SSA Emphasizes Hypothetical Nature of Eliminating Payroll Tax

Social Security Chief Actuary Gives Full Context after Senate Dems, Biden Mislead Public

Dems Manufactured Payroll Tax Cut Proposal, Biden
Attributed it to Trump, Still Got Facts Wrong

September 11, 2020

WASHINGTON — In a letter this week to top Republican tax writers, the Chief Actuary of Social Security affirmed that he was “not aware that anyone has proposed” legislation like Senate Democrats outlined in a recent request, which they subsequently used to spread false and misleading partisan messaging. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) made the following comments after receiving Chief Actuary's letter.

“I appreciate the Chief Actuary's response to our questions. It's important that the record remains correct, and Mr. Goss once again affirmed that there is no actual proposal like the one Senate Dems manufactured in an attempt to smear political rivals. No one has a plan to defund Social Security, and Democrats know it. Nonetheless, Democrats shamefully chose to scare seniors and the disabled to try to manufacture a controversy where none exists.

“Even the fact checkers at the Washington Post awarded Democrats four Pinocchios for peddling this falsehood and providing political fodder for the president's opponent. I urge my colleagues to be more responsible when utilizing government resources.”

Grassley and House Ways and Means Ranking Member Kevin Brady (R-Texas) wrote to the Chief Actuary on August 31 seeking to set the record straight on the partisan misinformation promoted by Senate Democrats that utilized information from his office. In the time since, the Washington Post assigned the campaign of Democrat Presidential nominee Joe Biden four Pinocchios for spreading the misinformation in an ad, saying in reference to Biden's Senate allies, “To make a long story short, Democrats ginned up a letter from the chief actuary to describe a plan that does not currently exist.”

The full response from Social Security Chief Actuary Stephen Goss to Grassley and Brady can be found HERE.

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September 9, 2020

The Honorable Chuck Grassley
Senate Finance Committee
United States Senate
Washington, DC 20510

The Honorable Kevin Brady
Committee on Ways and Means
United States House of Representatives
Washington, DC 20515

Dear Chairman Grassley and Ranking Member Brady:

This letter is in response to your August 31, 2020 letter (enclosed) regarding:

I appreciate your concerns and thank you for asking me to address them. I have enjoyed working with both of you and your staffs from my position in the Office of the Chief Actuary at the Social Security Administration, where I have served as Chief Actuary since 2001. Our office's mission has always been to provide objective information and analysis to assist lawmakers, the Social Security Board of Trustees, the Commissioner of Social Security, and the Administration in maintaining and evolving the Social Security and Supplemental Security Income programs to best serve the American people.

Annual Reports of the Board of Trustees

The annual report of the Board of Trustees has been produced each year starting in 1941, as required by law. My office develops the actuarial models and recommends the assumptions that are used to produce the projections of the future actuarial status of the trust funds. Starting in 1994, the Chief Actuary has been required by law to provide an opinion in the report attesting to the reasonableness of the assumptions and methods used. In this time, neither I, nor my predecessors, have taken exception to any of the assumptions used for the basic projections and determination of the actuarial status of the trust funds under the assumptions that are central to this determination. As a result, we have always received a clean opinion on the annual full-scope audit of these projections. This audit is completed by our Inspector General, the Government Accountability Office, and an independent accounting firm engaged by the Inspector General, and is required due to the inclusion of the basic projections in the Social Security Administration's Annual Financial Report.

The issues you refer to in the actuarial opinion for the 2014 Trustees Report (https://www.ssa.gov/OACT/TR/2014/tr2014.pdf) did not relate to the basic projections of trust fund solvency or the actuarial status of the trust funds. Rather, the comments alerted readers of the report that: (1) the range of variation in the stochastic projections was unreasonably small due to limitations in our stochastic methods, which the Trustees indicated in Appendix E of the report stating that “the true range of uncertainty is larger than indicated”; (2) reference to the implications of trust fund operations on the overall federal budget is not relevant to the actuarial status of the trust funds; and (3) the benefit replacement rates that had been included in the reports for many years were being removed, but would thereafter be found on the Office of the Chief Actuary's website. The actuarial opinions for the 2015 through 2020 reports have continued to include a comment about federal budget implications.

You indicate that my 2014 and 2015 actuarial opinions were subsequently used to promote allegations that a single Trustee had undue influence over the Trustees' process and assumption selection. These actuarial opinions did not refer to the Trustees' process or selection of assumptions; they simply disclosed information that was important for readers of the report to understand, as is required by actuarial standards of practice. As you mention, I noted in testimony in 2016 before the House Ways and Means Subcommittee on Social Security that I had never seen one Trustee capable of overwhelming the other five Trustees. In fact, decisions by the Trustees are made by consensus, as is indicated by the fact that dissenting opinions, which are allowed per the bylaws of the Board of Trustees, have never been included in the report by any Trustee. You mention that I did not comment on this point publicly until the hearing in 2016. That is only because I was not asked publicly until that time. Had I been asked in a Congressional letter or hearing at any earlier point, I assure you I would have provided the same answer.

Response to a Letter from Senators Van Hollen, Sanders, Wyden, and Schumer

Your second concern, regarding answers to questions from Senators Van Hollen, Sanders, Wyden, and Schumer in my letter to them on August 24, 2020 (https://www.ssa.gov/oact/solvency/VanHollenSandersWydenSchumer_20200824.pdf), also speaks to the basis for public statements made by the Chief Actuary and the Office of the Chief Actuary. Our policy has always been to answer questions from members of Congress objectively and directly. When the member makes public reference to information that we have provided, we post the full letter that we have provided on our website, so that the information is available with full context and detail, to minimize the possibility of misinterpretation. Per your request, we will post this response at the same location as the letter to Senators Van Hollen, Sanders, Wyden, and Schumer. I understand that even an entirely objective and factual statement may be interpreted and referenced differently, incompletely, or out of context by different parties. My hope and intent for any communication is that the answer provided, taken in totality, has provided a complete and factual response to the question posed.

The question the Senators posed related to “hypothetical legislation.” I indicated clearly in response that we were not aware that anyone had proposed the changes specified, and that is still the case today. I also indicated that our office's long-standing practice has been to ask the entity that has made a proposal if they would like us to prepare an estimate for them directly, rather than for the requester. As we were unable to find any party who had proposed the hypothetical legislation, I simply provided answers to the specific questions asked by the Senators. While the Senators asked only for the implications of setting the payroll tax rates to zero starting on January 1, 2021, I did include in our response the fact that the status of the trust funds and ability to pay benefits would not be affected if general revenue transfers were specified in amounts equal to the reduction in payroll tax.

The response clearly indicated that DI Trust Fund reserves would become depleted in mid-2021 and OASI Trust Fund reserves would become depleted in mid-2023 only for the hypothetical legislation that the Senators posed, and only if there were no alternative revenue source to replace the eliminated payroll tax revenue. The letter also clearly stated that we were not aware that anyone had proposed such hypothetical legislation. While the appropriateness of asking this question may be debatable, we were directly asked, and I can only hope that the clarity of the specification of this hypothetical legislation has assisted others in stating clearly that they have not proposed this change.

Further Information

It is worth noting that the Office of the Chief Actuary has on other occasions provided requested informational analysis and estimates for hypothetical changes that have not been formally proposed. One example is an analysis we provided to Senator Tom Cotton on June 1, 2017 (https://www.ssa.gov/oact/solvency/TCotton_20170601a.pdf), on a proposal he was evaluating but that was never introduced. This proposal would have reduced the employee payroll tax rate with no provision for revenue to make up the shortfall. On the same date, we provided Senator Cotton with estimates for the implications of increasing the rate at which Social Security disabled worker beneficiaries have their benefits terminated on the basis of returning to work. Senator Cotton felt that an increased disability termination rate might be achieved by implementing unspecified proposals he was considering (https://www.ssa.gov/oact/solvency/TCotton_20170601.pdf). These are examples of informational analyses of hypothetical changes we have provided to members of Congress when asked.

As indicated above, when we are asked for analysis of a proposal that has been made by an entity other than the entity that made the proposal, we always ask the proposing entity if we may provide the answers requested to them. If the proposing entity does not ask that we provide the answers to them, and a member of Congress desires that information, then we provide our objective analysis to the requesting member. One such example is the request made by Senator Ron Johnson for estimates of the effects of the President's Executive Actions for immigration announced on November 20, 2014, for which we provided an answer on February 2, 2015 (https://www.ssa.gov/oact/solvency/BObama_20150202.pdf). Similarly, on February 10, 2016, we provided Chairman Sam Johnson with estimates of the effects of a proposal in the President's Budget that would have applied a fee on petroleum products purchased in the United States (https://www.ssa.gov/oact/solvency/FY2017Budget_20160210a.pdf).

While it is never desirable for the Office of the Chief Actuary to engage in matters with political implications, it appears that this is unavoidable to a degree, as long as we are asked to provide objective and factual answers to questions posed by members of Congress. Our answers have always been as direct and objective as possible, and we regret that even clear answers may be taken out of context or used for purposes other than intended. I can only hope that by communicating as you have done in this letter, we will be able to continue to provide objective and factual information to you and all members of Congress. We take seriously our obligation to help assure that your decisions on behalf of the American people will always be well informed.

Sincerely,

Stephen C. Goss, ASA, MAAA
Chief Actuary

Enclosure

cc:
The Honorable Andrew Saul, Commissioner of Social Security and Trustee of the Old Age and Survivors Insurance and Disability Insurance Trust Funds
The Honorable Steven Mnuchin, Secretary of the Treasury and Managing Trustee of the Old Age and Survivors Insurance and Disability Insurance Trust Funds