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Updated Long-Term Projections for Social Security 1 (June 2006)

handle is hein.congrec/cbo0911 and id is 1 raw text is: Updated Long-Term Projections for Social Security June 2006 The Congressional Budget Office (CBO) first released long-term (100-year) Social Secilrity projections in 7h Outlook.fi Social Securily, (I une 2004). '[hose projections were updated in March 2005 (sec Lpdaed Long-Turm Pro/ectinsfor Social ,Secw'i. This report and the attached tables and figures present the agency's latest long-term Social Security projections, which differ slightly fiom the earlier results because of newly available data, updated assumptions., and iiproved modeling.' Such long-term projections are necessarily uncerlain, but the general conclusions presented in this report hold true tnder a wide range of assumptions about future demographic and economic trends. In this analysis, CBO presents future Social Secturity benefits under two scenarios. In the payable benefits scenario, outlays include only those benefits that the Social Security Administration (SSA) has legal authority to pay under current law. That scenario assumes all benefits will be reduced once the trust funds are exhausted so that total outlays equal available revenues.-' In the other scenario, termed the scheduled benetits scenario, outlays include the full benefits as currently calculated. At the present time, Social Security revenues are greater thait outlays. but as the baby-boonm generation continues to age, outlays wilt grow substantially faster than revenues. CBO projects that outlays will begin to exceed revenues in 2)19 and that the Social Security trust I'unds will be cxhausted in 2046. (All years referred to in this report are calendar years.) SSA would then no longer have the legal authority to pay full benefits. In the years following trust fund exhaustion. payable benefits would be substantially lower than scheduled benefits because annual outlays would be constrained to equal annual revenues. CBO's projections of benefit levels indicate that future beneficiaries will receive higher retirement benelits and pay higher Social Security taxes than cun'ent beneliciaries do, even after adjustments for inflation and for the reductions that occur after the trust funds are exhausted. However, those benefits will represent a smaller percentage of their preretirement earnings than is the case now. Social Security Finances Social Security is currently running an annual surplus, which, on net, offsets a portion of the delicit in the rest of the budget and thus reduces the total flederal budget deficit. In 2005, total outlays (benefits and administrative costs) equaled 4.24 percent of gross domestic product (GDP), whereas dedicated revenues (Social Security payroll taxes and income taxes on benefits [Appendix A revicws the changc since the Mrch 2005 update. 21n the Junc 2004 report. this scenario was described as Ihe trust ffind financed scenario.

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