Measuring Social Security's Financial Problems

29 Pages Posted: 15 Feb 2005 Last revised: 22 Sep 2010

See all articles by Jagadeesh Gokhale

Jagadeesh Gokhale

Cato Institute

Kent A. Smetters

University of Pennsylvania - Business & Public Policy Department; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

Abstract

The U.S. Social Security system has helped keep many retirees out of poverty. However, according to the Social Security and Medicare Trustees, Social Security faces a future financial shortfall of $10.4 trillion in present value. This enormous imbalance has received little attention in public debates about Social Security. Instead, the media and policymakers continue to focus on the program's trust fund and several other ad-hoc measures that create a misleading impression of the size of Social Security's financial problem. Although the Social Security Trust Fund is not projected to be exhausted until 2042, Social Security's $10.4 trillion present value imbalance is accruing interest and will grow by $600 billion during 2004 alone. The current cash-flow federal budget, however, is biased against reforms that would improve Social Security's finances. As shown herein, a new federal accounting system would remove this bias.

Suggested Citation

Gokhale, Jagadeesh and Smetters, Kent, Measuring Social Security's Financial Problems (January 2005). NBER Working Paper No. w11060. Available at SSRN: https://ssrn.com/abstract=649204

Jagadeesh Gokhale

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

Kent Smetters (Contact Author)

University of Pennsylvania - Business & Public Policy Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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