What's in the Social Security Trustees Report?

The 2007 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds was issued yesterday. You can read it here, with a summary here. You can find commentary around the blogosphere (Angry Bear, Brad DeLong, Atrios, Kash).

There is not much that is new here, as expected. The challenges facing Social Security are a demographic shift caused by improving longevity and fertility rates hovering around 2 children per woman. We should expect each year to look like the last, with a slow deterioration in the system's finance as the years of projected annual deficits approach, possibly tempered by differences in realized values of uncertain factors, like productivity growth, that are embedded in the projections.

I'll take the occasion of the report to reiterate some of the themes that have characterized my writing on Social Security and the need for reform over the past few years:

1) The most prominent number in the report is the 75-year actuarial balance, which now stands at 1.95 percent of taxable payroll, down from 2.02 percent in last year's report. This is a flawed metric, as it does not acknowledge the fact that the annual balances have a trend over this period. You can see this in the following figure