National Public Radio (NPR) economics correspondent John Ydstie cited a misleading estimate of Social Security's long-term revenue shortfall over an "infinite horizon," even though the American Academy of Actuaries has called this figure "misleading." In a report on Social Security on the February 22 broadcast of NPR's Morning Edition, Ydstie explained: "Over the next 75 years, there's a $3.7 trillion gap between what the system has promised in benefits and the resources it will have. And, over an even longer time frame, that gap will rise to more than $10 trillion."
He then quoted former Bush administration Treasury official Kent Smetters, who also cited the misleading $10 trillion figure. Smetters, who served in 2001 on the President's Commission to Strengthen Social Security, noted that "Model 2," the second of three options that the commission proposed for reforming the system, "completely eliminates the $10.4 trillion imbalance in the Social Security system."
But this figure, which comes from the 2004 report of the Social Security trustees, is misleading, according to the American Academy of Actuaries, the country's leading association of insurance and demographics experts. The academy criticized the use of "infinite horizon" projections for Social Security in a December 19, 2003, letter to the Social Security trustees:
Before 2003, the annual Trustees Reports showed OASDI's [Old-Age Social and Disability Insurance trust fund] actuarial deficit and, more recently, its unfunded obligations only on an open-group basis over the statutory 75-year valuation period. For the first time, in their 2003 Annual Report, the Trustees included OASDI's ... actuarial deficit and unfunded obligations on an open-group basis for an infinite time period.
The Social Insurance Committee disagrees with Recommendation M-6. Rather, the committee believes that the new measures of OASDI's unfunded obligations included in the 2003 report provide little if any useful information about the program's long-range finances and indeed are likely to mislead anyone lacking technical expertise in the demographic, economic and actuarial aspects of the program's finances into believing that the program is in far worse financial condition than is actually indicated.
Ydstie also failed to place the Social Security deficit in the context of other liabilities that the federal government has recently assumed. The Center on Budget and Policy Priorities has shown in the graph below that in terms of percentage of gross domestic product (GDP), the fiscal impact of other recent Bush administration initiatives dwarfs the long-term revenue shortfall of Social Security.
(Full disclosure: The author is a former NPR intern.)