The good news after the Congressional Budget Office (CBO) updated its projections for the solvency of Social Security’s retirement program, officially known as the Old Age and Survivor Insurance (OASI) trust fund, is that the retirement trust fund will remain solvent a year longer than previously expected. The bad news is Social Security’s chief actuary has still not released updates on the assessment of the OASI trust fund in the form of an annual report, which is typically released in the spring.
The projections released by the CBO were reported on by MarketWatch. The CBO, which is a non-partisan agency that analyzes budget impacts of legislative proposals, estimates the solvency of the retirement trust fund to be 2032. Previously solvency of the trust fund was expected to last until 2031. In the story reported by MarketWatch, it was reported that the chief actuary’s office sent an email indicating it was not up to the chief actuary when the annual Social Security report would be issued, that decision is up to the U.S. Treasury Department.
The annual Social Security trustees report was due out April 1, 2021, but five months later the report still has not been issued and members of Congress are now getting involved and want questions to where the trustees report is. To be fair, the trustees report is not always issued on time, but now that it is five months overdue officials are questioning why and are eager to see the latest report in determining the health Social Security’s trust funds. Until the report is issued, the projections from the CBO are the closest thing we have to determine the health of Social Security’s trust funds.
Below is the shortfall projections released in the CBO report.
Shortfall Projections
Because the trust funds’ revenues are currently lower than their outlays and projected to grow more slowly than those outlays, the Social Security program has a long-term actuarial deficit. Over the next 75 years, if current laws remained in place, the program’s actuarial deficit would equal 1.7 percent of GDP, or 4.9 percent of taxable payroll, CBO projects. Thus, according to the CBO’s projections, the federal government could pay the benefits prescribed by current law and maintain the necessary trust fund balances through 2095 if payroll taxes were raised immediately by about 4.9 percent of taxable payroll, if scheduled benefits were reduced by an equivalent amounts, or if some combination of taxes increases and spending reductions of equal present value was adopted.
A policy that eliminated that 75-year shortfall by increasing revenues or reducing outlays – and that did so by the same percentage of taxable payroll each year – would not place Social Security on a financial path that was sustainable beyond that period. Estimates of the actuarial deficit do not account for revenues and outlays would rise thereafter. Because projected shortfalls are generally smaller earlier in the period than they are later, such a policy would crease surpluses in the next few decades but result in deficits later and would not leave the system on a sustainable financial path after 2095.
