldn't collect SS benefits. So the ratio Krugman points out, while crucial today, isn't really all that meaningful. Of course, the "low" assumption is only nearly met because, as you point out, the baby boomers swelled the <65 group for a while and now will swell the ranks of the >65 group.

Now, the only reason that anybody cares is because that ratio, payees:payers, helps inform debates about benefit levels. Now. If you look at the 1945 assumptions you see that the number of workers paying it who wouldn't collect is anywhere from 40-48% of the retirement-aged male population. In other words, you would have far lower taxation rates, lower pay-out rates, and lower beneficiary rates.

His point is accurate. It's also specious. He does that in the NYT quite a bit, and it's really, really annoying--he'll cite a # but it won't mean what he assumes you'll assume it means. He's correct, if anybody accuses him of being misleading; but "correct" and "misleading" aren't contradictory terms, and it's misleading to assume they are.