Simcivic Briefing Book, continued . . .

E. If GDP Grows Faster Than Expected . . .

1. How benefits rise in the responsible Republican scenario

2. How benefits rise in the responsible Democratic scenario

Conclusions

1. Benefits in the responsible Republican scenario grow significantly if GDP growth exceeds Social Security’s forecasts.

• If GDP grows half a percentage point faster, the Payable Benefits estimate for 2075 rises from $1,366 per month to $1,841 per month. The simulator’s target benefit level changes very little, rising by one point from 76% to 77% of the current law schedule. The remaining gains are accounted for by faster GDP growth and its effects on wage indexing.

• If GDP grows one percentage point faster, estimated benefits in 2075 rise from $1,366 per month to $2,544 per month. The target benefit level rises from 76% to 80%, but most of the gains are due to Wage Indexing.

2. Benefits in the responsible Democratic scenario also grow significantly.

• For the Democratic scenario, half a point faster GDP growth supports an average benefit in 2075 of $1,937, up from $1,402. The benefit target rises from 78% to 81%, but, again, most of the gains derive from Wage Indexing.

• The one percentage point faster scenario raises the estimated monthly benefit to $2,671 in 2075, up from $1,402 in the original GDP forecast. The benefit target as a percent of current schedule rises from 81% to 84%; most of the gain comes from Wage Indexing.

All scenarios are designed to ensure lasting solvency.

CONCLUSIONS

Today’s Republicans make promises for personal accounts that are twice as high as prudent forecasting warrants

Today’s Democrats embrace “Grow Assets, Liquidate Assets” as their strategy for Social Security

The good news is that responsible options do exist

It is too early to tell whether the good news has a chance

HOME

A) How to Critique the Republican Approach
B) How to Critique the Democratic Approach
C) A Republican Solvency Strategy
D) A Democratic Solvency Strategy

Briefing Book Summary

NOTE: The Simulation Tool was developed in 2001 – 2002. Its SSA forecast data was current at that time. In addition, the simulation tool contains data from 3 special runs performed by Social Security’s Office of the Actuary. These runs modeled OASDI benefit changes associated with higher productivity & GDP growth rates.

The rate was half a percentage point higher in the first run, one point higher in the second run, and one and a half points higher in the third run.

All Social Security program simulations build on SSA-generated forecasts. Stock market simulations are built using the author’s analysis from http://www.sscommonsense.org/page04.html.

Revision Date 2005-05-04