The U.S. Treasury Department has released its first of six issue briefs on the Social Security and its potential reform, "The Nature of the Problem." It is a very good overview of the projected future shortfall based on the latest Social Security Trustees Report. It is particularly gratifying to see these passages in a Treasury brief:
Viewing Social Security from the perspective of how it affects current and future individuals and generations explains why reform can be fairer to future generations the sooner it is implemented. Delay reduces the options for distributing the financial burden of reform across generations because delay exempts additional generations from sharing in the financial consequences of reform.
To make this point more concretely, consider a policy of closing Social Security’s permanent financing gap by immediately increasing the payroll tax rate by 3.5 percentage points. This policy would affect all current and future workers. If the tax increase were instead delayed until 2041, when the trust fund is projected to be depleted, the requisite tax increase would be 5.8 percentage points rather than only 3.5 percentage points—the difference being that there are fewer cohorts (and therefore less resources) to tax the longer one waits. Similarly, all retirees’ benefits would have to be cut by 20.4 percent in 2007 to make Social Security permanently solvent—but this would rise to a benefit adjustment of 30.4 percent if reform were initiated in 2041. These examples show that fairness to future generations requires that action be taken sooner rather than later.
They appeared here (my first post on Social Security) nearly three years ago. The teaser for the next of the six briefs, from footnote 4 of the current brief:
The special Treasury securities in the present trust funds represent claims on the government and—ultimately—the public, in the form of future general tax revenues. Whether these trust fund accumulations constitute true pre-funding is an open question, and is discussed in Treasury’s second issue brief.
I'll look forward to seeing it.