This section contains 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 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.F4 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.F4 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
benefit payments,
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 from 2012 through 2015 under all three sets of assumptions. Under the low-cost assumptions, the OASDI annual balance as a percentage of GDP is positive from 2016 through 2019. After 2019, deficits increase to a peak in 2033 and decrease thereafter. By 2076, the OASDI balance becomes positive, reaching 0.04 percent of GDP in 2086. Under the intermediate assumptions, the Trustees estimate that the OASDI balance will be negative for all years of the projection period. Annual deficits decrease from 2013 through 2017, increase from 2017 through 2036, decrease from 2036 through 2053, and increase thereafter. Under the high-cost assumptions, the OASDI balance is negative, with increasing deficits throughout the projection period.
The Trustees project that the HI balance as a percentage of GDP will be negative from 2012 through 2014 under the low-cost assumptions, and then positive and generally increasing thereafter. Under the intermediate assumptions, the HI balance is negative throughout the projection period. Annual deficits decline through 2018, reach a peak in 2047, 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 2074 and 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 from 2012 through 2015, positive from 2016 through 2022, negative from 2023 through 2048, and then positive and rising thereafter. Under the intermediate assumptions, combined OASDI and HI annual deficits decline from 2013 through 2017, and then rise, reaching a peak in 2041. After 2041, annual deficits fluctuate between about 2.2 percent and 2.4 percent of GDP. Under the high-cost assumptions, combined annual deficits rise throughout the projection period.
By 2086, the combined OASDI and HI annual balances as percentages of GDP range from a positive balance of 0.54 percent for the low-cost assumptions to a deficit of 7.23 percent for the high-cost assumptions. Balances differ by a smaller amount for the tenth year, 2021, and range from a positive balance of 0.15 percent for the low-cost assumptions to a deficit of 1.67 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 0.26 percent under the low-cost assumptions to a deficit of 4.40 percent under the high-cost assumptions. The 25-year
summarized balance varies by a smaller amount, from a positive balance of 0.29 percent to a deficit of 2.15 percent. Summarized rates are calculated on a present-value basis. They include the trust fund balances on January 1, 2012 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.)
To compare trust fund operations expressed as percentages of taxable payroll and those expressed as percentages of GDP, table
VI.F5 displays ratios of OASDI taxable payroll to GDP. HI taxable payroll is about 26 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 0.31 percent. The Trustees project that the ratio of wages to employee compensation will continue to decline, over the 65-year period ending in 2086, at an average annual rate of 0.03, 0.13, and 0.23 percent for the low-cost, intermediate, and high-cost assumptions, respectively.
