2003 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.F5 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.F5. 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 2034, and decrease thereafter. The OASDI balance is projected to be positive until 2018 on the basis of the intermediate assumptions and until 2014 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 2040 on the basis of the low cost alternative. The HI balance is projected to remain positive through 2012 under the intermediate alternative and 2003 under the high cost alternative, with deficits increasing steadily thereafter. The combined OASDI and HI balance as a percentage of GDP is projected to be positive through 2023 under the low cost assumptions, through 2016 under the intermediate assumptions, and through 2010 under the high cost assumptions. Between 2010 and about 2035, under all three 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 OASDI and HI programs, both separately and combined.

By 2080, the combined OASDI and HI balances as percentages of GDP, are projected to range from a deficit of 1.64 percent for the low cost assumptions to a deficit of 13.65 percent for the high cost assumptions. Projected balances differ by a much smaller amount for the tenth year, 2012, ranging from a positive balance of 1.22 percent for the low cost assumptions to a deficit of 0.23 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 0.16 percent, based on the low cost assumptions, to a deficit of 5.09 percent, based on the high cost assumptions). The 25-year summarized balance varies by a smaller amount (from a positive balance of 1.20 percent to a deficit of 0.71 percent). Summarized rates are calculated on the present-value basis including the trust fund balances on January 1, 2003 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.F5.--OASDI and HI Annual and Summarized Income, Cost, and Balance
as a Percentage of GDP, Calendar Years 2003-80
Calendar year
Percentage of GDP
GDP in
dollars
(billions)
OASDI
 
HI
 
Combined
Income1
Cost
Balance
Income 1
Cost
Balance
Income 1
Cost
Balance
Intermediate:
 
2003
5.08
4.38
0.71
 
1.51
1.44
0.07
 
6.59
5.82
0.77
$10,915
 
2004
5.05
4.33
.72
 
1.51
1.44
.07
 
6.57
5.77
.79
11,518
 
2005
5.06
4.29
.78
 
1.52
1.43
.08
 
6.58
5.72
.86
12,182
 
2006
5.05
4.25
.80
 
1.52
1.43
.09
 
6.57
5.68
.89
12,888
 
2007
5.05
4.24
.81
 
1.52
1.43
.09
 
6.57
5.67
.89
13,625
 
2008
5.04
4.26
.78
 
1.52
1.44
.08
 
6.56
5.70
.86
14,372
 
2009
5.03
4.29
.74
 
1.53
1.46
.07
 
6.56
5.75
.81
15,137
 
2010
5.03
4.34
.69
 
1.53
1.48
.05
 
6.56
5.82
.74
15,925
 
2011
5.04
4.40
.64
 
1.54
1.50
.04
 
6.57
5.90
.67
16,740
 
2012
5.03
4.47
.56
 
1.54
1.53
.01
 
6.57
6.00
.58
17,575
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
5.03
4.77
.27
 
1.55
1.62
-.07
 
6.58
6.39
.20
20,245
 
2020
5.03
5.40
-.37
 
1.56
1.83
-.27
 
6.59
7.23
-.64
25,453
 
2025
5.03
6.00
-.98
 
1.57
2.11
-.53
 
6.60
8.11
-1.51
31,911
 
2030
5.01
6.43
-1.42
 
1.58
2.43
-.84
 
6.59
8.86
-2.26
40,025
 
2035
4.99
6.62
-1.64
 
1.58
2.74
-1.16
 
6.57
9.36
-2.80
50,280
 
2040
4.95
6.65
-1.69
 
1.57
3.02
-1.45
 
6.53
9.66
-3.14
63,113
 
2045
4.92
6.64
-1.73
 
1.56
3.26
-1.70
 
6.48
9.90
-3.43
79,037
 
2050
4.88
6.68
-1.80
 
1.55
3.48
-1.93
 
6.43
10.17
-3.73
98,759
 
2055
4.85
6.76
-1.92
 
1.54
3.71
-2.17
 
6.39
10.47
-4.08
123,302
 
2060
4.81
6.81
-2.00
 
1.54
3.97
-2.43
 
6.34
10.78
-4.44
154,043
 
2065
4.77
6.85
-2.08
 
1.53
4.26
-2.73
 
6.30
11.10
-4.81
192,407
 
2070
4.73
6.89
-2.16
 
1.52
4.58
-3.06
 
6.25
11.47
-5.22
240,146
 
2075
4.70
6.94
-2.25
 
1.51
4.91
-3.40
 
6.20
11.85
-5.65
299,479
 
2080
4.66
6.98
-2.32
 
1.50
5.26
-3.77
 
6.15
12.24
-6.09
373,322
Summarized rates:2
25-year:
 
2003-27
5.63
5.13
.49
 
1.64
1.76
-.11
 
7.27
6.89
.38
 
50-year:
 
2003-52
5.35
5.71
-.36
 
1.61
2.26
-.65
 
6.96
7.97
-1.01
 
75-year
 
2003-77
5.22
5.95
-.73
 
1.59
2.70
-1.11
 
6.82
8.65
-1.84
 
Low Cost:
 
2003
5.07
4.33
.74
 
1.51
1.40
.11
 
6.57
5.73
.85
11,003
 
2004
5.08
4.26
.83
 
1.52
1.38
.14
 
6.60
5.63
.96
11,622
 
2005
5.09
4.20
.89
 
1.52
1.35
.17
 
6.61
5.54
1.06
12,250
 
2006
5.08
4.14
.94
 
1.52
1.32
.20
 
6.60
5.46
1.14
12,892
 
2007
5.09
4.11
.99
 
1.52
1.30
.23
 
6.61
5.40
1.21
13,560
 
2008
5.09
4.08
1.00
 
1.53
1.28
.25
 
6.61
5.36
1.25
14,250
 
2009
5.09
4.08
1.00
 
1.53
1.27
.26
 
6.61
5.35
1.26
14,961
 
2010
5.08
4.09
.99
 
1.53
1.27
.26
 
6.62
5.36
1.26
15,688
 
2011
5.10
4.12
.98
 
1.54
1.27
.27
 
6.64
5.39
1.25
16,426
 
2012
5.10
4.16
.94
 
1.54
1.26
.28
 
6.64
5.42
1.22
17,173
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
5.10
4.41
.69
 
1.55
1.27
.28
 
6.65
5.68
.98
19,532
 
2020
5.12
4.96
.16
 
1.57
1.31
.25
 
6.68
6.27
.41
24,028
 
2025
5.13
5.43
-.31
 
1.58
1.38
.20
 
6.71
6.81
-.11
29,481
 
2030
5.13
5.73
-.61
 
1.59
1.45
.14
 
6.72
7.18
-.47
36,248
 
2035
5.11
5.80
-.69
 
1.59
1.52
.07
 
6.70
7.32
-.62
44,756
 
2040
5.10
5.72
-.62
 
1.58
1.58
3/
 
6.68
7.30
-.62
55,348
 
2045
5.08
5.62
-.55
 
1.58
1.65
-.08
 
6.65
7.27
-.62
68,445
 
2050
5.06
5.58
-.52
 
1.57
1.74
-.17
 
6.63
7.32
-.69
84,582
 
2055
5.04
5.57
-.53
 
1.57
1.86
-.30
 
6.60
7.44
-.83
104,553
 
2060
5.02
5.53
-.52
 
1.56
2.00
-.44
 
6.58
7.54
-.96
129,465
 
2065
5.00
5.47
-.47
 
1.55
2.16
-.61
 
6.55
7.63
-1.08
160,503
 
2070
4.98
5.41
-.44
 
1.55
2.33
-.79
 
6.52
7.75
-1.23
198,967
 
2075
4.95
5.39
-.44
 
1.54
2.51
-.98
 
6.49
7.91
-1.41
246,464
 
2080
4.93
5.39
-.46
 
1.53
2.71
-1.18
 
6.47
8.11
-1.64
305,072
Summarized rates: 2
25-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2003-27
5.70
4.78
0.92
 
1.65
1.36
.28
 
7.34
6.14
1.20
 
50-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2003-52
5.45
5.12
.33
 
1.62
1.45
.17
 
7.07
6.57
.50
 
75-year
 
 
 
 
 
 
 
 
 
 
 
 
 
2003-77
5.35
5.19
.16
 
1.61
1.61
-.01
 
6.96
6.80
.16
 
High Cost:
 
2003
5.13
4.49
.64
 
1.50
1.50
3/
 
6.64
5.99
.64
10,707
 
2004
4.98
4.44
.54
 
1.51
1.52
-.01
 
6.49
5.96
.53
11,398
 
2005
5.02
4.39
.64
 
1.51
1.53
-.02
 
6.54
5.92
.62
12,227
 
2006
5.00
4.44
.56
 
1.51
1.56
-.05
 
6.51
6.00
.51
12,937
 
2007
4.96
4.51
.45
 
1.51
1.59
-.08
 
6.47
6.10
.37
13,868
 
2008
4.95
4.52
.43
 
1.51
1.62
-.10
 
6.46
6.14
.32
15,025
 
2009
4.96
4.61
.35
 
1.52
1.67
-.15
 
6.48
6.28
.20
15,936
 
2010
4.97
4.69
.28
 
1.53
1.73
-.21
 
6.49
6.42
.07
16,809
 
2011
4.98
4.78
.20
 
1.53
1.79
-.26
 
6.51
6.57
-.06
17,731
 
2012
4.97
4.87
.09
 
1.54
1.86
-.32
 
6.51
6.73
-.23
18,703
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
4.96
5.19
-.23
 
1.55
2.08
-.53
 
6.51
7.27
-.76
21,866
 
2020
4.95
5.89
-.94
 
1.56
2.57
-1.02
 
6.51
8.46
-1.96
28,177
 
2025
4.93
6.61
-1.68
 
1.57
3.25
-1.68
 
6.50
9.85
-3.36
36,206
 
2030
4.90
7.18
-2.27
 
1.58
4.09
-2.52
 
6.48
11.27
-4.79
46,481
 
2035
4.87
7.52
-2.66
 
1.57
4.98
-3.41
 
6.44
12.50
-6.06
59,575
 
2040
4.82
7.71
-2.89
 
1.56
5.79
-4.22
 
6.38
13.50
-7.11
76,081
 
2045
4.77
7.87
-3.09
 
1.55
6.47
-4.91
 
6.32
14.33
-8.01
96,656
 
2050
4.72
8.06
-3.34
 
1.54
6.99
-5.45
 
6.27
15.05
-8.79
122,273
 
2055
4.68
8.29
-3.62
 
1.53
7.42
-5.89
 
6.21
15.72
-9.50
154,303
 
2060
4.63
8.51
-3.87
 
1.53
7.90
-6.37
 
6.16
16.40
-10.25
194,554
 
2065
4.58
8.72
-4.14
 
1.52
8.43
-6.91
 
6.10
17.15
-11.05
244,766
 
2070
4.54
8.95
-4.41
 
1.51
9.03
-7.52
 
6.05
17.98
-11.93
307,391
 
2075
4.49
9.16
-4.67
 
1.50
9.63
-8.13
 
5.99
18.79
-12.80
385,540
 
2080
4.44
9.31
-4.87
 
1.49
10.27
-8.78
 
5.93
19.58
-13.65
483,424
Summarized rates: 2
25-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2003-27
5.55
5.57
-.02
 
1.64
2.33
-.69
 
7.19
7.89
-.71
 
50-year:
 
 
 
 
 
 
 
 
 
 
 
 
 
2003-52
5.24
6.44
-1.20
 
1.61
3.75
-2.15
 
6.85
10.19
-3.34
 
75-year
 
 
 
 
 
 
 
 
 
 
 
 
 
2003-77
5.09
6.94
-1.85
 
1.59
4.83
-3.24
 
6.68
11.77
-5.09
 

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

2Summarized rates are calculated on the present-value basis including the value of the trust funds on January 1, 2003 and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end of the period.

3Between -0.005 and 0.005 percent of GDP.

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.F6. HI taxable payroll is about 25 percent larger than the OASDI taxable payroll throughout the long-range period (see appendix F.1 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 VI.F6.--Ratio of OASDI Taxable Payroll to GDP, Calendar Years 2003-80
Calendar year
Intermediate
Low Cost
High Cost
2003
0.402
0.402
0.401
2004
.400
.401
.399
2005
.399
.402
.396
2006
.399
.402
.394
2007
.398
.401
.391
2008
.397
.401
.389
2009
.396
.401
.389
2010
.395
.400
.390
2011
.394
.400
.388
2012
.393
.399
.387
 
 
 
 
2015
.391
.398
.384
2020
.388
.397
.379
2025
.385
.395
.374
2030
.381
.393
.369
2035
.378
.391
.364
2040
.374
.390
.359
2045
.371
.388
.354
2050
.368
.386
.349
2055
.364
.385
.344
2060
.361
.383
.339
2065
.357
.381
.335
2070
.354
.380
.330
2075
.351
.378
.325
2080
.347
.376
.320

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 increases in taxable payroll differ from projected increases 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 0.20 percent for the 40 years from 1961 to 2001. For the 10-year periods 1961-71, 1971-81, 1981-91 the ratio declined by 0.34, 0.60, and 0.13 percent, respectively. For the 10-year period 1991-2001 the ratio increased by 0.29 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 with wages above the contribution and benefit base. This decline in the taxable ratio is assumed to continue at a slower pace through 2012, with no further decline thereafter.


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