The Social Security Trustees' Projection Process: Imperfect but Indispensable (Part 2)

My last column reviewed several recent criticisms of the Social Security trustees' projection history by Konstantin Kashin, Gary King and Samir Soneji. This column reviews other criticisms by the same authors, this time focusing on process and presentation. As I indicated in my last column, their factual observations regarding the projections strike me as essentially correct, though I find myself in disagreement with many of their interpretative conclusions. The following summarizes my perspectives on some of their process criticisms, also restated in my own words.

Criticism: The reports are insufficiently transparent about methodologies and prior projection errors. This undercuts the ability of outside experts to replicate, analyze and offer improvements to the projection methods, as well as the trustees' ability to learn from past mistakes.

Transparency is a longstanding concern of the trustees, and we expend significant time and effort to increase it.  The SSA actuary's office now posts a wealth of methodological specifications online going a great deal of the way toward enabling others to replicate their projection methods.  The trustees' report itself contains ample sections detailing how projections have been revised over the last year in light of updated information.  It also contains a long-running table showing the history of prior actuarial balance estimates.  Another table compares actual prior-year operations (both income and expenditures) within each separate trust fund, to projections in the five previous trustees' reports.  And there's much more.  (Note to readers: to get some of these links to work, the hyperlink address may need to be copied and pasted directly into a browser address window).

Considerable discussion occurs each year between the trustees' offices about how to best explain deviations from prior projections (still more time is likely spent on this for the Medicare report, where the methodological issues are more complex).  As one example of a trustee initiative to expand such information, a footnote was recently added to the projection history table, directing readers to an online actuarial note breaking down the changes by source.

The trustees constantly face a trade-off between thoroughness and clarity.  As it is, the trustees' report is 250 pages long and its density challenges the most dedicated of readers.  In this context the pursuit of transparency is always ongoing.  More can be done to explain past forecasting errors accessibly and clearly.  A persistent challenge, especially when writing by committee, is to do it without making the reports still longer, more redundant or inaccessible to non-specialists.

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