Researchers at Harvard and Dartmouth Universities have concluded that since 2000, the projected health of the Social Security trust fund has been rosier than it actually is. The official word from the Trustees report is that the Social Security trust fund will be exhausted in 2033, meaning that benefits would have to be cut by 25 percent or taxes raised. But study authors Gary King, Konstantin Kashin, and Samir Soneji argue that many incorrect assumptions are resulting in an upwardly biased estimate of how much money is available in the trust fund. For example, the life expectancy has been underestimated for those 65 years and older, and the fertility rate among workers has been overestimated. Underestimating life expectancy by just 1.3 years means that 150,000 more retirees will receive benefits than originally predicted.
While this is certainly a shock to many, the Trustees have always made some problematic assumptions. Some economists argue that the discount rate used to calculate the program’s unfunded liabilities is too high considering the extraordinarily low rates on Treasury bonds. Also, while the Harvard and Dartmouth report did not examine the Medicare program, the solvency of Medicare has also been hotly debated, as NCPA senior fellow Devon Herrick wrote last year.