Since 2000, the Social Security Administration has been consistently overstating the financial health of its trust funds program, according to a new study from researchers at Harvard and Dartmouth.
Current SSA actuarial forecasts have become increasingly biased and are likely off by billions of dollars, the report says, warning that unless legislators act soon, the program could be insolvent earlier than the predicted 2033 date.
"These biases are getting bigger and they are substantial," said study co-author Gary King, director of Harvard's Institute for Quantitative Social Science, CNBC reported. "[Social Security] is going to be insolvent before everyone thinks."
Social Security predicted in its annual report last July that its old age and disability trust funds would be depleted by 2033, after which the government would only be collecting enough payroll tax revenues to pay for about three quarters of promised benefits through 2088.
King said his team hasn't estimated how much sooner the funds could run out, but said it was in "significantly worse shape" than official estimates, according to CNBC.
"After 2000, forecast errors became increasingly biased, and in the same direction. Trustees Reports after 2000 all overestimated the assets in the program and overestimated solvency of the Trust Funds," the researchers wrote.
The Harvard-Dartmouth team found that outdated methods used to create the forecasts are largely to blame for the faulty predictions. Additionally, efforts by the SSA to insulate the forecasts from political influence have actually resulted in the agency resisting pressure from outside technical experts as well, which "insulated the process from data that could improve their accuracy," according to the report.
"The bias in their forecasts results in a picture that's rosier than it really is," King said. "They're not saying the system is in good health. Pretty much everybody who evaluates Social Security realizes there's a problem ... But the system is in significantly worse shape than their forecasts are indicating."
"This is a major problem," he added. "Social Security is the single largest government program. It lifted an entire generation of elderly out of poverty, and today affects the lives of almost every American. The forecasts are essential for ensuring the solvency of the Social Security trust fund, as well for Medicare and Medicaid, which together add up to half of the entire budget of the federal government."
To improve the forecasts and allow for independent forecasts to be conducted, King recommended that the agency make the data used in the forecasts publicly available.
"No one else can make fully independent forecasts of Social Security because they have the data, and they don't fully share it with anyone," King said. "They don't share it with government; they don't share it with academics; they don't even share it with other parts of the Social Security Administration. There's no reason it needs to be kept secret ... And if they were to make the data available to the scientific community, academics would fall over themselves competing to help them make better forecasts, and ultimately that would be better for absolutely everyone in the United States."
