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CBO's long-term Social Security projections: changes since 2017 and comparisons with the Social Security trustees' projections

Contributor(s):
United States. Congressional Budget Office, issuing body.
Publication:
Washington, D.C. : Congressional Budget Office, December 2018
Language(s):
English
Format:
Text
Subject(s):
Budgets -- trends
Social Security -- economics
Social Security -- trends
Forecasting
Income Tax
Humans
United States
Genre(s):
Technical Report
Abstract:
Each year, the Congressional Budget Office updates its projections of the Social Security system's finances to incorporate newly available data and information from the research community. The agency also updates its models to incorporate improvements in methods and feedback on its analytical approach. CBO's latest long-term budget projections were published in June 2018. Comparison With CBO's Previous Projections. CBO's June 2018 projections indicate a slight improvement in the Social Security system's financial outlook compared with the previous year's projections: The projected 75-year actuarial balance, a commonly used measure of the system's financial condition, has not changed as a percentage of gross domestic product (GDP) since last year, remaining at -1.5 percent of GDP (that is, a deficit of 1.5 percent). As a percentage of taxable payroll, the projected 75-year actuarial balance has improved slightly from -4.5 percent to -4.4 percent (see Table 1). Changes to projections of three key inputs have improved the Social Security system's projected finances: the share of earnings that is subject to Social Security payroll taxes, the labor force participation rate, and interest rates. Those improvements have been partially offset by including an additional year of deficit, 2092, in the calculation of the actuarial balance. Technical changes also collectively worsen the 75-year outlook. Comparison With the Social Security Trustees' Projections. CBO projects larger deficits in Social Security's finances than do the Social Security Trustees. That difference is largely explained by CBO's and the trustees' different projections of several key inputs into estimates of the system's finances: the population, earnings subject to Social Security payroll taxes, real interest rates (that is, interest rates adjusted to remove the effects of inflation), and components of GDP growth (see Table 2). Changes to CBO's Projections Since Last Year. Created in 1935, Social Security is the largest single program in the federal budget. The Social Security system pays benefits to retired workers, their eligible dependents, and some survivors of deceased workers from the Old-Age and Survivors Insurance (OASI) Trust Fund, and it makes payments to disabled workers and their dependents through the Disability Insurance (DI) Trust Fund. Although the two trust funds are legally separate, in this report, CBO generally follows the common analytical convention of considering them as combined. A common measure of the sustainability of a program that has a trust fund and a dedicated revenue source is its estimated actuarial balance over a given period--that is, the sum of the present value of projected tax revenues and the current trust fund balance minus the sum of the present value of projected outlays and a year's worth of benefits at the end of the period.1 For Social Security, that difference is traditionally presented as a percentage of the present value of GDP or taxable payroll over 75 years.
Copyright:
The National Library of Medicine believes this item to be in the public domain. (More information)
Extent:
1 online resource (1 PDF file (14 pages))
Illustrations:
Illustrations
NLM Unique ID:
101738507 (See catalog record)
Contributor(s):
United States. Congressional Budget Office, issuing body.
Publication:
Washington, D.C. : Congressional Budget Office, December 2018
Language(s):
English
Format:
Text
Subject(s):
Budgets -- trends
Social Security -- economics
Social Security -- trends
Forecasting
Income Tax
Humans
United States
Genre(s):
Technical Report
Abstract:
Each year, the Congressional Budget Office updates its projections of the Social Security system's finances to incorporate newly available data and information from the research community. The agency also updates its models to incorporate improvements in methods and feedback on its analytical approach. CBO's latest long-term budget projections were published in June 2018. Comparison With CBO's Previous Projections. CBO's June 2018 projections indicate a slight improvement in the Social Security system's financial outlook compared with the previous year's projections: The projected 75-year actuarial balance, a commonly used measure of the system's financial condition, has not changed as a percentage of gross domestic product (GDP) since last year, remaining at -1.5 percent of GDP (that is, a deficit of 1.5 percent). As a percentage of taxable payroll, the projected 75-year actuarial balance has improved slightly from -4.5 percent to -4.4 percent (see Table 1). Changes to projections of three key inputs have improved the Social Security system's projected finances: the share of earnings that is subject to Social Security payroll taxes, the labor force participation rate, and interest rates. Those improvements have been partially offset by including an additional year of deficit, 2092, in the calculation of the actuarial balance. Technical changes also collectively worsen the 75-year outlook. Comparison With the Social Security Trustees' Projections. CBO projects larger deficits in Social Security's finances than do the Social Security Trustees. That difference is largely explained by CBO's and the trustees' different projections of several key inputs into estimates of the system's finances: the population, earnings subject to Social Security payroll taxes, real interest rates (that is, interest rates adjusted to remove the effects of inflation), and components of GDP growth (see Table 2). Changes to CBO's Projections Since Last Year. Created in 1935, Social Security is the largest single program in the federal budget. The Social Security system pays benefits to retired workers, their eligible dependents, and some survivors of deceased workers from the Old-Age and Survivors Insurance (OASI) Trust Fund, and it makes payments to disabled workers and their dependents through the Disability Insurance (DI) Trust Fund. Although the two trust funds are legally separate, in this report, CBO generally follows the common analytical convention of considering them as combined. A common measure of the sustainability of a program that has a trust fund and a dedicated revenue source is its estimated actuarial balance over a given period--that is, the sum of the present value of projected tax revenues and the current trust fund balance minus the sum of the present value of projected outlays and a year's worth of benefits at the end of the period.1 For Social Security, that difference is traditionally presented as a percentage of the present value of GDP or taxable payroll over 75 years.
Copyright:
The National Library of Medicine believes this item to be in the public domain. (More information)
Extent:
1 online resource (1 PDF file (14 pages))
Illustrations:
Illustrations
NLM Unique ID:
101738507 (See catalog record)