The person who determines if the Social Security Administration (SSA) has enough cash to operate is likely way off on his numbers. How far off? According to multiple reports, it could be a mind-boggling $1 trillion.

As a result, Steve gives this week’s “Slap in the Face” Award to the SSA. But he also has a request.

Well, the slap this week goes out to the Social Security Administration (SSA) and its statistical model for projecting revenues and costs.

[ad#Google Adsense 336×280-IA]Steve Goss is the chief actuary for Social Security.

And he’s the guy who, based on revenues, the birth rate, the mortality rate and immigration, determines if the program has enough money to function.

He is also the person who is supposed to be able to tell the government when we’re going to hit the wall and the program is going to run out of money.

Which, if it isn’t fixed, it will in 2030! At least, that’s what everybody thought until recently.

According to a new report by the Journal of Economic Perspectives and another publication called Political Analysis, Mr. Goss, who has been running the actuary show at the SSA since 2000, has missed the mark on his estimates to the tune of about $1 trillion. He is very likely $1 trillion short.

And according to the Journal of Economic Perspectives, the further you go out in his projections, the bigger his errors get.

It seems his revenue, mortality and immigration numbers are off, and his model has really missed the mark on life expectancies.

Even the CBO, the Congressional Budget Office, has broken with his estimates on mortality and immigration.

The Journal of Economic Perspectives described the SSA’s research methods as antique, opaque and functioning at the level of the sextant and dead reckoning in the GPS navigation age.

The sextant has been in use since 1730. That’s how bad this is.

And according to a recent Barron’s article, no one outside of the SSA has been able to duplicate this guy’s numbers. Not one statistician!

Mr. Goss, according to Barron’s, refuses to change his ways or methods. He claims he cannot upset the consistency of his operation.

Now, this stance is particularly interesting when you consider that Social Security, based on what we now believe are very flawed estimates, will run out of money in just 15 years.

If Goss is off by the $1 trillion both reports estimate, the SSA time bomb is a lot closer than 2030.

And here’s where it gets really sick. One of the proposals to fix the problem is to cut benefits by 20% for anyone who retires after 2014 – or to cut everyone’s benefits across the board by 17%.

If this guy’s estimates are off as much as most think, we might need something as drastic as a 20% cut just to keep SSA afloat.

Yes, there are other fixes. But if they aren’t implemented soon, cuts are going to be the only thing that will work.

Einstein said, you can’t solve current problems with current thinking. And our current problems here are the result of current thinking. Boy, do we need some new thinking in D.C.

If you do nothing else this week, write a letter to Mr. Obama, your congressman and senator, and demand they stop thinking of their careers first and do something about this disaster that’s on our doorsteps.

A trillion dollars short. This is just beyond belief.

Good investing,

Steve McDonald


Source: Wealthy Retirement