Social Security: A Long Term Planning Horizon Like No Other

The Social Security Act was passed 77 years ago this month.  When you consider that the planning horizon for Social Security is 75 years into the future, then the most distant horizon at the start of the program was 2010, just two years ago.  What did 2010 look like, viewed from way back in 1935?  I doubt anyone but the actuaries at Social Security gave it much thought.  Who would have imagined the relentless march of technology, television, the computer, moon and Mars travel, the Internet, iPod, iPhone, iPad?  The U.S. population growing from 127 million to 309 million?  Per capita real income growth up over 400%?  A lot can happen in 75 years...

Now let's turn and look ahead 75 years, as the Social Security actuaries do each year.  Pretty foggy looking, isnt' it?  It's very hard to gauge what that future will bring.  I think we need to keep this in mind when we digest the forecasts for Social Security solvency and the estimates of what changes would be required to return it to balance.  That's because these estimates can vary considerably from year to year based on how the economy has done in the last year.  Needless to say, with the Great Recession performance of the last few years, the forecasts have dimmed considerably and steps required to right the Social Security ship have steepened sharply.  However, over reliance on these estimates as pin point forecasts is an incorrect use of the information.  Rather, we need to use this information as general feedback to guide us in the direction to take in correcting the system, knowing that large swings in one direction over a few years can be mitigated by swings in the other direction in the future.  Remember, it was only about a dozen years ago that people were fretting over U.S. government surpluses that would lead to a shortage of government debt for bond purchasers in the not-too-distant future!  (Talk about happy days...) 

Social Security is more a like a big ship that needs occasional changes of direction supplemented with constant tweaking to keep it on a viable course for another 77 years.