CBO’s Director, Phillip Swagel, testifies about the agency’s projections of Social Security’s finances before the House Ways and Means Committee’s Subcommittee on Social Security.
Social Security faces a significant financial challenge in the coming decade. Its two components, Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI), are financed by revenues from payroll taxes and income taxes on benefits that are credited to separate trust funds.
In the Congressional Budget Office’s projections, the OASI trust fund is exhausted in fiscal year 2032, and the DI trust fund is exhausted in 2050. If the two trust funds were combined, they would be exhausted in fiscal year 2033.
Economic growth is a key source of uncertainty in these projections. If the economy grew faster than projected, annual revenues would be greater and the trust funds would be exhausted later than projected (or the opposite could occur).
CBO produces two main sets of long-term projections for Social Security, which differ in the concepts used to estimate benefits after the projected exhaustion of the trust funds:
Scheduled benefits—benefit amounts are paid as scheduled under current law, regardless of whether balances in the program’s trust funds are sufficient to cover those payments.
Payable benefits—total benefit amounts are limited to annual revenues from payroll taxes and income taxes on benefits after the trust funds are exhausted.
In this testimony, CBO’s Director, Phillip Swagel, discusses two sets of projections of Social Security’s finances and the agency’s underlying demographic projections.
