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1997 OASDI Trustees Report



C. LONG-RANGE ESTIMATES OF SOCIAL SECURITY
TRUST FUND OPERATIONS AS A PERCENTAGE
OF GROSS DOMESTIC PRODUCT

This appendix 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 II.F13 and appendix A), 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 III.C1 shows estimated income excluding interest, total outgo, 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 III.C1. 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 outgo 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 contributions (including contributions from railroad employment) and payments from the general fund of the Treasury for contributions on deemed wage credits for military service. Total outgo consists of outlays (benefits and administrative expenses) for insured beneficiaries. Both the HI income and outgo are on an incurred basis.

The OASDI balance (income excluding interest, less outgo) as a percentage of GDP is projected to be positive on the basis of the low cost alternative I through 2015, but with decreasing deficits after 2030. The OASDI balance is projected to be positive through 2010 on the basis of the intermediate alternative II and through 2000 on the basis of the high cost alternative III, before becoming permanently negative, with increasing deficits. The projected HI balance as a percentage of GDP, however, is negative, with increasing deficits, throughout the long-range period under all three alternatives. The combined OASDI and HI balance as a percentage of GDP is projected to be positive through 2010 under the low cost alternative I, through 1998 under the intermediate alternative II, and through only 1997 under the high cost alternative III. Between 2010 and about 2030, under all three alternatives, both the OASDI and HI balances as percentages of GDP are projected to decline substantially because the "baby-boom" generation reaches retirement age during these years. After balances cease to be positive under the intermediate and high cost alternatives, the size of annual deficits increases fairly steadily for the OASDI and HI programs, both separately and combined.

By the year 2070, the combined OASDI and HI balances as percentages of GDP, based on the three alternatives, are projected to differ by a relatively large amount: from a deficit of 1.53 percent for the low cost alternative I to a deficit of 12.26 percent for the high cost alternative III. Projected balances differ by a much smaller amount by the year 2006: from a positive balance of 0.25 percent for the low cost alternative I to a deficit of 1.46 percent for the high cost alternative III.

The summarized long-range (75-year) balance as a percentage of GDP for the combined OASDI and HI programs varies by a relatively large amount (from a deficit of 0.72 percent, based on the low cost alternative I, to a deficit of 6.17 percent, based on the high cost alternative III). The 25-year summarized balance varies by a smaller amount (from a positive of 0.11 percent to a deficit of 2.05 percent). Summarized rates are calculated on the present-value basis including the trust fund balances on January 1, 1997 and the cost of reaching and maintaining a target trust fund level equal to 100 percent of annual expenditures by the end of the period. (See section II.F for further explanation.)


Table III.C1.­ Estimated OASDI and HI Income Excluding Interest, Outgo, and Balance as a Percentage of GDP by Alternative, Calendar Years 1997-2071


Calendar
year
Percentage of GDP
GDP in
dollars
(billions)
OASDI
HI
Combined
In-   
come 1/
Out-
go
Bal-
ance
In-   
come 1/
Out-
go
Bal-
ance
In-   
come 1/
Out-
go
Bal-
ance

Intermediate:
       1997 5.12 4.66 0.46 1.48 1.76 -0.28 6.60 6.41 0.19 $7,963
       1998 5.05 4.65 .40 1.46 1.81 -.35 6.51 6.46 .05 8,365
       1999 5.02 4.65 .37 1.46 1.86 -.40 6.48 6.52 -.04 8,796
       2000 5.00 4.65 .35 1.46 1.92 -.46 6.46 6.57 -.11 9,256
       2001 5.00 4.66 .34 1.46 1.97 -.51 6.46 6.63 -.18 9,748
       2002 4.99 4.67 .32 1.46 2.03 -.57 6.45 6.70 -.25 10,273
       2003 4.98 4.68 .30 1.46 2.08 -.62 6.44 6.76 -.32 10,825
       2004 4.97 4.69 .27 1.46 2.13 -.67 6.43 6.83 -.40 11,408
       2005 4.97 4.71 .26 1.46 2.18 -.72 6.43 6.89 -.46 12,024
       2006 4.96 4.72 .24 1.46 2.23 -.77 6.42 6.95 -.53 12,678
 
       2010 4.96 4.87 .08 1.47 2.43 -.97 6.42 7.30 -.88 15,587
       2015 4.94 5.27 -.32 1.48 2.77 -1.29 6.42 8.04 -1.62 19,886
       2020 4.94 5.80 -.87 1.49 3.18 -1.69 6.43 8.99 -2.56 25,111
       2025 4.92 6.27 -1.35 1.50 3.61 -2.10 6.43 9.88 -3.45 31,542
       2030 4.91 6.57 -1.66 1.51 4.01 -2.50 6.41 10.57 -4.16 39,835
       2035 4.88 6.64 -1.76 1.51 4.31 -2.80 6.39 10.95 -4.56 50,507
       2040 4.84 6.56 -1.72 1.50 4.49 -2.99 6.34 11.05 -4.70 64,037
       2045 4.80 6.50 -1.69 1.49 4.59 -3.10 6.30 11.08 -4.79 80,902
       2050 4.77 6.50 -1.73 1.49 4.63 -3.15 6.25 11.13 -4.88 101,948
       2055 4.73 6.58 -1.84 1.48 4.67 -3.19 6.21 11.25 -5.03 128,296
       2060 4.70 6.64 -1.95 1.48 4.74 -3.27 6.18 11.39 -5.21 161,494
       2065 4.66 6.67 -2.01 1.47 4.84 -3.37 6.13 11.51 -5.38 203,431
       2070 4.62 6.68 -2.05 1.46 4.96 -3.50 6.09 11.64 -5.55 256,211
 
Summarized rates: 2/
25-year:
1997-2021 5.34 5.20 .14 1.55 2.51 -.96 6.89 7.71 -.82 -
50-year:
1997-2046 5.15 5.71 -.56 1.53 3.16 -1.63 6.68 8.88 -2.19 -
75-year:
1997-2071 5.06 5.90 -.84 1.52 3.50 -1.99 6.57 9.40 -2.83 -
 
Low Cost:
       1997 5.11 4.62 .49 1.48 1.72 -.25 6.59 6.35 .24 8,004
       1998 5.07 4.58 .50 1.46 1.75 -.29 6.53 6.33 .21 8,422
       1999 5.06 4.54 .52 1.46 1.78 -.32 6.52 6.32 .20 8,853
       2000 5.04 4.49 .55 1.46 1.81 -.35 6.50 6.30 .20 9,304
       2001 5.06 4.46 .59 1.46 1.84 -.38 6.51 6.30 .22 9,775
       2002 5.05 4.43 .62 1.46 1.86 -.40 6.51 6.29 .22 10,270
       2003 5.05 4.39 .66 1.46 1.88 -.42 6.51 6.28 .24 10,787
       2004 5.05 4.37 .68 1.46 1.91 -.45 6.51 6.28 .23 11,323
       2005 5.06 4.35 .71 1.46 1.92 -.46 6.52 6.28 .25 11,887
       2006 5.06 4.34 .72 1.46 1.94 -.47 6.52 6.27 .25 12,480
 
       2010 5.08 4.42 .65 1.47 2.01 -.54 6.55 6.43 .12 15,031
       2015 5.08 4.77 .31 1.48 2.14 -.65 6.57 6.91 -.35 18,677
       2020 5.09 5.24 -.15 1.50 2.30 -.80 6.59 7.54 -.95 23,039
       2025 5.10 5.62 -.52 1.51 2.39 -.88 6.61 8.01 -1.40 28,374
       2030 5.09 5.80 -.71 1.52 2.47 -.95 6.61 8.27 -1.66 35,284
       2035 5.08 5.76 -.68 1.52 2.52 -1.00 6.60 8.28 -1.68 44,184
       2040 5.06 5.57 -.51 1.52 2.55 -1.03 6.57 8.12 -1.54 55,466
       2045 5.03 5.41 -.38 1.51 2.58 -1.07 6.55 7.99 -1.45 69,499
       2050 5.01 5.32 -.31 1.51 2.62 -1.11 6.52 7.93 -1.41 87,000
       2055 4.99 5.29 -.29 1.51 2.64 -1.14 6.50 7.93 -1.43 108,973
       2060 4.97 5.24 -.27 1.50 2.70 -1.19 6.48 7.94 -1.46 136,734
       2065 4.95 5.16 -.21 1.50 2.77 -1.27 6.45 7.93 -1.48 171,770
       2070 4.93 5.10 -.17 1.49 2.85 -1.36 6.42 7.95 -1.53 215,706

 
Summarized rates: 2/
25-year:
1997-2021 5.44 4.81 .63 1.55 2.07 -.52 6.99 6.88 .11 -
50-year:
1997-2046 5.29 5.13 .17 1.54 2.23 -.69 6.83 7.36 -.52 -
75-year:
1997-2071 5.22 5.14 .08 1.53 2.33 -.80 6.75 7.47 -.72 -
 
High Cost:
       1997 5.13 4.70 .43 1.48 1.82 -.34 6.61 6.52 .09 7,922
       1998 5.05 4.84 .21 1.46 1.93 -.47 6.51 6.76 -.25 8,159
       1999 4.98 4.76 .22 1.45 1.99 -.53 6.43 6.75 -.32 8,801
       2000 4.97 4.80 .16 1.46 2.06 -.60 6.42 6.86 -.44 9,416
       2001 4.96 5.08 -.12 1.45 2.20 -.74 6.41 7.27 -.86 9,661
       2002 4.91 5.06 -.15 1.45 2.26 -.81 6.36 7.32 -.96 10,371
       2003 4.90 5.05 -.16 1.45 2.35 -.90 6.35 7.40 -1.05 11,072
       2004 4.90 5.10 -.19 1.45 2.44 -.99 6.36 7.54 -1.18 11,739
       2005 4.90 5.14 -.23 1.45 2.53 -1.07 6.36 7.66 -1.31 12,444
       2006 4.89 5.18 -.29 1.46 2.62 -1.16 6.34 7.80 -1.46 13,184
 
       2010 4.86 5.39 -.53 1.46 3.03 -1.57 6.32 8.42 -2.10 16,515
       2015 4.84 5.83 -1.00 1.47 3.71 -2.25 6.30 9.55 -3.24 21,595
       2020 4.81 6.45 -1.63 1.48 4.61 -3.13 6.29 11.06 -4.77 27,885
       2025 4.79 7.04 -2.25 1.49 5.70 -4.21 6.28 12.73 -6.46 35,705
       2030 4.76 7.49 -2.74 1.50 6.78 -5.28 6.25 14.27 -8.02 45,785
       2035 4.72 7.75 -3.03 1.50 7.67 -6.17 6.22 15.42 -9.20 58,766
       2040 4.67 7.86 -3.18 1.49 8.21 -6.72 6.16 16.07 -9.90 75,159
       2045 4.63 7.99 -3.36 1.48 8.46 -6.98 6.11 16.45 -10.34 95,576
       2050 4.58 8.19 -3.61 1.48 8.50 -7.02 6.06 16.69 -10.63 121,007
       2055 4.54 8.48 -3.94 1.48 8.51 -7.03 6.02 16.99 -10.97 152,668
       2060 4.50 8.77 -4.27 1.47 8.60 -7.12 5.98 17.37 -11.39 192,292
       2065 4.46 9.02 -4.55 1.47 8.74 -7.27 5.93 17.75 -11.82 242,110
       2070 4.42 9.22 -4.80 1.46 8.92 -7.46 5.88 18.14 -12.26 304,698
 
Summarized rates: 2/
25-year:
1997-2021 5.26 5.68 -.42 1.54 3.17 -1.63 6.80 8.85 -2.05 -
50-year:
1997-2046 5.04 6.46 -1.42 1.52 4.85 -3.33 6.56 11.31 -4.75 -
75-year:
1997-2071 4.92 6.94 -2.01 1.51 5.67 -4.16 6.43 12.61 -6.17 -

1 Income excludes interest on the trust funds.

2 Summarized rates are calculated on the present-value basis including the value of the trust funds on January 1, 1997 and the cost of reaching and maintaining a target trust fund level equal to 100 percent of annual expenditures by 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 seen by analyzing the estimated ratios of OASDI taxable payroll to GDP, which are presented in table
III.C2. HI taxable payroll is about 20 percent larger than the OASDI taxable payroll throughout the long-range period (see appendix A for a detailed description of the difference). The cost as a percentage of GDP is approximately equal to the cost as a percentage of taxable payroll multiplied by the ratio of taxable payroll to GDP.


Table III.C2.­ Ratio of OASDI Taxable Payroll to GDP by Alternative,
Calendar Years 1997-2075


Calendar year Intermediate Low Cost High Cost

         1997 0.405 0.406 0.405
         1998 .400 .403 .400
         1999 .398 .402 .395
         2000 .397 .401 .393
         2001 .396 .401 .392
         2002 .395 .401 .389
         2003 .394 .401 .387
         2004 .394 .401 .388
         2005 .393 .401 .387
         2006 .393 .401 .386

         2010 .391 .401 .382
         2015 .387 .400 .376
         2020 .383 .398 .371
         2025 .380 .396 .366
         2030 .376 .394 .360
         2035 .372 .392 .355
         2040 .369 .390 .350
         2045 .365 .388 .345
         2050 .362 .386 .340
         2055 .358 .384 .335
         2060 .355 .383 .331
         2065 .351 .381 .326
         2070 .348 .379 .321
         2075 .345 .377 .317



Projections of GDP for the first several years were based on assumed quarterly changes in real GDP and the GDP implicit price deflator. Thereafter, projections of GDP were based on the projected increases in U.S. employment, labor productivity, and the GDP implicit price deflator. Productivity projections are consistent with assumed changes in the level of average earnings, the ratio of earnings to worker compensation, the ratio of worker compensation to GDP, and average hours worked per year (see section
II.H).

Projections of taxable payroll, which are described in detail in section II.H, were based on the projected increases in covered employment and average taxable earnings. Therefore, the projected increases in taxable payroll differ from projected increases in GDP primarily to the extent that average taxable earnings are assumed to increase more slowly than is productivity and to the extent that OASDI program coverage of employment changes over time.

The long-range trend in the ratio of taxable payroll to GDP reflects the assumed trend in the ratio of wages to total employee compensation -- i.e., wages plus fringe benefits. The ratio of wages to total employee compensation declined at average annual rates of 0.36 percent for the 40 years 1956-95 and 0.31, 0.60, 0.40, and 0.12 percent for the 10-year periods 1956-65, 1966-75, 1976-85, and 1986-95, respectively. Ultimate future annual rates of decline in the ratio of wages to employee compensation are assumed to be 0.1, 0.2, and 0.3 percent for alternatives I, II, and III, 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 earnings to covered earnings, as a result the relatively greater increases in earnings for persons with earnings above the benefit and contribution base. This decline in the taxable ratio is assumed to continue at a slower pace through the end of this century.

Between 1983 and 2015, however, the tendency toward decreases in the ratio of taxable payroll to GDP, discussed above, is at least partially offset by the gradually expanding OASDI coverage of Federal civilian employment resulting from the 1983 amendments.

For the low cost alternative I, the ratio of taxable payroll to GDP is projected to be nearly constant through the year 2010, and then to decrease for the remainder of the long-range period. For the intermediate and high cost alternatives, the ratio of taxable payroll to GDP is projected to decrease essentially throughout the long-range period.



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