2016 OASDI Trustees Report

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2. Estimates as a Percentage of Gross Domestic Product
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 a very 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.G4 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.G4 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 scheduled benefits, 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, premium revenues, monies from fraud and abuse control activities, and reimbursements from the General Fund of the Treasury, if any. Cost consists of outlays (benefits and administrative expenses) for beneficiaries. The Trustees show income and cost estimates generally on a cash basis for the OASDI program1 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 throughout the projection period under the intermediate and high-cost assumptions, and to be negative through 2047 and positive thereafter under the low-cost assumptions. Under the low-cost assumptions, the OASDI annual deficit as a percentage of GDP decreases through 2021. After 2021, deficits increase to a peak in 2032, decrease through 2047, and then the annual balance becomes positive starting in 2048. The positive annual balances increase through 2054, decrease through 2070, and fluctuate thereafter. Under the intermediate assumptions, annual deficits decrease from 2016 to 2017, increase through 2038, decrease from 2038 through 2051, and mostly increase thereafter. Under the high-cost assumptions, annual deficits increase throughout the projection period.
The Trustees project that the HI balance as a percentage of GDP will be positive throughout the projection period under the low-cost assumptions. Under the intermediate assumptions, the HI balance is negative for each year of the projection period. Annual deficits decrease from 2016 to 2018, increase through 2045, and then generally 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 2074 and decline slowly 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 2016 through 2018, positive from 2019 through 2023, negative from 2024 through 2034, and then positive and mostly rising thereafter. Under the intermediate assumptions, combined OASDI and HI annual deficits decline from 2016 to 2017, increase from 2017 through 2039, and decrease through 2054. After 2054, annual deficits generally rise, reaching 1.82 percent of GDP by 2090. Under the high-cost assumptions, combined annual deficits rise throughout the projection period.
By 2090, the combined OASDI and HI annual balances as percentages of GDP range from a positive balance of 0.98 percent for the low-cost assumptions to a deficit of 6.21 percent for the high-cost assumptions. Balances differ by a much smaller amount for the tenth projection year, 2025, ranging from a deficit of 0.02 percent for the low-cost assumptions to a deficit of 1.99 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 0.64 percent under the low-cost assumptions to a deficit of 4.05 percent under the high-cost assumptions. The 25-year summarized balance varies by a smaller amount, from a positive balance of 0.30 percent to a deficit of 2.19 percent. Summarized rates are calculated on a present-value basis. They include the trust fund balances on January 1, 2016 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.)
Incomea
Costb

a
Income for individual years excludes interest on the trust funds. Interest is implicit in all summarized values.

b
OASDI benefit payments which were scheduled to be paid on January 3 for some past and future years were actually paid on December 31 as required by the statutory provision for early delivery of benefit payments when the normal payment delivery date is a Saturday, Sunday, or legal public holiday. For comparability with the values for historical years and the projections in this report, all trust fund operations and asset reserves reflect the 12 months of benefits scheduled for payment each year.

c
Between -0.005 and 0.005 percent of GDP.

d
Summarized rates are calculated on a present-value basis. They include the value of the trust funds on January 1, 2016 and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end of the period.

Notes:
1. The Trustees show income and cost estimates generally on a cash basis for the OASDI program and on an incurred basis for the HI program.
2. Totals do not necessarily equal the sums of rounded components.
To compare trust fund operations expressed as percentages of taxable payroll and those expressed as percentages of GDP, table VI.G5 displays ratios of OASDI taxable payroll to GDP. HI taxable payroll is about 25 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 ratio of OASDI taxable payroll to GDP is projected to 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 0.23 percent. Over the 65-year period ending in 2090, the ratio of wages to employee compensation is projected to decline at an average annual rate of 0.07 and 0.17 percent for the intermediate and high-cost assumptions, respectively, and to increase at an average annual rate of 0.03 percent for the low-cost assumptions. 
 

1
OASDI benefits paid for entitlement for a particular month are generally paid in the succeeding month. There are two primary exceptions to this general rule. First, payments can occur with a greater delay when a benefit award is made after the month of initial benefit entitlement. At the time of benefit award, benefits owed for months of prior entitlement are then also paid to the beneficiary. For the projections in this report, such retroactive payments are included in the period where they are paid (at time of award). Second, when benefit payments scheduled for January 3 are paid on the prior December 31, because January 3 falls on a Sunday, such payments are shown in this report for the period they were scheduled to be paid.


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