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February 04, 2005

Passive Resistance from the President's Council of Economic Advisors

The President's Council of Economic Advisors is ordered to write that faster productivity growth will not improve the outlook for Social Security. And they do what they are told:

...While [faster] economic growth makes it easier to sustain some government spending programs, this does not apply to Social Security... (Council of Economic Advisors, "Three Questions About Social Security," February 4, 2005.)

But they engage in a form of passive resistance to the demands of their political masters. For three paragraphs further down, the CEA writes that:

Simulations in the [2004] Report [of the Social Security Trustees] indicate that an 0.5 percentage point increase in real wage growth would improve the 75-year actuarial balance... mean a 75-year deficit of 1.35... instead of... 1.89 percent of taxable payroll.... The date of Trust Fund exhaustion would be pushed back from 2042 to 2048.

On the normal definition of "easier to sustain," pushing back the date of required benefit cuts or tax increases by six years and reducing the long-run deficit by 0.54 percent of taxable payroll would qualify as making Social Security "easier to sustain."

Posted by DeLong at February 4, 2005 03:45 PM