CBO’s Director, Phillip Swagel, testifies 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 from income taxes on Social Security benefits. But those revenues, which are credited to the components’ separate trust funds, are not sufficient to cover the benefits that are due under the program
- .In the Congressional Budget Office’s projections, the balance of the OASI trust fund reaches zero in fiscal year 2033, and the DI trust fund is exhausted in 2061. If the two trust funds were combined, they would be exhausted in fiscal year 2034.
- The trust fund balances would be sufficient to pay benefits as scheduled under current law through 2098 if payroll tax rates were increased immediately and permanently by about 4.4 percentage points or benefits were reduced by an amount equivalent to that change. A combination of changes to taxes and benefits or a transfer from the Treasury’s general fund could also be sufficient.
- Such long-term projections are uncertain. Demographic and economic factors are key sources of that uncertainty. For instance, if the economy grew more quickly than projected, the trust funds’ annual revenues would be greater, and the changes to taxes or spending that would be necessary to pay benefits as scheduled under current law through 2098 would be smaller. If, instead, the economy grew more slowly than projected, revenues would be smaller, and the necessary changes would be larger.
