This section presents long-range projections in dollars of the operations of
the combined OASI and DI Trust Funds and in some cases the HI Trust Fund. Meaningful comparison of current dollar values over long periods of time can be difficult because of the effect of inflation
. Some means of removing inflation is thus generally desirable. Several economic series or indices are provided to allow current dollars
to be adjusted for changes in prices, wages, and certain other aspects of economic growth during the projection period.
presents five indices that may be used to adjust dollar amounts, over time, to produce appropriately comparable values. Any series of values can be adjusted by dividing the value for each year by the corresponding index values for the year.
One of the most common forms of standardization is based on some measure
of change in the prices of consumer goods. The Bureau of Labor Statistics, Department of Labor, publishes one such price index, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W, hereafter referred to as CPI
). This index is used to determine annual increases in OASDI monthly benefits payable after the year of initial eligibility. The CPI is assumed to increase ultimately at annual rates of 1.8, 2.8, and 3.8 percent for the low-cost, intermediate, and high-cost sets of assumptions
, respectively. Constant-dollar values (those adjusted using the CPI index in table VI.F6
) indicate the relative purchasing power of the values over time, and are provided in table VI.F7
Another type of standardization combines the effects of price inflation and
real-wage growth. The wage index presented here is the national average wage index
, as defined in section 215(i)(1)(G) of the Social Security Act. This index is used to make annual adjustments to many earnings-related quantities embodied in the Social Security Act, such as the contribution and benefit base
. The growth in the average annual wage is assumed to average 3.6, 4.0, and 4.4 percent under the low-cost, intermediate, and high-cost assumptions, respectively, between 2020 and 2085. Wage-indexed values indicate the level of a series relative to the standard of living of workers over time.
The taxable payroll
index adjusts for the effects of changes in the number of workers and changes in the proportion of earnings that are taxable, as well as for the effects of price inflation and real-wage growth. The OASDI taxable payroll consists of all earnings subject to OASDI taxation, adjusted for the lower effective tax rate on multiple-employer excess wages
. A series of values, divided by the taxable payroll, indicates the percentage of payroll that each value represents, and thus the extent to which the series of values increases or decreases as a percent of payroll over time.
The GDP index adjusts for the growth in the aggregate amount of goods and
services produced in the United States. Values adjusted by GDP (see appendix VI.F.2
) indicate their relative share of the total output of the economy. No explicit assumptions are made about growth in taxable payroll or GDP. These series are computed reflecting the other more basic demographic
and economic assumptions
, as discussed in sections V.A
Discounting at the rate of interest is another way of adjusting current dollars.
The series of interest-rate factors included here is based on the average of the assumed annual interest rates for special public-debt obligations issuable to the trust funds for each year. This series is slightly different from the interest rates used to create summarized values elsewhere in this report, where the actual yield on currently-held trust fund assets is used for each year. Ultimate nominal interest rates, which in practice are compounded semiannually, are assumed to be approximately 5.4, 5.7, and 5.9 percent for the low-cost, intermediate, and high-cost assumptions, respectively.
shows estimated operations of the combined OASI and DI Trust Funds in constant 2011 dollars (i.e., adjusted by the CPI indexing series as discussed above). The following items are presented in the table: income excluding interest, interest income, total income, total cost, and assets at the end of the year. Income excluding interest consists of payroll tax contributions, income 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. These estimates are based on the low-cost, intermediate, and high-cost sets of assumptions.
provides a comparison of annual cost with total annual income (including interest) and annual income excluding interest, for the OASDI program under intermediate assumptions. All values are expressed in constant dollars, consistent with table VI.F7
. The difference between the income values for each year is equal to the trust fund interest earnings. The figure illustrates that, under intermediate assumptions: (1) annual cost will exceed non-interest income in each year of the projection period; (2) total annual income, which includes interest earnings on trust fund assets, will be sufficient to cover annual cost for years 2011 through 2022; and (3) total annual income will not be sufficient to cover annual cost for years beginning in 2023. From 2023 through 2035 (the year preceding the year of trust fund exhaustion), annual cost will be covered by drawing down combined trust fund assets.
shows estimated operations of the combined OASI and DI Trust Funds in current dollars — that is, in dollars unadjusted for price inflation. The following items are presented in the table: income excluding interest, interest income, total income, total cost, and assets at the end of the year. These estimates, based on the low-cost, intermediate, and high-cost sets of demographic and economic assumptions, are presented to facilitate independent analysis.
shows, in current dollars, estimated annual income (excluding interest) and estimated annual cost of the combined OASI and DI Trust Funds, of the HI Trust Fund, and of the combined OASI, DI, and HI Trust Funds, based on the low-cost, intermediate, and high-cost sets of assumptions described earlier in this report. For OASDI, income excluding interest consists of payroll tax contributions, proceeds from taxation of OASDI 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 the taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any
. Total cost consists of outlays (scheduled benefits and administrative expenses) for insured beneficiaries. Income and cost estimates are shown on a cash basis for the OASDI program and on an incurred basis for the HI program.
also shows the difference between income excluding interest and cost, which is called the balance. The balance indicates the size of the difference between non-interest income and cost.