Infinite Horizon

Apropos of nothing save my annoyance, I did a little research on the "infinite-horizon" modeling today. "Infinite horizon" projections are where we get numbers like Social Security's supposed $11 trillion deficit. It's a way of forecasting costs off into the great beyond. It's also a load of crap. President Bush's tax cuts, if judged via an infinite horizon projection, would cost us $20 trillion, and his Medicare plan would be coming to your house to eat your children.

But the infinite horizon is BS. While trawling around the internets to figure out exactly how it works, I found a good article explaining that, well, it doesn't. Because it's so inaccurate, it was never included until the 2003 Trustees Report, which apparently was when the Bush administration decided to add fangs and a pitchfork to the Social Security numbers. A technical panel advising them on the inclusion on the number said it's misleading as a dollar estimate and should instead be expressed as a percentage of the taxable payroll numbers, which, in 2003, would have been 3.8%. Not so impressive, is it?

It gets worse. In a letter to the Social Security Advising Board, the American Academy of Actuaries (nominated for most boring national convention six years in a row!) wrote:

The new measures of the unfunded obligations included in the 2003 report provide little if any useful information about the program’s long-range finances and indeed are likely to mislead anyone lacking technical expertise in the demographic, economic, and actuarial aspects of the program’s finances into believing that the program is in far worse financial condition than is actually indicated.


Thus, we believe that including these values in the Trustees Report is unnecessary and is, on balance, a detriment to the Trustees’ charge to provide a meaningful and balanced presentation of the financial status of the program.

So the whole thing is useless. What's really aggravating is that Bush has shown no compunction about shortening every projection we've got. Bush has rejected 10-year budgetary outlooks in favor of five-year projections, and the Medicare expansion was regularly undersold and placed on a shortened projection in order to lowball the costs. And that's not even getting into the the intimidation of its chief actuary, who believed it'd cost $100 billion more than the Administration was admitting, and was told he'd lose his job if he said anything. He was right.

This, I feel, has been the media's primary failure over the past few few years. By not insisting on any numerical standard for their economic reporting, they've allowed the Administration to bewilder voters by placing every policy on a different projection depending on whether they want it to look healthy or near-death. That failure has denied news consumers any sort of comparative ability when evaluating different stories. It's straight insane that voters think Social Security is in worse shape, yet they do. And, after all, how can they compare them accurately when Social Security is evaluated into the ever-stretching future and Medicare is capped at 10 years? They can't -- there's no way to decipher that. It's the media's job to provide the translation. And they've failed.