Social Security is the federal government’s largest single program; outlays in fiscal year 2010 totaled $706 billion, roughly one-fifth of the federal budget. About 54 million people currently receive Social Security benefits. Most are retired workers, their spouses, their children or their survivors, who receive payments through Old-Age and Survivors Insurance (OASI). The remainder are disabled workers or their spouses and children, who receive Disability Insurance (DI) benefits.
Tax revenues credited to the program totaled about $670 billion in fiscal year 2010, almost all from payroll taxes. A very small portion—about 3 percent—comes from income taxes on benefits. Revenues from taxes, along with intragovernmental interest payments, are credited to Social Security’s two trust funds—one for OASI and one for DI—and the program’s benefits and administrative costs are paid from those funds.
Today CBO released additional information about the long-term projections of the Social Security program’s finances that were included in The Long-Term Budget Outlook (June 2010, revised August 2010) and in Social Security Policy Options (July 2010). The methodology used to develop those projections is described in CBO’s Long-Term Model: An Overview, a background paper published in June 2009.
Today’s publication updates the projections included in CBO’s Long-Term Projections for Social Security: 2009 Update. As we reported in June 2010, the long-term gap between Social Security’s spending and revenues that CBO is currently projecting is larger than the shortfall projected in our August 2009 publication.
The first group of exhibits—exhibits 1 through 8—examines Social Security’s financial status from several vantage points. The second group—exhibits 9 through 16—examines the program’s effects on various categories of Social Security participants in terms of the average taxes and benefits for those groups.
As detailed in the first eight exhibits, CBO projects that:
As shown in subsequent charts beginning with exhibit 9, the amount of Social Security taxes paid by various groups of people differs, as do the benefits that different groups receive. For example:
In many of the exhibits throughout the publication, we created a distribution of outcomes to quantify the amount of uncertainty in our Social Security projections. The analysis was based on 500 simulations in which most of the key demographic and economic factors in the analysis vary according to historical patterns. For example, we examined the percentage of simulations in which the trust funds are exhausted by a specific year. In 37 percent of CBO’s simulations, the funds are exhausted before 2035. In 84 percent of the simulations, the trust funds are exhausted by 2050. In 97 percent of the simulations, the trust funds are exhausted by 2084.
The analysis was prepared by Noah Meyerson, Charles Pineles-Mark, Jonathan Schwabish, Michael Simpson, and Julie Topoleski of CBO’s Long-Term Modeling Group under the supervision of Joyce Manchester.