ARTICLES BY TOPIC ¦ SOCIAL SECURITY



Letter to the Editor ¦ December 7, 2004
It's Simple: Social Security Is Very Complex

Susan Lee's The Dismal science column "All You Need to Know about Social Security" (editorial page, Nov. 23) argues for complex changes to cut the costs of Social Security, such as adopting President Bush's Plan Two to privatize a portion of workers' contributions and using the consumer price index to determine the AIME (average indexed monthly earnings), instead of indexing to real wage growth.

But there is a flaw in her basic premise that Social security is heading for disaster" - the available evidence is to the contrary. The recent long-term (75-year) projections of the Social Security actuaries, using overly pessimistic assumptions dictated by the politicized trustees, grossly understate future assets. In the period 1992 to 1996, the projections of assets to the end of 2002 understated actual assets by an average of 20%. This undoubtedly created the long -term deficit of 1.89%.

A major factor for this misfiring is the trustees' use of a future average gross domestic product of a mere 2% compared with the 3.3% historic average. Using only 2.6% as the average future GDP produces a surplus for each of the next 75 years. There is thus no need for any changes to Social Security as Ms. Lee assert.

David Langer
Consulting Actuary
New York


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