Eddie Stannard: THE 2010 ANNUAL REPORT OF THE BOARD OF TRUSTEES OF THE FEDERAL OASI TRUST FUNDS (SOCIAL SECURITY)

A. HIGHLIGHTS
The report’s major findings are summarized below.

In 2009
At the end of 2009, about 53 million people were receiving benefits:
36 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 10 million disabled workers and dependents of disabled workers. During the year, an estimated 156 million people had earnings covered by Social Security and paid payroll taxes. Total expenditures in 2009 were $686 billion. Total income was $807 billion ($689 billion in tax revenue and $118 billion in interest earnings), and assets held in special issue U.S. Treasury securities grew to $2.5 trillion.

Short-Range Results
The assets of the OASI Trust Fund and of the combined OASI and DI Trust Funds are projected to be adequate over the next 10 years under the intermediate assumptions. However, the assets of the DI Trust Fund are projected to steadily decline over the next 10 years under the intermediate assumptions, falling below 100 percent of annual cost by the beginning of 2013 and continuing to decline until the trust fund is exhausted in 2018. Therefore, the DI Trust Fund does not satisfy the short-range test of financial adequacy. The combined assets of the OASI and DI Trust Funds are projected to grow from $2,540 billion at the beginning of 2010, or 355 percent of annual cost, to $3,774 billion at the beginning of 2019, or 309 percent of annual cost in that year under the intermediate assumptions. Combined assets were projected for last year’s report to be 360 percent of annual cost at the beginning of 2010 and 327 percent at the beginning of 2019.

Long-Range Results
Under the intermediate assumptions, OASDI cost generally increases more rapidly than tax income through 2035 because the retirement of the babyboom generation increases the number of beneficiaries much faster than subsequent relatively low-birth-rate generations increase the labor force. From 2035 to 2050, the cost rate declines somewhat due principally to the aging of the already retired baby-boom generation. Thereafter, increases in life expectancy generally cause OASDI cost to again increase relative to tax income, but more slowly than prior to 2035. Annual cost is projected to exceed tax income in 2010 and 2011, to be less than tax income in 2012 through 2014, then to exceed tax income in 2015 and remain higher throughout the remainder of the long-range period. Interest earnings on trust fund assets alone will be sufficient to cover the annual difference between cost and tax revenue until 2025. The dollar level of the Trust Funds is projected to be drawn down beginning in 2025 until assets are exhausted in 2037. Individually, the DI fund is projected to be exhausted in 2018 and the OASI fund in 2040. For the 75-year projection period, the actuarial deficit is 1.92 percent of taxable payroll, 0.08 percentage point smaller than in last year’s report. The open group unfunded obligation for OASDI over the 75-year period is $5.4 trillion in present value and is $0.1 trillion more than the measured level of a year ago. If the assumptions, methods, starting values, and the law had all remained unchanged, the unfunded obligation would have risen to about $5.7 trillion due to the change in the valuation date.
The OASDI annual cost rate is projected to increase from 13.09 percent of taxable payroll in 2010 to 16.73 percent in 2035 and to 17.43 percent in 2084, a level that is 4.12 percent of taxable payroll more than the projected income rate for 2084. For last year’s report, the OASDI cost for 2084 was estimated at 17.73 percent, or 4.39 percent of payroll more than the annual income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost is estimated to rise from the current level of 4.8 percent of GDP to about 6.1 percent in 2035, then to decline to 5.9 percent by 2050, and to remain between 5.9 and 6.0 percent through 2084.

Conclusion
Under the long-range intermediate assumptions, annual cost for the OASDI program is projected to exceed tax income in 2010 and 2011, to be less than tax income in 2012 through 2014, then to exceed tax income in 2015 and remain higher throughout the remainder of the long-range period. The combined OASI and DI Trust Funds are projected to increase in dollar level through 2024, and then to decline and become exhausted and thus unable to pay scheduled benefits in full on a timely basis in 2037. However, the DI Trust Fund is projected to become exhausted in 2018, so some action will be needed in the next few years. At a minimum, a reallocation of the payroll tax rate between OASI and DI would be necessary, as was done in 1994.
For the combined OASDI Trust Funds to remain solvent throughout the 75-year projection period, the combined payroll tax rate could be increased during the period in a manner equivalent to an immediate and permanent increase of 1.84 percentage points,1 scheduled benefits could be reduced during the period in a manner equivalent to an immediate and permanent reduction of 12.0 percent, general revenue transfers equivalent to $5.4 trillion in present value could be made during the period, or some combination of approaches could be adopted. Significantly larger changes would be required to maintain solvency beyond 75 years.
The projected trust fund shortfalls should be addressed in a timely way so that necessary changes can be phased in gradually and workers can be given time to plan for them. Implementing changes sooner will allow the needed revenue increases or benefit reductions to be spread over more generations.
Social Security plays a critical role in the lives of 54 million beneficiaries and 155 million covered workers and their families in 2010. With informed discussion, creative thinking, and timely legislative action, present and future Congresses and Presidents can ensure that Social Security continues to protect future generations.

I was looking at the www.moveon.org website today and saw that they had created a link called "Top 5 Social Security Myths". One of the myths was:

Myth: We have to raise the retirement age because people are living longer.

Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago.3 What's more, what gains there have been are distributed very unevenly--since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

As you can see from the data below, yes life expectancy did go up, and I'm sure the data looks skewed because many people died when they were very young which decreased the life expectancy back in the thirties.
U.S. Life Expectancy at Birth, by Sex, in Selected Years (in years)

Years	Total	Males	Females
1929-1931	59.2	57.7	60.9
1939-1941	63.6	61.6	65.9
1949-1951	68.1	65.5	71.0
1959-1961	69.9	66.8	73.2
1969-1971	70.8	67.0	74.6
1979-1981	73.9	70.1	77.6
1989-1991	75.4	71.8	78.8
2003	77.5	74.8	80.1

Source: CRS Report for Congress

However, after looking at some more details from government sources, I discovered something. If you look at the graph below, the number of people who reached the age of 65 years out of a total of 100,000 people back in the thirties was around 57,000 (I took the average of 53,195 and 60,366). But in 2006, the number of people who reached the age of 65 years out of a total of 100,000 people was 83,251. So if you look at it from a percentage point of view, 57% of all people reached the age of 65 back in the thirties and now 83% of people reach the age of 65. That's a big difference! So, as I discovered, there are a lot more people reaching the age of 65 and getting Social Security, and if you look at the number of people who are living longer by looking at more of the data from the link I have below, people are receiving the benefits for a lot longer. For example, the percentage of people who lived to age 90 was 3.4% in the thirties and went up to 21% in 2006. And that not only increases the length of time for Social Security, but also all of the other benefits people get (like health care).