CBO’s Long-Term Social Security Projections: Changes Since 2018 and Comparisons With the Social Security Trustees’ Projections
Report
In June 2019, CBO updated its long-term budget projections, including projections of the Social Security system’s finances. CBO compares those projections with its 2018 projections and with the Social Security trustees’ latest projections.
Each year, CBO updates its projections of the Social Security system’s finances to incorporate newly available data and methodological improvements. CBO published its latest long-term budget projections in June 2019. This report compares those with the ones CBO prepared in 2018 and with the latest projections by the Social Security trustees.
CBO’s June 2019 projections of the Social Security system’s financial outlook are similar to those it produced last year (see table below):
The projected 75-year actuarial balance, a commonly used measure of the system’s financial condition, has not changed as a percentage of gross domestic product (GDP) since last year, remaining at −1.5 percent of GDP (that is, a deficit of 1.5 percent).
As a percentage of taxable payroll, the projected 75-year actuarial balance has worsened slightly, moving from −4.4 percent to −4.6 percent.
Changes to CBO’s Projections of the 75-Year Actuarial Balance
As a Percentage of
GDP
Taxable Payroll
June 2018 Projection
-1.5
-4.4
Estimated Effects of Revisions to Factors Worsening the Actuarial Balance
Lower interest rates
*
-0.1
Change in valuation period
*
-0.1
Technical changes
-0.1
-0.3
Total
-0.1
-0.5
Estimated Effects of Revisions to Factors Improving the Actuarial Balance
Higher labor force participation rate
0.1
0.2
Lower long-run DI incidence
*
*
Smaller population
*
*
Technical changes
*
0.1
Total
0.1
0.3
Overall Change
*
-0.1
June 2019 Projection
-1.5
-4.6
That change in the system’s outlook results from several factors.
Worsening the outlook are reduced projections of interest rates, the inclusion of another year (2093) with a relatively large difference between Social Security’s revenues and outlays, and some technical changes.
Improving the outlook are higher overall rates of projected labor force participation, lower projections of the number of workers who are awarded disability benefits, and the slightly lower projected share of the population that is age 65 or older.
For the 2018–2093 period, CBO projects larger deficits in Social Security’s finances than do the Social Security trustees. That difference is largely explained by CBO’s and the trustees’ different projections of several key inputs into estimates of the system’s finances: the population, components of GDP growth, earnings subject to Social Security payroll taxes, and real interest rates (that is, interest rates adjusted to remove the effects of inflation).
