Testimony on Comparing CBO’s Long-Term Projections With Those of the Social Security Trustees

Chairman Johnson, Ranking Member Becerra, and Members of the Subcommittee, thank you for inviting me to testify this morning. As you know, Social Security pays benefits to retired workers, to their eligible dependents, and to some survivors of deceased workers, and also makes payments to disabled workers and to their dependents until those workers are old enough to claim full retirement benefits. The program is funded by dedicated tax revenues from two sources—mostly from a payroll tax, but also from income taxes levied on Social Security benefits. Those revenues are credited to the two trust funds that finance the program’s benefits.

Since 2010, annual outlays for Social Security have exceeded the program’s receipts, excluding interest credited to the trust funds. In 2015, outlays exceeded receipts, excluding interest, by 8 percent. When such a gap exists, the difference is a draw on the government’s cash in that year that must be made up either by running a surplus in the rest of the federal budget or through additional government borrowing in that year.

For some time, both CBO and the Social Security Trustees have projected that, if full benefits were paid under the formulas specified in current law, the program’s spending would rise significantly during the coming decades. In contrast, total revenues for the program are anticipated to grow more slowly than outlays: The faster growth projected for total benefits than for total revenues means that a shortfall in the program’s finances is expected to continue. Although both CBO and the Trustees project such a shortfall, they differ in their assessment of its magnitude. This testimony describes that difference and the major factors that contribute to it.