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Projected Effects of Various Provisions on Social Security's Financial and Distributional Outcomes 1 (May 2005)

handle is hein.congrec/cbo0840 and id is 1 raw text is: May 25, 2005 Projected Effects of Various Provisions on Social Security's Financial and Distributional Outcomes Congressional Budget Office The attached tables present projected changes tofinancial and distribuiional outcomes under various provisions. In keeping with CBO's mandate to provide objective, nonpartisan analysis, this document makes no recommendations. The outcomes presented here arc based on the Sucial Security trustees' 2004 demographic assumptions and CBO's January 2005 economic assumptions. They correspond to the outcomes that C130 released in March 2005. These provisions are stylized concepts of various individual changes to Social Security. The results may be very sensitive to the exact implementation of any particular provision. If provisions are combined, significant interactions in the presented changes may occur. If the start date of a provision is delayed, the change in the effects could be disproportionate because of the large shift in demographics occurrhig over the next 30 years. In particular, trust find exhaustion dates can be very sensitive to adjustments in provision details. Provisions that change sche- duled benefits also change revenues through the income taxation of benefits. Financial outcomes are presented relative to a scheduled baseline. The scheduled baseline assumes the Social Security trust funds have borrowing authority to pay scheduled benefits after the trust funds have been exhausted. Distributional out- comes are presented relative to both scheduled and current law baselines. The current law baseline assumes that all beneficiaries are subject to an across-the- board cut in benefits so that total projected outlays equal projected revenues once the Social Security trust funds are projected to be exhausted; similar cuts are applied under each provision in any years after the Social Security trust funds are projected to be depleted. Financial outcomes include: 0 Revenues as a share or GDP * Outlays as a share of GDP 6 Balances (revenues less outlays) as a share of GDP , 75-year present value deficit as a share of GI)P • 75-year present value deficit as a share of taxable payroll (75-year actuarial balance) 0 Crossover year-revenues from dedicated taxes first fall below outlays

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