Social Security: Disaster Is Closer Than It Appears

By Brenton Smith

Every car sold since I was born carries a warning on the passenger side view mirror: “Objects in the mirror are closer than they appear.” Car manufacturers provide this warning because the same mirror produces different views of the same traffic: one accurate and one dangerous.

The Social Security debate has its own set of mirrors, with an illusion actually designed to make the problem look smaller than it is. The difference here, of course, is that car manufacturers see the danger of misreading traffic, whereas those in our government want the public to misread the size of the underfunding of Social Security.

The problem in Social Security is that the system has made more promises than it has money. This problem is expressed as the “shortfall.” The figure represents the amount of promises left over after the trust fund has been exhausted. It is total amount of promises in excess of what Social Security can pay.

The Trustees provide information on the “shortfall” in two different forms. One is the 75-year shortfall, and the other is the infinite shortfall. In 2012, the Trustees determined that Social Security has a shortfall of 20.5 trillion dollars over the infinite horizon, whereas the 75-year shortfall is roughly $8.6 trillion. So to believe that the 75-year “shortfall” is meaningful, you have to believe that the vast majority of Social Security’s problems lie 76 years or more away.

No one does, of course. Washington uses this view because it makes the problem appear smaller — about 12 trillion dollars smaller. So it is important for readers to understand how the illusion works.

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