Social Security Trustees Move Closer to CBO Projections
Trust Fund Depletion Date Pushed Out, Again
For Immediate Release: March 30, 2000
The year 2000 Trustees' report showed a slightly better future for Social Security than the 1999 report. The new report pushes out the projected date of the trust fund's depletion to 2037, 3 years later than the 1999 report and 8 years later than the 1997 report. The projected long-term shortfall fell from 2.07 percent of payroll in the 1999 report to 1.89 percent of payroll.
The main reasons for the improvement in the projections were a slight increase in the projected rate of growth of real wages to 1.0 percent, and a slightly improved picture for near-term economic growth. The projections also included a somewhat more rapid rate of increase in life expectancies, the impact of which was largely offset by a slightly higher projected fertility rate.
Even with the higher wage growth projected in this report, the trustees are still projecting a considerably slower path of wage growth than they did four years ago. When measured against the current consumer price index, the 1996 trustees report projected a long-term rate of real wage growth of 1.4 percent, 0.4 percentage points higher than the wage growth projected in this report. The Social Security Administration's measure of rate of real wage growth has averaged 3.1 percent over the last four years.
It is also worth noting that even with the slightly improved near and long-term wage growth projections, the trustees remain more pessimistic about the program's future than the Congressional Budget Office (CBO). Over the next ten years, CBO projects that the cumulative surplus will be $95 billion more than the trustees. In 2010, the last year for which CBO provides explicit projections, the annual surplus projected by CBO is $27.5 billion larger than the surplus projected by the trustees.
Even though the wage growth projections in this report are still very pessimistic compared with the both the recent and longer U.S. history, as well as recent trends in western Europe, they do show a somewhat more optimistic vision of the future than in the 1999 report. By 2037, when the trust fund is projected to be depleted, the average wage in the economy is projected to be more than 50 percent (in today's dollars) than it is at present. At that point, even if no changes had ever been made in the program, it could still afford to pay out benefits that on average would be almost 15 percent higher (also in today's dollars) than those received by an average worker retiring in 2000.
Since this date is ten presidential and 19 congressional elections in the future, there may seem little basis for immediate concern about the program's future. If the political attacks on the program can be beaten back, the economics suggests that the program will face no significant problems for a very long time. If the United States is able to attain the 2.0 percent rate of real wage growth which is common in western Europe, then the program will be completely sound for the next half century, with no changes whatsoever.