[Congressional Record Volume 161, Number 20 (Thursday, February 5, 2015)]
[Senate]
[Pages S813-S816]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SOCIAL SECURITY
Mr. SANDERS. Mr. President, as ranking member of the Budget
Committee, this afternoon I would like to discuss an issue of very
serious concern to tens of millions of Americans; that is, the
Republican effort to cut Social Security disability insurance benefits
and perhaps benefits for Social Security retirees. In my view and in
the view of seniors throughout the State of Vermont, this is a very bad
idea.
As you know, on the very first day of the new Congress, House
Republicans passed a rule--later adopted by the full House--which would
prevent the common practice of rebalancing funds from the Social
Security retirement program to the Social Security disability program.
This rule adopted by the Republicans in the House would lay the
groundwork for a 19-percent cut in disability benefits next year.
President Obama, in his budget, did exactly what has been done on 11
separate occasions in the past, always--and here is the point I want to
make time and time again and why this is a manufactured crisis--this
has been done 11 times in the past, always in a noncontroversial way,
and that is to rebalance the funds between the two programs. This is
not a big deal. The Republicans are manufacturing a crisis where none
exists. Time and time again, Democratic Presidents and Republican
Presidents, with absolutely no controversy, have done what President
Obama has proposed. This was done in 1968 under President Johnson; in
1970 under President Nixon; in 1978, 1979, and 1980 under President
Carter; in 1982, 1983, 1984, and 1987 under President Ronald Reagan; in
1994, 1996, 1997, 2000, and beyond under President Bill Clinton. In
other words, this is a totally noncontroversial process that has been
done time and time again under Republican Presidents and Democratic
Presidents.
What the President is suggesting today is that we reallocate funds
from the senior retirement fund to the disability fund. But
interestingly enough, of the 11 times the funds were reallocated, it
turns out that on five occasions it was money going from the disability
fund to temporarily help out the retirement fund.
There are some people who sadly are trying to divide the senior
population from the disability population. What they are saying in a
way that is untruthful and unfair is that by reallocating money into
the disability fund, we are taking funding away from seniors and the
retirement fund. This is absolutely untrue because, as I have
indicated, on 11 occasions we have seen this reallocation, and
sometimes, in fact, it comes from the disability fund to help the
retirement fund.
I am very happy to tell you that virtually every senior organization
in America--organizations representing tens of millions of senior
citizens--has made it clear that we must reallocate funds, we must
prevent a cut in disability benefits, and we must do what has been done
time and time again.
Let me briefly read a letter from the AARP. The AARP is the largest
senior organization in America. This letter was written on July 22,
2014. It went to chairman Ron Wyden and ranking member Orrin Hatch of
the Finance Committee. What the letter says:
As the largest nonprofit, nonpartisan organization
representing the interests of Americans age 50 and older and
their families, we write in advance of the Committee's
legislative hearing on the Social Security Disability
Insurance program (SSDI) to express our support for Social
Security, including its disability insurance functions, and
our support of rebalancing payroll taxes to ensure the earned
benefits of 11 million disabled Americans and their families
are not reduced or put at risk.
Once again, AARP: We ``support the rebalancing of payroll taxes to
ensure the earned benefits of 11 million disabled Americans and their
families are not reduced or put at risk.''
I ask unanimous consent that letter be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
AARP,
Washington, DC, July 22, 2014.
Hon. Ron Wyden,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
Hon. Orrin Hatch,
Ranking Member, Committee on Finance,
U.S. Senate, Washington, DC.
Dear Chairman Wyden and Senator Hatch: As the largest
nonprofit, nonpartisan organization representing the
interests of Americans age 50 and older and their families,
we write in advance of the Committee's legislative hearing on
the Social Security Disability Insurance program (SSDI) to
express our support for Social Security, including its
disability insurance functions, and our support of
rebalancing payroll taxes to ensure the earned benefits of 11
million disabled Americans and their families are not reduced
or put at risk. AARP recognizes the need to address the
overall funding shortfall
[[Page S814]]
facing Social Security in the next 20 years, and we stand
ready to engage with Congress, our members and other
Americans on ways to strengthen Social Security, now and in
the future. But, we also recognize that without rebalancing
in the near-term, SSDI beneficiaries are at risk of
significant benefit cuts. This is of particular concern to
older workers who are most likely to rely heavily on SSDI in
part because of higher rates of chronic illness and
disability at older ages.
Income support in the event of a disability is a critical
lifeline for millions of American families. Congress wisely
added disability insurance protection to the Social Security
system in 1956, under President Eisenhower, and has since
then modified and improved the program many times. It should
be noted that since the creation of the SSDI program in 1956,
the United States workforce has more than doubled from 62
million to over 140 million workers, and women today
represent half of the workforce and almost half of the SSDI
beneficiaries.
By law, Social Security maintains two trust funds--the Old-
Age and Survivors Insurance (OASI) and the Disability
Insurance (DI) trust funds--and they operate independently.
Congress has faced shortfalls in both the OASI and DI trust
funds many times in the past. Most recently, in 1994,
Congress rebalanced the allocation of Social Security payroll
taxes between the OASI trust and the DI trust, estimating the
rebalancing would adequately fund SSDI benefits for
approximately 20 years. Congress forecast accurately, as the
Social Security Trustees estimate that the payroll taxes
allocated to the Disability Insurance trust fund will cease
being adequate to pay full benefits in late 2016. After that,
according to the Social Security Actuaries as of 2013,
``[p]rojected revenue from non-interest income specified for
the DI program is sufficient to support 80 percent of program
cost after trust fund depletion in 2016, increasing slightly
to 81% of program cost in 2087.'' CBO maintains similar
projections.
Many experts, including the Congressional Budget Office,
have estimated the shortfall is largely due to: 1) general
population growth, 2) women's entrance into the labor force
and consequent eligibility for SSDI benefits, 3) the increase
in the Social Security normal retirement age from 65 to 67,
and 4) the aging of the Baby Boom population leading to a
higher percentage of older people vulnerable to illness and
disability. All of these factors also contribute to other
challenges in the SSDI program.
One of the most significant challenges facing the SSDI
program is the unacceptably long delay in processing
applications of disabled workers who have earned the right to
their benefits. A large and growing backlog both at the
initial claims and appeals level has caused lengthy delays
and imposes severe hardships on disabled workers and their
families. AARP has long urged an increase in funding to meet
the increase in the administrative workload. We also
recognize that the SSDI program needs greater program
integrity efforts both over initial eligibility approvals and
continuing disability reviews. AARP has been among the
staunchest advocates requesting program integrity funding; we
regret that in recent years this funding has been cut,
reducing the Social Security Administration's ability to
maximize integrity efforts.
The Committee's upcoming hearing is a welcome opportunity
to examine the resources that will be needed to ensure the
continuing success of the SSDI program. We believe SSDI
program reforms and improvements can be identified that would
both improve the fairness of the process for disabled
claimants and encourage greater work participation for those
who have limited ability to work. We support and will
continue to urge that Congress provide adequate resources for
the Social Security Administration to conduct timely initial
and continuing disability reviews. But, the highest priority
in the near term is to ensure that SSDI beneficiaries--most
of whom are older Americans--are not at risk of a 20% benefit
cut in the very near future. To prevent any imminent
reductions in SSDI benefits, we urge you to rebalance the
allocation of Social Security payroll taxes between the OASI
trust and the DI trust, as Congress has done with success in
the past.
Because of SSDI, millions of disabled Americans are able to
live their lives with dignity and support their families. We
look forward to continuing to work with you and the other
members of the Committee to ensure that all aspects of the
Social Security program remain strong for future generations
of American workers and their families. If you have any
questions, please feel free to call me, or have your staff
contact Michele Varnhagen on our Government Affairs staff.
Sincerely,
Joyce Rogers,
Senior Vice President,
Government Affairs.
Mr. SANDERS. Mr. President, it is not just the AARP that holds that
view. It is dozens and dozens of senior organizations all across the
country. Let me read very briefly from a letter written by the
Leadership Council of Aging Organizations, dated October 9, 2014. It is
a letter that goes to the President--to President Obama. What it says
is:
We urge you to include a non-controversial, commonsense
legislative adjustment in your 2016 budget for Congress to
temporarily reallocate the Social Security payroll
contributions to address the anticipated shortfall in the
Social Security Disability Insurance (DI) program. We also
strongly urge you to reject proposals to cut Social Security
benefits, coverage, or eligibility.
That is the Leadership Council of Aging Organizations.
I ask unanimous consent that letter also be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Leadership Council of Aging Organizations, Debra B.
Whitman, Chair,
Washington, DC, October 9, 2014.
The White House,
Washington, DC.
Dear President Obama: On behalf of the Leadership Council
of Aging Organizations (LCAO), a coalition of national not-
for-profit organizations representing over 60 million older
Americans, we write to ask you to maintain a vital part of
our Social Security system in your 2016 budget proposal. We
urge you to include a non-controversial, commonsense
legislative adjustment in your 2016 budget for Congress to
temporarily reallocate the Social Security payroll
contributions to address the anticipated shortfall in the
Social Security Disability Insurance (DI) program. We also
strongly urge you to reject proposals to cut Social Security
benefits, coverage, or eligibility.
Social Security's Disability Insurance (DI) fund reserves
are projected to be depleted in 2016, at which point revenue
coming into the system would cover only 80% of benefits. This
projected shortfall is not a surprise and Congress should
rebalance income across the Social Security Trust Funds, as
it has done 11 times before, to cover the anticipated
shortfall. As Treasury Secretary Lew stated in July, ``it's
going to be important for there to be legislation that does
reallocate the payroll tax to support the disability fund.''
A modest, temporary reallocation of part of Social
Security's 6.2% tax rate from the Old-Age and Survivors
Insurance (OASI) fund to the DI fund would put both funds on
an equal footing. Congress has rebalanced tax rates between
the two funds 11 times since the DI trust fund was
established in 1956. About half the time Congress increased
the share going to the OASI fund and about half the time it
increased the share for DI. Congress has never failed to act
when it was necessary to rebalance the two funds, and it has
consistently done so in a bipartisan basis. It is time to do
so again, and can be done today without compromising the
ability of the overall Social Security program to pay full
benefits from both trust funds for the next 20 years.
When Congress acted to rebalance the two funds in 1994, it
was clear it would have to take action again in 2016. The
1995 Social Security Trustees Report showed that the DI
reserves would be depleted in 2016, primarily due to a rapid,
but temporary, increase in the number of DI beneficiaries as
baby boomers passed through their 50s and early 60s when the
risk of disability is greatest.
The typical DI beneficiary is in his or her late 50s.
Seventy percent are over age 50, and 30 percent are 60 or
older. These beneficiaries depend on Social Security for a
significant portion of their income. Without benefits, fifty-
five percent of families with a disabled worker would have
incomes below the poverty line. And, since the benefits they
receive continue as they grow older, the DI program helps to
ensure that these disabled workers don't fall into poverty as
they age.
Another factor that has led to an increase in the number of
DI beneficiaries is a rise in the full retirement age. When
DI beneficiaries reach Social Security's full retirement age,
they begin receiving Social Security retirement benefits
rather than DI. The increase in the full retirement age to 66
has delayed that conversion. In December 2013, more than
450,000 people between ages 65 and 66--over 5 percent of DI
beneficiaries--collected DI benefits. Under the rules in
place until 2003, they would have received retirement
benefits instead. This is just one example of how closely the
retirement and disability components of Social Security are
interwoven.
The growth in DI is leveling off as boomers enter
retirement and shift to OASI benefits. The need to rebalance
by 2016 reflects a long-anticipated, but temporary, shift in
the funding requirements of the two funds. Rebalancing would
not affect the long-term financing of the combined Social
Security system, which would remain solvent through 2033.
Rebalancing can and should be done without cutting benefits
or narrowing coverage or eligibility. This sensible action
will give policymakers ample time to strengthen Social
Security for the long-term.
For these reasons, the undersigned organizations urge you
to include a legislative proposal to rebalance the Social
Security funds in your 2016 budget, and to exclude proposals
to cut Social Security benefits, coverage or eligibility.
Sincerely,
AFL-CIO, AFSCME Retirees, Alliance for Retired Americans,
American Federation of Government Employees (AFGE), American
Foundation for the Blind (AFB), American Postal Workers Union
Retirees (APWU) American Society on Aging (ASA), Asociacion
Nacional Pro Personas Mayores (ANPPM)/ National Association
for Hispanic
[[Page S815]]
Elderly, Association For Gerontology and Human Development in
Historically Black Colleges and Universities (AGHDHBCU),
Association of Jewish Aging Services (AJAS), B'nai B'rith
International, Caring Across Generations, Center for Elder
Care and Advanced Illness--Altarum Institute.
Center for Medicare Advocacy, Inc., Easter Seals, Military
Officers Association of America (MOAA), National Academy of
Elder Law Attorneys (NAELA), National Active and Retired
Federal Employees Association (NARFE), National Adult Day
Services Association (NADSA), National Adult Protective
Services Association (NAPSA), National Alliance for
Caregiving, National Association for Home Care & Hospice,
National Association of Area Agencies on Aging (n4a),
National Association of Retired and Senior Volunteer Program
Directors, INC. (NARSVPD), National Association of Social
Workers (NASW), National Caucus and Center on Black Aged,
Inc. (NCBA), National Committee to Preserve Social Security
and Medicare (NCPSSM), National Senior Citizens Law Center
(NSCLC), National Senior Corps Association (NSCA), OWL--The
Voice for Women 40+, Pension Rights Center, Volunteers of
America, Wider Opportunities for Women (WOW).
Mr. SANDERS. Mr. President, let me be very clear and say that this
fight--what some of us see on our TV screens and what we hear from some
politicians--the simple truth is that Social Security is not going
broke. Social Security is not going broke. Today, Social Security has a
$2.8 trillion surplus in its trust fund and can pay out all benefits to
all beneficiaries, the elderly and the disabled, for the next 18 years.
This is not the opinion of Senator Bernie Sanders. This is the
opinion of the Social Security Administration in their latest report.
There is and can be no debate about these simple facts. If we rebalance
funds, as President Obama and many others have proposed, all benefits--
retiree benefits for our older Americans and disabled benefits for
disabled Americans--would be paid out for the next 18 years--the next
18 years.
So people who come before you and say Social Security is going broke,
they are simply not telling the truth. While this 18-year period makes
it clear that we do not have an imminent crisis with regard to Social
Security, I do agree with those who want to make sure Social Security
is solvent for a lot longer than 18 years, for our kids and for our
grandchildren.
Frankly, when we talk about the long-term solvency of Social
Security, and that of course includes disability insurance as well,
there are two basic approaches we can take for those who want to extend
Social Security for many decades. One approach is what many of my
Republican colleagues are talking about. What they are saying, in
essence, is that in order to save Social Security we have to cut Social
Security. Some are talking about a so-called chained CPI, which would
mean a cut in cost-of-living adjustments, some are talking about
raising the retirement age, at which point seniors will be able to get
benefits, and some in fact are talking about privatizing Social
Security and giving that program over to Wall Street. That is one
approach. That is one way we could deal with Social Security and the
future of the program. Needless to say that is an approach I very
strongly disagree with.
The other approach, an approach which is widely supported in poll
after poll by the American people, extends Social Security and protects
Social Security in a very different way than many Republicans are
proposing; that is, it addresses the issue that right now, as most
Americans know, there is a cap on the income that is subject to the
Social Security payroll tax.
That cap is now at $118,500; in other words, one individual makes
$11.8 million a year but only pays 6.2 percent on the first $118,500 he
earns. The second individual makes $118,500 and pays Social Security
taxes on all of that income. That, I think most Americans believe, is
patently unfair.
I have introduced legislation in the past, and I am now working with
other Senators who have introduced similar types of legislation which
eliminates the cap on income subject to the Social Security payroll
tax. My own view is we should apply the Social Security payroll tax to
income above $250,000.
If we do that, if we go down that very simple and fair route of
asking very wealthy individuals--the top 1 percent, the top 1\1/2\
percent--to contribute more into the Social Security trust fund, the
fact is we could extend Social Security for decades, disability
benefits for decades, and in fact we would have enough money to expand
benefits, not cut them.
On March 19, 2013, in response to a letter I wrote to the Social
Security Chief Actuary, he wrote back and he told us that taking the
approach my legislation lays out, raising the cap on taxable income
starting at $250,000, would extend the life of Social Security past the
year 2060.
So for anybody to come on this floor and say in order to save Social
Security we have to cut benefits, at a time when millions of senior
citizens in this country are struggling to pay for the medicine they
need, to keep warm in the winter, to buy the food they need, people out
there living on $13,000, $14,000 a year--and there are some who say we
have to cut Social Security--let me go on record and say I strongly
disagree.
The far better and far fairer approach is to lift the cap on taxable
income and start at $250,000. So if we are serious about extending the
life of Social Security, if we are serious about not cutting disability
benefits, there is a path forward. Yes, it does ask the people on top
to contribute a little bit more. I know that with all of the lobbyists
and all the campaign contributions coming in here that sometimes
becomes tough, but it is the right thing to do.
Let's stand with the millions of seniors who are struggling to stay
alive economically in these tough times, rather than wealthy campaign
contributors.
I ask unanimous consent that the March 19, 2013, letter from the
Chief Actuary of the Social Security Administration be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Social Security Administration,
Office of the Chief Actuary,
Baltimore, MD, March 19, 2013.
Hon. Bernie Sanders,
U.S. Senate,
Washington, DC.
Dear Senator Sanders: I am writing in response to your
request for estimates of the financial effects on Social
Security of a proposal to apply the Social Security payroll
tax to earned income over $250,000 beginning in 2014. The
estimates and analysis provided in this letter reflect the
intent, as discussed with Warren Gunnels of your staff, of S.
500, ``Keeping Our Social Security Promises Act,'' which you
introduced on March 7, 2013.
We estimate that enactment of this Bill would extend full
solvency of the OASDI program for an additional 28 years,
with the projected depletion of combined OASI and DI Trust
Fund reserves moving from 2033 under current law to 2061
under the proposal. All estimates are based on the
intermediate assumptions of the 2012 Trustees Report. The
estimates presented reflect the combined efforts of many in
our office, but particularly Alice Wade, Christopher
Chaplain, Dan Nickerson, Kyle Burkhalter, Katie Sutton, and
William Piet. A detailed description of our understanding of
the intent of the Bill is included immediately below.
The intent of this proposal is identical to the Bill you
introduced in September 2011 and H.R. 797 introduced in the
House of Representatives in February 2011 by Mr. DeFazio. Our
earlier estimates for both of these Bills, reflecting
baseline assumptions from the 2011 and 2010 Trustees Reports,
respectively, are available at http://www.ssa.gov/OACT/
solvency/index.html.
S. 500 would modify the Internal Revenue Code of 1986 to
subject a worker's OASDI covered earnings in excess of
$250,000 in any calendar year after 2013 to the combined
OASDI payroll tax rate of 12.4 percent. This is the same tax
rate that is applied, under current law, to OASDI covered
earnings up to the contribution and benefit base ($113,700
for 2013). Under present law, the contribution and benefit
base is scheduled to increase in the future based on
increases in the average wage in the U.S. economy. However,
the threshold of $250,000 would be constant after 2014 until
the contribution and benefit base exceeds this level (in the
year 2033), at which point the threshold would be set equal
to the contribution and benefit base for that and all
subsequent years. Earnings subject to tax above the threshold
would not be included in earnings credited for the purpose of
OASDI benefit computation.
All wages and self-employment earnings in OASDI covered
employment during a given year would be reflected in the
determination of earnings above the threshold. For workers
with more than one employer (including self employment) for a
given year, total tax liability for the year would be
computed as if all earnings had been received from a single
employer for the year, but in no case would any employee or
employer pay less tax than they would under current law. To
the extent adjustments of payroll tax liability are needed
for a given year, employees would make such adjustments on
their income tax filing forms. SSA would contact employers
regarding any additional tax liability due to multiple jobs
for employees during the year.
The balance of this letter provides summary and detailed
estimates of the effects of enactment of the proposal.
[[Page S816]]
summary of effects on actuarial status
Figure 1 illustrates the expected change in the combined
Old-Age and Survivors Insurance (OASI) and Disability
Insurance (DI) Trust Fund reserves, expressed as a percent of
annual program cost, assuming enactment of this Bill.
Assuming enactment, the OASDI program would be expected to be
fully solvent for an additional 28 years, under the
intermediate assumptions of the 2012 Trustees Report.
The level of reserves for the theoretical combined OASI and
DI Trust Funds would decline from 340 percent of annual
program cost at the beginning of 2012 until these reserves
would become depleted in 2061 (28 years later than projected
depletion under current law). At the time of reserve
depletion in 2061, the program would be able to pay about 91
percent of then scheduled benefits with continuing taxes
(under current law, 75 percent of scheduled benefits are
projected to be payable in 2033 after depletion). By 2086, 88
percent of benefits scheduled under the proposal would be
payable compared to 73 percent of scheduled benefits payable
under present law.
Enactment of this Bill would eliminate about 80 percent of
the long-range OASDI actuarial deficit of 2.67 percent of
taxable payroll under current law, lowering the OASDI
actuarial deficit to 0.55 percent of payroll for the long-
range period.
Figure 2 illustrates annual projected levels of cost,
expenditures, and non-interest income as a percent of the
current-law taxable payroll. The projected levels of cost
reflect the full cost of scheduled benefits under both
present law and the proposal. After trust fund reserve
depletion, projected expenditures under current law and under
the proposal include only amounts payable from projected tax
revenues (non-interest income), which are less than projected
cost.
Figure 2 shows that the estimated cost of the OASDI program
would be very slightly reduced under this proposal. A slight
decrease in benefits is projected to follow from a small
decrease in the proportion of employee compensation that
would be paid in the form of wages under the current-law
contribution and benefit base. This small reduction in wages
as a percentage of employee compensation reflects the assumed
behavioral response of employees and employers to the
additional payroll taxes under the proposal.
It is also useful to consider the projected cost and income
for the OASDI program expressed as a percentage of Gross
Domestic Product (GDP). The graph illustrates these levels
under both present law and this proposal.
detailed financial results
Benefit Illustrations
Benefit illustrations are not provided for the proposal
because benefit levels would not be materially changed from
the scheduled benefit levels under current law.
Trust Fund Operations
Table 1 shows the annual cost and income rates, annual
balances, and trust fund ratios (reserves as percent of
annual program cost) for OASDI assuming enactment of the
proposal. This table also shows the change from present law
in these cost rates, income rates, and balances. Included at
the bottom of this table are summarized rates for the 75-year
(long-range) period.
Table 1 indicates that the OASDI program is projected to be
solvent for an additional 28 years assuming enactment of the
proposal. The year in which the combined reserves of the OASI
and DI Trust Funds are projected to deplete would change from
2033 under current law to 2061 under the proposal. Even after
depletion of the trust fund reserves, however, the actuarial
status of the program is improved as continuing income would
be sufficient to pay a higher percentage of scheduled
benefits than under current law. Under current law, 75
percent of benefits are projected to be payable at trust fund
reserve depletion in 2033, declining to 73 percent payable by
2086. Under this proposal, 100 percent of the scheduled
benefits would be fully payable through 2060, and 91 percent
would be payable at trust fund reserve depletion in 2061,
declining to 88 percent payable by 2086.
The actuarial deficit for the OASDI program over the 75-
year projection period is reduced by 2.12 percent of taxable
payroll, from an actuarial deficit of 2.67 percent of payroll
under current law to an actuarial deficit estimated at 0.55
percent of taxable payroll under the proposal.
We project annual balances (annual income rate minus annual
cost rate) to become positive for years 2014 through 2021
under the proposal and to be negative thereafter. Annual
deficits (negative annual balances) after 2028 are projected
to be smaller than the deficits projected under current law
by more than 2 percentage points through 2086.
Program Transfers and Asset Reserves
Column 4 of Table 1a provides a projection of the level of
reserves for the theoretical combined OASI and DI Trust Funds
under the proposal, expressed in present value dollars
discounted to January 1, 2012. The table indicates that the
proposal includes no new specified transfers of general
revenue to the trust funds. For purpose of comparison, the
OASDI Trust Fund reserves, expressed in present value
dollars, are also shown for the current-law Social Security
program both without the added general fund transfers (if
any) provided under the proposal (column 6) and with the
proposal added transfers (column 7). Note that negative
values in columns 4, 6, and 7 represent the ``unfunded
obligation'' for the program through the year. The unfunded
obligation is the present value of the shortfall of revenue
needed to pay full scheduled benefits on a timely basis from
the date of trust fund reserve depletion to the end of the
indicated year. Gross Domestic Product (GDP), expressed in
present value dollars, is shown in column 5 for comparison
with other values in the table.
Effect on the Federal Budget
Table 1b shows the projected effect, in present value
discounted dollars, on the Federal budget (unified-budget and
on-budget) cash flows and balances, assuming enactment of
proposal. Table 1b.n provides the estimated nominal dollar
effect of enactment of the proposal on the annual budget
balances for years 2012 through 2022. All values in these
tables represent the amount of the change from the level
projected under current law.
The effect of the proposal on unified budget cash flow
(column 3) is expected to be positive starting for 2014,
reflecting the application of the payroll tax to earnings
above the current-law taxable maximum amount.
Column 4 of Table 1b indicates that the projected effect of
implementing this Bill is a reduction, starting in 2014, of
the Federal debt held by the public, reaching about $7.2
trillion in present value by 2086. Column 5 provides the
projected effect of the proposal on the annual unified budget
balances, including both the cash flow effect in column 3 and
the additional interest on the accumulated debt indicated in
column 4. Columns 6 and 7 indicate that the proposal would
have no expected direct effects on the on-budget cash flow,
or on the total Federal debt, in the future.
It is important to note that these estimates are based on
the intermediate assumptions of the 2012 Trustees Report and
thus are not consistent with estimates made by the Office of
Budget and Management or the Congressional Budget Office
based on their assumptions.
Annual Trust Fund Operations as a Percentage of GDP
Table 1c provides annual cost, annual expenditures (on a
payable basis), and annual tax income for the OASDI program
expressed as a percentage of GDP. These values are shown for
both present law and assuming enactment of the Bill. Showing
the annual trust fund flows as a percent of GDP provides an
additional perspective on these trust fund operations in
relation to the total value of goods and services produced in
the United States. The relationship between income and cost
is similar when expressed as a percent of GDP to that when
expressed as a percent of taxable payroll (see Table 1).
Effects on Trust Fund Reserves and Unfunded Obligations
Table 1d provides estimates of the changes due to the
proposal in the level of projected trust fund reserves under
present law and, for years after trust fund exhaustion, the
level of unfunded obligations under present law. All values
in the table are expressed in present-value discounted
dollars. For the 75-year long-range period as a whole, the
present-law unfunded obligation of $8.6 trillion in present
value is reduced to an unfunded obligation of $1.4 trillion
in present value. This change is the combination of the
following:
A $7.1 trillion increase in revenue from applying the
payroll tax to covered earnings above the present-law
contribution and benefit base (column 2), less
A $0.1 trillion reduction in cost from the behavioral
response to additional payroll tax, causing a small decrease
in the share of employee compensation that is received in
wages, and thus a small decrease in total benefits (column
3).
We hope these estimates will be helpful. Please let me know
if we may provide further assistance.
Sincerely,
Stephen C. Goss,
Chief Actuary.
Mr. SANDERS. I yield the floor.
The PRESIDING OFFICER (Mr. Hoeven). The Senator from North Carolina.
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