The Social Security trustees issued their annual report last week. This report includes estimates for the present values of system receipts and expenditures, based on projections many years into the future.
Each year, the federal government uses the trustees’ reports to include present values for Social Security and Medicare in the “Statements of Social Insurance” published in its overall, consolidated report. Those reports show massive shortfalls in the present value of future revenue (contributions and dedicated taxes), less the present value of future expenditures (for scheduled future benefit payments).
In the recently released 2017 annual financial report, that shortfall stood at $15.4 trillion, an increase of more than $3 trillion compared to four years ago.
Things get a lot more interesting when you look at the three different groups for which present values are calculated. The report calculates, for a 75-year forecast horizon, present values for receipts and expenditures for a) participants who have reached eligibility age, b) participants who have yet to attain eligibility age, and c) future participants (the young and the unborn).
Future participants are damned, it appears.
The $15+ trillion negative position in Social Security last year arrived despite an $18 trillion positive contribution from future participants! Essentially, this means future participants face a huge negative return, under current law, while they support the rest of us.
An important qualifier, however, is that these Social Security projections depend on current law— whatever that means.
If you weren’t confused yet, here are two sentences from the annual financial report of the U.S. Government to help “explain” things:
The SOSI projections … are based on current law; that is, they assume that scheduled social insurance benefit payments would continue after related trust funds are projected to be depleted, contrary to current law. By law, once assets are exhausted, expenditures cannot be made except to the extent covered by ongoing tax receipts and other trust fund income.
How can the SOSI projections be based on current law, while they assume payments will be made “contrary to current law?”