SS Projected Income/Cost #1

Another chart for a blog comment at Angry Bear.

The Income/Cost values are calculated from 2006 report Table IV.B1 for combined OASDI. I failed to update to 2008 because I was just looking for a conceptual impact. The magenta line is projected according to Intermediate Cost and the Red is projected according to Low Cost. The idea was to determine what would happen if we chose to limit haw fast we allowed the SS Trust Fund to be used up. The green line is the calculated tax rate required to assure that tax receipts provide a minimum of 85 percent of each years costs. The would start going up in 2025 and would reach 6.7 percent in 2040 (which is the last year IC costs and income are provided).

Notes:
The scale is exagerated since they do not go to zero, but it makes it more readable to match the left and right scales.
I assumed that costs do not change as the tax rate changes because I have only the data from the table, no underlying models.

SS Projection Uncertainty and Recessions

In a post at Angry Bear Bruce Webb counters someone's claim that the recession is going to force us to deal with changes to SS sooner. My thoughts (on accuracy of projections) require looking at this chart which is drawn from several different years reports.

You can see that the 1990-1991 recession caused actuals to diverge from the 1985 projection (green line). Employment was very slow to recover, taking about 5 years to return to pre-recession growth rates. By 1995 the projection assumed that the low growth rates had a permanent effect. Five years of growth brought things back up, but the 2001 recession turned it down again. Even with the slow recovery from 2002 to 2006, the 5-10 year projection from 2000 was beginning to look too pessimistic.