I came across this unusually thoughtful article on the state of the Social Security system from the editorial staff at Fisher Investments and only wish everyone would read it.  It does an excellent job of putting the numbers associated with the system's viability in context.  To wit, take them with a big grain of salt.  Due to the nature of any program providing retirement benefits, the Social Security actuaries forecast decades into the future.  Yet any such forecast is inherently unreliable and subject to enormous fluctuations over time.  As they note, "You can see this in past long-term governmentally produced forecasts, which are frequently wide of the mark—like federal government surplus projections for the next decade minted in 2000."  Don't we wish...

Yet politicians pick up on the latest projection, promote it wildly if it happens to suit their agenda, and the press often picks up their lamentations, treating them without offering much perspective.  For instance, the report of the actuaries this spring moved up the expected date of the Social Security Trust Funds exhaustion by several years, to 1933.  Only a few years ago the date was around 2049.  How could the funds be so diminished in just a few years?  Every year the actuaries update their assumptions based on recent economic developments.  Key factors this year were a reduction in long term earnings growth over the next 75 years due to (1) higher long term energy prices and (2) slower growth in work hours coming out of the recession.  In a future year (perhaps during brighter economic times) these trends could be reversed, or other trends such as unanticipated productivity gains could cause the forecast of Trust Fund exhaustion to recede once again further into the future.

In sum, a forecast indicating a shortage in the Trust Fund in 20 years should be little more than a red flag that if something isn't done, we will eventually encounter a problem.  On this score everyone is in agreement and the question is when will it be politically feasible to make the fix.  Fisher Investments is pessimistic on this score, thinking there will have to be much more of a crisis to bring this all to a head. Indeed that was the case in 1983, when the fabled Greenspan Commission did the last big fix - within about six months of system becoming insolvent!  I am more optimistic.  In the grand debt bargain that Obama and Boehner almost reached last summer to lop around $4 trillion off the long term debt, Obama put a major concession on the table as part of a broader package: move the COLA adjustment to a chained CPI basis.  That coupled with an increase in the tax cap or gradual increase in the rate and another longevity adjustment could do the trick and bring balance to Social Security for another 50 years or so.  Both parties would endure shrieking from their bases, a reasonable price to pay for Social Security security.