The Trustees Report Is Here
With the release of the 2011 OASDI Trustees Report, there are a lot of numbers to digest, not to mention a few hundred pages to read (if you actually want to go through the whole thing). Fortunately, for our readers, CRFB has released its analysis of the report, which breaks down the important points.
The financial outlook of Social Security has worsened since last year's report. The 75-year actuarial imbalance stands at 0.8 percent of GDP (2.22 percent of taxable payroll), a notable drop-off compared to the 0.7 percent of GDP (1.92 percent of taxable payroll) shortfall projected last year (read our analysis for an explanation of why shortfalls are now projected to be larger). In addition, cash flow deficits from 2012-2021 for the program are now about $490 billion, a $110 billion increase from last year. Not only that, but the few years of surpluses that were projected last year from 2012-2014 have been wiped out; thus, unless the Trustees' economic and demographic assumptions don't pan out roughly as expected, we are in permanent deficit territory.
The date of OASDI trust fund exhaustion has been moved up one year to 2036, at which time benefits would have to be cut 23 percent to match revenue. Spending and revenue paths over the long-term have not changed much from previous years.
Spending currently sits at 4.9 percent of GDP, but it will increase to 6.2 percent by 2035. After that, spending will decline slightly and stabilize around 6 percent for the rest of the 75-year outlook. Revenue is projected to be 4.6 percent of GDP this year and it will peak at 4.9 percent around 2020. After that, it will decline slightly to 4.6 percent by the end of the 75-year window. Of course, the takeaway from this report is that delaying action on Social Security will only make the problem harder to solve.
The longer we put off making changes to the program, the larger these actuarial shortfalls will look and the larger the changes will need to be. It's time to fix Social Security now.