2020 OASDI Trustees Report

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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 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 scheduled OASDI benefits, and any reimbursements from the General Fund of the Treasury. 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 scheduled OASDI benefits, premium revenues, monies from fraud and abuse control activities, and any reimbursements from the General Fund of the Treasury. 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. Under the low-cost assumptions, the OASDI annual deficit as a percentage of GDP decreases through 2024, increases in 2025, and then decreases in 2026, in part because of a permanent level shift upward in taxation of benefits income due to the expiration of the personal income tax provisions in Public Law 115-97, the Tax Cuts and Jobs Act. After 2026, deficits increase to a peak in 2034 and then decrease through 2055. After 2055, the annual deficits increase through 2072 and then decrease through 2083 before becoming positive for 2084 and later. Under the intermediate assumptions, the annual deficits increase through 2041, decrease slightly through 2051, and then generally increase thereafter. Under the high-cost assumptions, annual deficits mostly increase throughout the projection period.
The Trustees project that the HI annual balance as a percentage of GDP will be negative in 2020, and then positive and mostly increasing throughout the rest of the projection period, under the low-cost assumptions. Under the intermediate and the high-cost assumptions, the HI annual balance is negative for all years of the projection period. Under the intermediate assumptions, annual deficits generally increase through 2045, and then decline thereafter. Under the high-cost assumptions, annual deficits reach a peak in 2068 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 annual balance is negative through 2040, and then positive and mostly rising thereafter. Under the intermediate assumptions, the combined OASDI and HI annual deficits increase from 2020 through 2043, decrease through 2054, increase through 2077, and then mostly decline thereafter, reaching 1.68 percent of GDP by 2094. Under the high-cost assumptions, combined annual deficits rise to a peak of 6.02 percent in 2080 and decrease thereafter.
By 2094, the combined OASDI and HI annual balances as percentages of GDP range from a positive annual balance of 0.97 percent for the low-cost assumptions to an annual deficit of 5.83 percent for the high-cost assumptions. Annual balances differ by a much smaller amount for the tenth projection year, 2029, ranging from an annual deficit of 0.17 percent for the low-cost assumptions to an annual deficit of 2.28 percent for the high-cost assumptions.
The summarized long-range (75-year) actuarial 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 actuarial balance of 0.50 percent under the low-cost assumptions to an actuarial deficit of 4.21 percent under the high-cost assumptions. The 25-year summarized actuarial balance varies by a smaller amount, from a positive actuarial balance of 0.09 percent to an actuarial deficit of 2.49 percent. Summarized rates are calculated on a present-value basis. They include the trust fund reserve balances on January 1, 2020 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
Summarized rates are calculated on a present-value basis. They include the value of the trust funds on January 1, 2020 and the cost of reaching a target trust fund level equal to 100 percent of annual cost at the end of the period.

d
Between -0.005 and 0 percent of GDP.

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.
Table VI.G5 displays annual ratios of OASDI taxable payroll to GDP. These ratios facilitate comparisons of trust fund operations expressed as percentages of taxable payroll and those expressed as percentages of GDP. HI taxable payroll is about 26 percent larger than the OASDI taxable payroll on average over the long-range period; see section 1 of this appendix for a detailed description of the difference. For each year, 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 price index (GDP deflator). Projections of taxable payroll reflect the components of growth in GDP along with assumed changes in the ratio of total labor compensation to GDP, the ratio of earnings to total labor 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 and salaries to employee compensation. Over the last five complete economic cycles, the ratio of wages and salaries to employee compensation declined at an average annual rate of 0.23 percent. Over the 65-year period ending in 2094, the ratio of wages and salaries to employee compensation is projected to decline at an average annual rate of 0.13, 0.03, and 0.23 percent for the intermediate, low-cost, and high-cost assumptions, respectively. 

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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