By now all sensible people understand that the long run rate of productivity growth assumed by the Social Security trustees - 1.6% - is completely incompatible with the belief that the stock market returns will be at historical rates. One of those assumptions has to be incorrect - either long run productivity growth is assumed to be to low, stock market returns too high, or some combination.
Today DeLong informs us that the methodology the trustees used to arrive at their anemic 1.6% long run productivity growth letters was only put into place last year. And, if previously methodology had been used, the long run rate of productivity growth would be 1.9%, substantially lengthening the solvency of the trust fund.
