Accrual Accounting for Social Security

Responds to some key points in Howell E. Jackson's "Accounting for Social Security and Its Reform" (2004). Jackson's calculation of the annual change in maximum transition cost is addressed first. Then, problems with his argument that reforms should treat accrued benefits differently from those expected to accrue are revealed, asserting that Social Security's financing & reform plans should not center on his accrual measure. Attention turns to the reform role of solvency measures, explaining why the current 75-year actuarial imbalance measure reflects a good balance among competing demands. A discussion of Jackson's take on Social Security accounting system reform in relation to the federal budget argues that accrual accounting should be evaluated under the assumption that a substantial share of the federal budget were accounted for in this manner, which exposes problems connected to the ease in which accrual measures can be manipulated & the failure of accrual accounting to offer a clear & sensible target for balance. It is concluded that annual accrual accounting, while useful, cannot be the centerpiece of Social Security policy making. An appendix provides reasons to support the 75-year measure for long-term Social Security balance. 1 Appendix. J. Zendejas