IQSS Researchers Evaluate Social Security Administration Forecasts

May 19, 2015
king_kashin.jp

The future of Social Security in the United States is more dire than official reports would suggest, according to a recent paper by IQSS researchers.

In their recent paper, "Explaining Systematic Bias and Nontransparency in U.S. Social Security Administration Forecasts," Gary King, Konstantin Kashin, and Samir Soneji evaluate historic forecasting performance of the Social Security Administration (SSA) and compare its forecasts with the reality that has come to pass. The researchers examine the SSA's forecasting performance in life expectancy as well as metrics of financial health, such as trust fund balance and trust fund cost. In their paper, they show that the SSA’s forecasting errors were approximately unbiased until about 2000, but then began to grow quickly, with increasingly overconfident uncertainty intervals.

The main reason for the SSA's miscalculation, according to King, Kashin, and Soneji, is an inadvertent result of efforts to prevent bias. The Actuary's Office has made an effort in the 21st century to insulate itself against external pressures from an increasingly polarized political atmosphere. This has had the unfortunate side-effect, however, of also shutting out recent developments in and expertise of data research. In hopes of minimizing public concern, the paper explains, the SSA instead grew biased toward unchanging annual forecasts that claimed the system to be healthier than it was in reality. The next step, King and his co-authors say, is for the SSA to share their data openly so that outside researchers can help to correct and prevent such errors going forward.

Gary King is Director of the Institute for Quantitative Social Science, and Albert J. Weatherhead III University Professor; Konstantin Kashin is a PhD Candidate in the Department of Government, and an IQSS affiliate; and Samir Soneji is Assistant Professor of The Dartmouth Institute for Health Policy and Clinical Practice, and an IQSS affiliate.

King, Kashin, and Soneji's paper is published in the Journal of Economic Perspectives, and it can also be accessed at Gary King's website.