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Sustainable Social Security: What Would It Cost?

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  • Lee, Ronald
  • Yamagata, Hisashi

Abstract

The standard measure of the 75-year Social Security imbalance is 1.87 percent of payroll, but raising taxes this much would not make finances sustainable. We consider exact and approximate infinite horizon measures based on different strategies for extending the projections past 75 years. These indicate imbalances of 3.1 to 5.7 percent of payroll. We also suggest a simpler common sense measure: the tax increase necessary to make the Trust Fund Ratio equal in the 74th and 75th years. Under the Trustees’ mortality projection, it indicates 3.1 percent imbalance, with a more rapid mortality decline of 4.2 percent. All sustainability measures indicate greater imbalance than is currently thought.

Suggested Citation

  • Lee, Ronald & Yamagata, Hisashi, 2003. "Sustainable Social Security: What Would It Cost?," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 27-43, March.
    • Handle: RePEc:ntj:journl:v:56:y:2003:i:1:p:27-43
    DOI: 10.17310/ntj.2003.1.02
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    Cited by:

    1. John Sabelhaus & Julie Topoleski, 2006. "Uncertain Policy for an Uncertain World: The Case of Social Security: Working Paper 2006-05," Working Papers 17664, Congressional Budget Office.
    2. Yuehong Tian & Xianglian Zhao, 2016. "Stochastic Forecast of the Financial Sustainability of Basic Pension in China," Sustainability, MDPI, vol. 8(1), pages 1-17, January.
    3. Ronald Lee & Timothy Miller & Michael Anderson, 2004. "Stochastic Infinite Horizon Forecasts for Social Security and Related Studies," NBER Working Papers 10917, National Bureau of Economic Research, Inc.
    4. John Sabelhaus & Julie Topoleski, 2007. "Uncertain policy for an uncertain world: The case of social security," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 26(3), pages 507-525.
    5. André Portela Souza & Hélio Zylberstajn & Luís Eduardo Afonso & Priscilla Matias Flori, 2004. "Fiscal Impacts Of Social Security Reform In Brazil," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 138, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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