Just a Wild Ass Guess?

Before the Bush Administration again begins to push a program to "reform" (read "gut") Social Security, you should read the report just issued by the CBO, Projections of Net Migration to the United States. It shows that the estimates of the solvency of the Social Security trust fund are based upon assumptions that, in the dry words of the report, "are subject to a high degree of uncertainty."

Estimates of immigration trends are necessary components in determining the future size of the Social Security trust fund, since:

higher rates of immigration improve the [Social Security] system's solvency, at least for a time—because the immigrant population is disproportionately composed of people of prime working ages, with relatively small percentages of children and the elderly. However, outlays are also affected: those immigrants will eventually retire and become eligible to collect Social Security benefits.

Both the Social Security Administration and the Census Bureau make such estimates. The estimates vary significantly. In 2003,

[a] Technical Panel on Assumptions and Methods was appointed by the Social Security Advisory Board to review the trustees' methodology and key demographic and economic assumptions used to project the future financial status of the system’s trust funds, including assumptions about immigration.

With respect to immigration, the Technical Panel's estimates were strikingly at variance with the estimates of both the Social Security trustees and the Census Bureau. The following chart dramatically illustrates the differences:

(Click chart for larger image.)

You will note that the trustees' estimates are, in the near term, the lowest estimates of the three. This contributed to their recent finding that the trust fund would be depleted earlier than previously estimated. If the Technical Panel's estimates are correct (or, more appropriately, closer to correct), we have more time to deal with structural problems in the system than the trustees' estimates would lead us to conclude. And remember, the estimates as to immigration are only one set of assumptions that go into the final estimate of system solvency. Thus, any single report by the trustees has to be taken with a large heaping of salt because the various assumptions upon which the trustees' conclusions are based "are subject to a high degree of uncertainty."