2014 OASDI Trustees Report

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2. Estimates as a Percentage of Gross Domestic Product
This section contains long-range projections of the operations of the theoretical combined Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds and of the Hospital Insurance (HI) Trust Fund, expressed as a percentage of gross domestic product (GDP). While expressing fund operations as a percentage of taxable payroll is the most useful approach for assessing the financial status of the programs (see section IV.B.1), expressing them as a percentage of the total value of goods and services produced in the United States provides an additional perspective.
Table VI.G4 shows non-interest income, total cost, and the resulting balance of the combined OASI and DI Trust Funds, of the HI Trust Fund, and of the combined OASI, DI, and HI Trust Funds, expressed as percentages of GDP on the basis of each of the three alternative sets of assumptions. Table VI.G4 also contains estimates of GDP. For OASDI, non-interest income consists of payroll tax contributions, proceeds from taxation of benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of scheduled benefits, administrative expenses, financial interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, non-interest income consists of payroll tax contributions (including contributions from railroad employment), up to an additional 0.9 percent tax on earned income for relatively high earners, proceeds from taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of outlays (benefits and administrative expenses) for insured beneficiaries. The Trustees show income and cost estimates on a cash basis for the OASDI program and on an incurred basis for the HI program.
The Trustees project the OASDI annual balance (non-interest income less cost) as a percentage of GDP to be negative throughout the projection period under the intermediate and high-cost assumptions, and to be negative through 2076 under the low-cost assumptions. Under the low-cost assumptions the OASDI annual deficit as a percentage of GDP decreases through 2018. After 2018, deficits increase to a peak in 2033 and then decrease through 2076, after which annual balances are positive, reaching 0.07 percent of GDP in 2088. Under the intermediate assumptions, annual deficits decrease from 2014 to 2015, generally increase through 2037, decrease from 2037 through 2051, and mostly increase thereafter. Under the high-cost assumptions, annual deficits increase throughout the projection period.
The Trustees project that the HI balance as a percentage of GDP will be positive throughout the projection period under the low-cost assumptions. Under the intermediate assumptions, the HI balance is negative for each year of the projection period except for 2015-21. Annual deficits increase through 2049 and remain relatively stable thereafter. Under the high-cost assumptions, the HI balance is negative for all years of the projection period. Annual deficits reach a peak in 2075 and mostly decline thereafter.
The combined OASDI and HI annual balance as a percentage of GDP is negative throughout the projection period under both the intermediate and high-cost assumptions. Under the low-cost assumptions, the combined OASDI and HI balance is negative through 2015, positive from 2016 through 2024, negative from 2025 through 2037, and then positive and mostly rising thereafter. Under the intermediate assumptions, combined OASDI and HI annual deficits decline from 2014 through 2017, increase from 2017 through 2041, and mostly decrease through 2052. After 2052, annual deficits generally rise, reaching 2.18 percent of GDP by 2088. Under the high-cost assumptions, combined annual deficits rise throughout the projection period.
By 2088, the combined OASDI and HI annual balances as percentages of GDP range from a positive balance of 0.85 percent for the low-cost assumptions to a deficit of 7.01 percent for the high-cost assumptions. Balances differ by a much smaller amount for the tenth year, 2023, ranging from a positive balance of 0.11 percent for the low-cost assumptions to a deficit of 1.82 percent for the high-cost assumptions.
The summarized long-range (75-year) balance as a percentage of GDP for the combined OASDI and HI programs varies among the three alternatives by a relatively large amount, from a positive balance of 0.53 percent under the low-cost assumptions to a deficit of 4.20 percent under the high-cost assumptions. The 25-year summarized balance varies by a smaller amount, from a positive balance of 0.35 percent to a deficit of 2.12 percent. Summarized rates are calculated on a present-value basis. They include the trust fund balances on January 1, 2014 and the cost of reaching a target trust fund level equal to 100 percent of the following year’s annual cost at the end of the period. (See section IV.B.4 for further explanation.)
Incomea

a
Income for individual years excludes interest on the trust funds. Interest is implicit in all summarized values.

b
Between 0 and 0.005 percent of GDP.

c
Summarized rates are calculated on a present-value basis. They include the value of the trust funds on January 1, 2014 and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end of the period.

Note: Totals do not necessarily equal the sums of rounded components.
To compare trust fund operations expressed as percentages of taxable payroll and those expressed as percentages of GDP, table VI.G5 displays ratios of OASDI taxable payroll to GDP. HI taxable payroll is about 25 percent larger than the OASDI taxable payroll throughout the long-range period; see section 1 of this appendix for a detailed description of the difference. The cost as a percentage of GDP is equal to the cost as a percentage of taxable payroll multiplied by the ratio of taxable payroll to GDP.
Projections of GDP reflect projected increases in U.S. employment, labor productivity, average hours worked, and the GDP deflator. Projections of taxable payroll reflect the components of growth in GDP along with assumed changes in the ratio of worker compensation to GDP, the ratio of earnings to worker compensation, the ratio of OASDI covered earnings to total earnings, and the ratio of taxable to total covered earnings.
Over the long-range period, the Trustees project that the ratio of OASDI taxable payroll to GDP will decline mostly due to a projected decline in the ratio of wages to employee compensation. Over the last five complete economic cycles, the ratio of wages to employee compensation declined at an average annual rate of 0.25 percent. The Trustees project that the ratio of wages to employee compensation will continue to decline, over the 65-year period ending in 2088, at an average annual rate of 0.03, 0.13, and 0.23 percent for the low-cost, intermediate, and high-cost assumptions, respectively. 
 

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