2005 OASDI Trustees Report

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VI. APPENDICES
F. ESTIMATES FOR OASDI AND HI, SEPARATE AND COMBINED

2. Estimates as a Percentage of Gross Domestic Product

This section presents long-range projections of the operations of the 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 these fund operations as a percentage of taxable payroll is the most useful approach for assessing the financial status of the programs (see table IV.B1 and section IV.B.1), analyzing them as a percentage of GDP provides an additional perspective on these fund operations in relation to the total value of goods and services produced in the United States.

Table VI.F4 shows estimated income excluding interest, 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. The estimated GDP on which these percentages are based is also shown in table VI.F4. For OASDI, income excluding interest consists of payroll-tax contributions, proceeds from taxation of benefits, and various reimbursements from the General Fund of the Treasury. Total cost consists of benefit payments, administrative expenses, net transfers from the trust funds to the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, income excluding interest consists of payroll-tax contributions (including contributions from railroad employment) and proceeds from taxation of OASDI benefits. Total cost consists of outlays (benefits and administrative expenses) for insured beneficiaries. Both the HI income and cost are on an incurred basis.

The OASDI annual balance (income excluding interest, less cost) as a percentage of GDP is projected to be positive on the basis of the low cost assumptions until 2022. After 2021, deficits increase to a peak in about 2035, and decrease thereafter. The OASDI balance is projected to be positive until 2017 on the basis of the intermediate assumptions and until 2013 on the basis of the high cost assumptions, at which time balances become permanently negative, with generally increasing deficits. The projected HI balance as a percentage of GDP, is positive through 2026 on the basis of the low cost assumptions. The HI balance is projected to be negative in the first projection year under the intermediate and high cost assumptions, with deficits increasing steadily thereafter. The combined OASDI and HI balance as a percentage of GDP is projected to be positive through 2022 under the low cost assumptions, through 2014 under the intermediate assumptions, and through 2009 under the high cost assumptions. Between 2010 and about 2035, under all three sets of assumptions, both the OASDI and HI balances as percentages of GDP are projected to decline (or deficits increase) substantially because the baby-boom generation reaches retirement age during these years. After balances cease to be positive under the intermediate and high cost assumptions, the annual deficits increase fairly steadily for the combined OASDI and HI programs.

By 2080, the combined OASDI and HI balances as percentages of GDP, are projected to range from a deficit of 1.59 percent for the low cost assumptions to a deficit of 13.49 percent for the high cost assumptions. Projected balances differ by a much smaller amount for the tenth year, 2014, ranging from a positive balance of 0.75 percent for the low cost assumptions to a deficit of 0.76 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 deficit of 0.04 percent, based on the low cost assumptions, to a deficit of 5.60 percent, based on the high cost assumptions). The 25-year summarized balance varies by a smaller amount (from a positive balance of 0.86 percent to a deficit of 1.28 percent). Summarized rates are calculated on the present-value basis including the trust fund balances on January 1, 2005 and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end of the period. (See section IV.B.4 for further explanation.)

Table VI.F4.—OASDI and HI Annual and Summarized Income, Cost, and Balance
as a Percentage of GDP, Calendar Years 2005-80  
Calendar year
Percentage of GDP
GDP in
dollars
(billions)
OASDI
 
HI
 
Combined
Income1
Cost
Balance
Income 1
Cost
Balance
Income 1
Cost
Balance
Intermediate:
 
2005
4.82
4.26
0.56
 
1.45
1.45
2/
 
6.27
5.71
0.56
$12,359
 
2006
4.88
4.21
.67
 
1.46
1.47
-0.01
 
6.34
5.68
.66
13,020
 
2007
4.87
4.19
.68
 
1.47
1.48
-.02
 
6.33
5.67
.66
13,710
 
2008
4.87
4.20
.67
 
1.48
1.50
-.02
 
6.35
5.70
.65
14,424
 
2009
4.86
4.24
.61
 
1.47
1.52
-.04
 
6.33
5.76
.57
15,160
 
2010
4.86
4.28
.57
 
1.48
1.54
-.06
 
6.34
5.82
.51
15,926
 
2011
4.87
4.34
.53
 
1.49
1.56
-.07
 
6.36
5.90
.46
16,721
 
2012
4.87
4.42
.45
 
1.50
1.59
-.09
 
6.37
6.02
.35
17,534
 
2013
4.87
4.51
.36
 
1.50
1.63
-.12
 
6.37
6.14
.23
18,369
 
2014
4.86
4.61
.25
 
1.51
1.66
-.15
 
6.37
6.27
.10
19,232
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
4.86
4.71
.16
 
1.51
1.70
-.19
 
6.37
6.41
-.04
20,127
 
2020
4.86
5.24
-.38
 
1.52
1.94
-.42
 
6.38
7.17
-.80
25,150
 
2025
4.84
5.75
-.91
 
1.53
2.24
-.71
 
6.37
7.99
-1.62
31,204
 
2030
4.83
6.14
-1.31
 
1.53
2.57
-1.04
 
6.36
8.71
-2.35
38,644
 
2035
4.80
6.31
-1.51
 
1.53
2.90
-1.37
 
6.33
9.21
-2.88
47,952
 
2040
4.76
6.31
-1.54
 
1.52
3.18
-1.66
 
6.29
9.49
-3.20
59,553
 
2045
4.73
6.26
-1.54
 
1.51
3.42
-1.91
 
6.24
9.69
-3.45
73,937
 
2050
4.69
6.24
-1.55
 
1.50
3.65
-2.15
 
6.18
9.89
-3.70
91,544
 
2055
4.65
6.25
-1.60
 
1.49
3.88
-2.39
 
6.14
10.13
-3.99
113,245
 
2060
4.61
6.29
-1.67
 
1.48
4.15
-2.67
 
6.09
10.44
-4.35
139,983
 
2065
4.58
6.33
-1.75
 
1.47
4.46
-2.99
 
6.05
10.79
-4.74
173,043
 
2070
4.54
6.36
-1.82
 
1.46
4.80
-3.34
 
6.00
11.16
-5.16
213,845
 
2075
4.50
6.38
-1.88
 
1.45
5.14
-3.69
 
5.95
11.52
-5.56
264,319
 
2080
4.46
6.39
-1.93
 
1.44
5.48
-4.04
 
5.90
11.88
-5.97
326,509
Summarized rates:3
25-year:
 
2005-29
5.47
5.16
.31
 
1.60
1.93
-.33
 
7.07
7.09
-.02
 
50-year:
 
2005-54
5.17
5.59
-.42
 
1.56
2.47
-.91
 
6.73
8.06
-1.33
 
75-year
 
2005-79
5.04
5.74
-.70
 
1.54
2.95
-1.40
 
6.58
8.69
-2.10
 
Low Cost:
 
2005
4.82
4.25
.57
 
1.45
1.41
.04
 
6.27
5.66
.61
12,365
 
2006
4.89
4.18
.70
 
1.46
1.40
.05
 
6.34
5.59
.76
13,015
 
2007
4.88
4.14
.74
 
1.46
1.39
.07
 
6.35
5.53
.81
13,677
 
2008
4.89
4.11
.78
 
1.48
1.38
.10
 
6.37
5.49
.88
14,366
 
2009
4.89
4.11
.77
 
1.47
1.37
.10
 
6.36
5.49
.87
15,071
 
2010
4.89
4.12
.78
 
1.48
1.37
.11
 
6.37
5.48
.89
15,799
 
2011
4.91
4.13
.78
 
1.49
1.36
.13
 
6.40
5.49
.90
16,552
 
2012
4.92
4.18
.74
 
1.50
1.36
.13
 
6.41
5.54
.87
17,303
 
2013
4.92
4.24
.68
 
1.50
1.37
.13
 
6.42
5.61
.82
18,050
 
2014
4.92
4.30
.62
 
1.50
1.37
.13
 
6.43
5.67
.75
18,812
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
4.92
4.38
.54
 
1.51
1.38
.13
 
6.43
5.76
.67
19,599
 
2020
4.93
4.81
.12
 
1.52
1.43
.09
 
6.45
6.24
.21
23,944
 
2025
4.93
5.22
-.28
 
1.53
1.51
.02
 
6.47
6.73
-.26
29,065
 
2030
4.93
5.49
-.56
 
1.54
1.58
-.04
 
6.47
7.07
-.60
35,259
 
2035
4.92
5.56
-.64
 
1.54
1.64
-.10
 
6.45
7.19
-.74
42,962
 
2040
4.89
5.46
-.56
 
1.53
1.68
-.15
 
6.42
7.14
-.72
52,527
 
2045
4.87
5.34
-.47
 
1.52
1.74
-.22
 
6.39
7.07
-.68
64,311
 
2050
4.85
5.24
-.39
 
1.51
1.81
-.30
 
6.36
7.06
-.70
78,685
 
2055
4.83
5.19
-.36
 
1.51
1.93
-.42
 
6.33
7.12
-.78
96,274
 
2060
4.81
5.15
-.35
 
1.50
2.07
-.57
 
6.31
7.23
-.92
117,833
 
2065
4.79
5.11
-.33
 
1.49
2.24
-.74
 
6.28
7.35
-1.07
144,438
 
2070
4.77
5.07
-.30
 
1.49
2.42
-.93
 
6.25
7.49
-1.23
177,162
 
2075
4.75
5.02
-.28
 
1.48
2.60
-1.12
 
6.23
7.62
-1.40
217,350
 
2080
4.73
5.00
-.28
 
1.47
2.79
-1.32
 
6.20
7.79
-1.59
266,448
Summarized rates: 3
25-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2005-29
5.54
4.80
.74
 
1.60
1.48
0.13
 
7.14
6.28
.86
 
50-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2005-54
5.27
5.02
.26
 
1.57
1.57
2/
 
6.84
6.59
.26
 
75-year
 
 
 
 
 
 
 
 
 
 
 
 
 
2005-79
5.16
5.02
.14
 
1.55
1.73
-.18
 
6.71
6.75
-.04
 
High Cost:
 
2005
4.89
4.41
.49
 
1.45
1.53
-.08
 
6.34
5.93
.41
$12,024
 
2006
4.82
4.37
.45
 
1.46
1.57
-.11
 
6.28
5.94
.34
12,743
 
2007
4.85
4.37
.47
 
1.47
1.61
-.14
 
6.31
5.98
.33
13,455
 
2008
4.86
4.45
.41
 
1.48
1.67
-.19
 
6.34
6.12
.23
14,032
 
2009
4.81
4.51
.30
 
1.47
1.71
-.24
 
6.28
6.22
.06
15,019
 
2010
4.76
4.52
.24
 
1.47
1.75
-.28
 
6.24
6.28
-.04
16,366
 
2011
4.78
4.63
.15
 
1.49
1.82
-.33
 
6.26
6.44
-.18
17,451
 
2012
4.80
4.77
.03
 
1.49
1.89
-.40
 
6.29
6.66
-.37
18,382
 
2013
4.80
4.88
-.09
 
1.50
1.97
-.47
 
6.30
6.85
-.56
19,334
 
2014
4.79
5.00
-.22
 
1.50
2.05
-.55
 
6.29
7.05
-.76
20,340
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
4.78
5.11
-.33
 
1.50
2.13
-.63
 
6.29
7.25
-.96
21,391
 
2020
4.76
5.71
-.95
 
1.51
2.66
-1.15
 
6.27
8.37
-2.10
27,419
 
2025
4.74
6.29
-1.56
 
1.52
3.38
-1.86
 
6.25
9.67
-3.41
34,902
 
2030
4.71
6.78
-2.07
 
1.52
4.24
-2.72
 
6.23
11.03
-4.80
44,304
 
2035
4.67
7.07
-2.40
 
1.52
5.20
-3.68
 
6.19
12.27
-6.09
56,199
 
2040
4.62
7.20
-2.58
 
1.51
6.07
-4.56
 
6.13
13.27
-7.14
71,099
 
2045
4.57
7.28
-2.71
 
1.50
6.80
-5.31
 
6.07
14.08
-8.01
89,713
 
2050
4.52
7.37
-2.85
 
1.48
7.39
-5.91
 
6.00
14.77
-8.77
112,658
 
2055
4.47
7.50
-3.04
 
1.47
7.87
-6.40
 
5.94
15.38
-9.44
141,075
 
2060
4.42
7.66
-3.24
 
1.46
8.39
-6.92
 
5.88
16.05
-10.16
176,324
 
2065
4.37
7.85
-3.47
 
1.45
8.96
-7.51
 
5.83
16.81
-10.98
219,808
 
2070
4.33
8.02
-3.70
 
1.44
9.60
-8.15
 
5.77
17.62
-11.85
273,874
 
2075
4.28
8.17
-3.89
 
1.43
10.23
-8.79
 
5.71
18.39
-12.68
340,772
 
2080
4.23
8.28
-4.05
 
1.42
10.86
-9.44
 
5.65
19.14
-13.49
423,931
Summarized rates: 3
25-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2005-29
5.38
5.60
-.22
 
1.58
2.64
-1.05
 
6.96
8.24
-1.28
 
50-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2005-54
5.05
6.27
-1.22
 
1.55
4.22
-2.67
 
6.60
10.49
-3.89
 
75-year
 
 
 
 
 
 
 
 
 
 
 
 
 
2005-79
4.89
6.62
-1.73
 
1.53
5.39
-3.86
 
6.42
12.01
-5.59
 

1Income for individual years excludes interest on the trust funds. Interest is implicitly reflected in all summarized values.

2Between -0.005 and 0.005 percent of GDP.

3Summarized rates are calculated on the present-value basis including the value of the trust funds on January 1, 2005 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.

The difference between trust fund operations expressed as percentages of taxable payroll and those expressed as percentages of GDP can be understood by analyzing the estimated ratios of OASDI taxable payroll to GDP, which are presented in table VI.F5. HI taxable payroll is about 25 percent larger than the OASDI taxable payroll throughout the long-range period (see appendix VI.F.1 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.

Table VI.F5.—Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2005-80
Calendar year
Intermediate
Low Cost
High Cost
2005
0.383
0.383
0.384
2006
.383
.383
.382
2007
.382
.384
.380
2008
.382
.384
.381
2009
.381
.384
.378
2010
.381
.384
.373
2011
.380
.384
.372
2012
.379
.383
.372
2013
.378
.383
.371
2014
.377
.383
.370
 
 
 
 
2015
.377
.383
.369
2020
.373
.381
.364
2025
.370
.379
.359
2030
.367
.377
.354
2035
.363
.375
.350
2040
.360
.374
.345
2045
.357
.372
.340
2050
.354
.371
.336
2055
.350
.369
.331
2060
.347
.368
.326
2065
.344
.366
.321
2070
.341
.364
.317
2075
.338
.363
.312
2080
.334
.361
.308

Projections of GDP are based on the projected increases in U.S. employment, labor productivity, average hours worked, and the GDP implicit price deflator. Projections of taxable payroll reflect the projected 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, projected growth in taxable payroll differs from projected growth in GDP primarily due to the assumed trend in the ratio of wages to total employee compensation—i.e., wages plus fringe benefits. The ratio of earnings to total worker compensation declined at an average annual rate of 0.26 percent for the 40 years from 1963 to 2003. For the 10-year periods 1963-73, 1973-83, and 1983-93 the ratio declined by 0.39, 0.57, and 0.11 percent, respectively. For the 10-year period 1993-2003 the ratio increased by 0.03 percent. Ultimate future annual rates of decline in the ratio of earnings to employee compensation are assumed to be 0.1, 0.2, and 0.3 percent for the low cost, intermediate, and high cost assumptions, respectively. An additional factor that has made the overall ratio of taxable payroll to GDP decline in recent years is the decline in the ratio of taxable wages to covered wages, as a result of the relatively greater increases in wages for persons earning above the contribution and benefit base. This decline in the taxable ratio is assumed to continue at a slower pace through 2014, with no further decline thereafter.


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