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. Table
VI.F4 also shows the estimated GDP on which these percentages are based. For OASDI, income excluding interest 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, income excluding interest 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. In computing these percentages, OASDI income and cost are on a cash basis; 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 negative in 2011 and 2012 under all three sets of assumptions. On the basis of the low-cost assumptions, the OASDI annual balance as a percentage of GDP is projected to be positive from 2013 through 2019. After 2019, deficits increase to a peak in 2033 and decrease thereafter. By 2063, the OASDI balance becomes positive, reaching 0.18 percent of GDP in 2085. On the basis of the intermediate assumptions, the OASDI balance is projected to be negative for all years of the projection period. Annual deficits decrease through 2014, increase from 2015 through 2036, decrease from 2037 through 2052, and increase thereafter. On the basis of the high-cost assumptions, the OASDI balance is projected to be negative throughout the projection period, with increasing deficits starting in 2013.
The HI balance as a percentage of GDP is projected to be negative from 2011‑14 under the low-cost assumptions, and then positive and increasing thereafter. Under the intermediate assumptions, the HI balance is projected to be negative throughout the projection period. Annual deficits decline through 2018, reach a peak in 2045, and decline thereafter. Under the high-cost assumptions, the HI balance is negative for all years of the projection period. Annual deficits reach a peak in 2056 and decline thereafter.
The combined OASDI and HI annual balance as a percentage of GDP is projected to be negative throughout the projection period under the intermediate and high-cost assumptions. Under the low-cost assumptions, the combined OASDI and HI balance is negative from 2011‑13, positive from 2014 through 2023, negative from 2024 through 2040, then positive and rising thereafter. Under the intermediate assumptions, combined OASDI and HI annual deficits decline through 2016, then rise, reaching a peak in 2038. After 2038, annual deficits fluctuate between about 1.7 percent and 1.9 percent of GDP. Combined annual deficits rise after 2013 under the high-cost assumptions.
By 2085, the combined OASDI and HI annual balances as percentages of GDP are projected to range from a positive balance of 0.98 percent for the low-cost assumptions to a deficit of 6.03 percent for the high-cost assumptions. Projected balances differ by a smaller amount for the tenth year, 2020, ranging from a positive balance of 0.21 percent for the low-cost assumptions to a deficit of 1.35 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 0.54 percent, based on the low-cost assumptions, to a deficit of 3.85 percent, based on the high-cost assumptions). The 25-year
summarized balance varies by a smaller amount (from a positive balance of 0.49 percent to a deficit of 1.71 percent). Summarized rates are calculated on the present-value basis and include the trust fund balances on January 1, 2011 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.)
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 26 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.
Projections of GDP are based on the projected increases in U.S. employment, labor productivity, average hours worked, and the GDP 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 0.24 percent for the 40 years from 1969 to 2009. For the 10‑year periods 1969‑79, 1979‑89, 1989‑99, and 1999‑2009, the average annual rates of change were ‑0.62, ‑0.14, 0.13 and ‑0.33 percent, respectively. Ultimate future annual rates of decline in the ratio of wages to employee compensation are assumed to be 0.0, 0.1, and 0.2 percent for the low-cost, intermediate, and high-cost assumptions, respectively. Another factor in the decline in the ratio of taxable payroll to GDP in most recent years is the decline in the ratio of
taxable wages to covered wages, due to the relatively greater increases in wages for persons earning above the contribution and benefit base. Compared to the period 1983‑2007, the projected taxable-to-covered wage ratio for 2011‑20 is assumed to decline at a slower pace, with no further decline thereafter.
