First, the 1983 Amendments were an interim solution to the well-understood changing of the age distribution due to the drop in birth rate after 1965. These Amendments were expected to extend the ability to pay scheduled benefits from 1982 to the mid-2050s, with the clear understanding that further changes would be needed by then.
Second, the redistribution of earned income to the highest earners was not anticipated in 1983. This shift resulted in about 8 percent less payroll tax revenue by 2000 than had been expected, with this reduced level continuing thereafter. The severity of the 2007-09 recession was also not anticipated.
Third, with the passage of 40 years since 1983, we clearly see the shortcomings of the 1983 Amendments in achieving “sustainable solvency” for Social Security. We are now in a position to formulate further changes needed, building on the start made in 1983.
Fourth, the long-known and understood shift in the age distribution of the US population will continue to increase the aged dependency ratio until about 2040, and in turn increase the cost of the OASDI program as a percentage of taxable payroll and GDP. Once this shift, which reflects the drop in the birth rate after 1965, is complete, the cost of the program will be relatively stable at around 6 percent of GDP. The unfunded obligation for the OASDI program over the next 75 years represents 1.2 percent of GDP over the period as a whole.
Author(s): Stephen C. Goss, Chief Actuary, Social Security Administration
COLAs for Social Security’s OASDI have had an additional significant fiscal effect. Until recently, the payroll taxes paid for Social Security each year have usually exceeded the cost of benefits paid in that year. This balance was transferred to the general fund of the U.S. Treasury, which in turn issued special Treasury bonds to the Social Security Trust Fund to be redeemed later when taxes collected were less than the benefits paid. The fund balance reached $2.9 trillion at the end of 2020. Then in 2021, the Social Security Trust Fund had to redeem $56.3 billion of those bonds to pay OASDI benefits. Social Security actuaries have calculated that increasingly larger withdrawals will continue until the Trust Fund is fully depleted in early 2035.36 Under current law, once the Trust Fund balance is fully depleted, payments to beneficiaries must be reduced to the level supported by current Social Security taxes.
If Social Security COLAs had been calculated using the combination of C‑CPI‑U and PCEPI, then the Trust Fund balance in 2020 would have been $3.5 trillion, and full depletion of the Trust Fund would have been delayed two more years to 2037. If the price indexes had also been improved to minimize new‐item bias (the best‐practices index), the balance in 2020 would have been $4.4 trillion, and full depletion of the fund would have been delayed until 2039 (see Figure 1).
The Supplement is a major resource for data on programs administered by the Social Security Administration—the Old-Age, Survivors, and Disability Insurance program, known collectively as Social Security, and the Supplemental Security Income program. The Supplement also includes program summaries and legislative histories that help users of the data understand these programs. Please note that additional disability tables and statistics can be found in the SSI Annual Statistical Report and the Annual Statistical Report on the Social Security Disability Insurance Program.
The Supplement has been published annually since 1940. Decisions affecting the future of Social Security are facilitated by the availability of relevant data over a long period. The data provide a base for research, policy analysis, and proposals for changing the programs. In addition to meeting the Social Security Administration’s information needs, the Supplement strengthens the agency’s ability to respond to requests for program data from congressional committees, government agencies at all levels, and the research community.
The Supplement is prepared by Social Security Administration staff from various components throughout the agency. I would like to express my thanks to them for their contributions.
Katherine N. Bent Acting Associate Commissioner for Research, Evaluation, and Statistics February 2021