Fuzzy Math: AARP's Bogus "Solvency Calculator"

AARP has created a flash game to explore various policy alternatives it claims would make the Social Security system solvent, but the game is completely misleading...

The first problem with this calculator is the meter. There is an extra mark between 0 and 100, making each mark is worth about 9 degrees as opposed to the traditional 10 degrees. The visual effect the extra mark is to over exaggerate the degrees of solvency reached in the game. For example, a viewer who is used to evaluating a thermometer in increments of 10 would, at first blush, assume the solvency achieved in the image to the left was about 70-73 degrees. However, because of the 9-point increments, the actual value is much closer to 67 degrees. This means that the game gives players the impression of having moved anywhere from 3 to 5 degrees closer to solvency than is actually the case.

The second problem is that the calculator misrepresents the effects of combinations of policy changes. For example, the calculator claims the effect of raising payroll taxes will improve solvency by 22 degrees and raising the cap of taxable wages would improve solvency by 45 degrees. It further claims the combined effect of both changes would increase solvency by 67 degrees, but it is misleading to simply add up individual effects to estimate a combined effect.

When more than one feature of policy is changed those individual changes will interact with each other and diminish each other's effects. Increasing payroll taxes, for instance, makes it more expensive for employers pay high salaries. This means that fewer workers earn salaries high enough to be affected by raising the cap on taxable income. Hence, the true combined effect of these two policy changes would be much lower than the 67 degrees estimated by the calculator.

A final flaw in this calculator is that AARP is making a host of fiscal and demographic assumptions, but it does not tell game players what those assumptions are. For example, by making claims about the effect raising the retirement age would have on solvency, AARP is making assumptions about the average life expectancy of individuals. Without knowing what those assumptions are, there is little reason to trust the benchmarks AARP uses to evaluate “solvency” in the game and even less of a reason to take any of the figures presented seriously.

AARP's Solvency Game pretends to provide a fair analysis of all the policy reform options out there. We at S4 aren't buying, and we hope you aren't either.