By John Scorza, CCH
Washington Staff Writer
A panel of economists warned in a recent report that the
Social Security system could be in deeper financial trouble than
assumed, largely because the Social Security
Administration (SSA) may be underestimating future increases
in life expectancy.
The panel, according to the report, "concurs with many
demographers in noting that the projections of life expectancy
by [the SSA's office of the chief actuary] are unduly
pessimistic, and that mortality rates will likely decline even
more than estimated."
As a result, Social Security taxes would have to increase at
a greater rate than estimated to pay benefits. The SSA assumes
that in 2034 the system will begin spending more than it takes
in, and that costs will exceed revenues by 6.44 percent 75 years
from now. The panel's report estimates that costs will outpace
revenues by 7.7 percent in 75 years.
The panel's report, recently presented to the Social Security
Advisory Board, also warned that the SSA may be overestimating
the return the system would realize if it invested in the stock
market. The report "concludes that the assumption on the
equity premium (return on stocks over return on bonds) used by
the Office of the Chief Actuary should be lowered in the current
economic environment." The panel would reduce the assumed
equity premium from 4 percent to 3 percent.
Copyright 1999, CCH Incorporated. All Rights Reserved.
