This section contains long-range projections, in dollars, of the operations of the combined OASI and DI Trust Funds and in some cases the HI Trust Fund. Comparing current dollar values over long periods of time is difficult because of the effect of inflation. In order to compare dollar values in a meaningful way, table VI.F6 provides several economic series or indices which can be used to adjust current dollars for changes in prices, wages, or other aspects of economic growth during the projection period. Any series of values can be adjusted by dividing the value for each year by the corresponding index value for the year.One of the most common forms of standardization is price indexing, which uses some measure of change in the prices of consumer goods. The Bureau of Labor Statistics, Department of Labor, publishes one such price index, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W, hereafter referred to as CPI). The Social Security Administration (SSA) uses this index to determine the annual cost-of-living increases for OASDI monthly benefits. The Trustees assume the ultimate annual rate of increase in the CPI will be 1.8, 2.8, and 3.8 percent for the low-cost, intermediate, and high-cost sets of assumptions, respectively. Table VI.F7 provides CPI-indexed dollar values (those adjusted using the CPI in table VI.F6), which indicate the relative purchasing power of the values over time.Wage indexing is another type of standardization. It combines the effects of price inflation and real-wage growth. The wage index presented here is the national average wage index, as defined in section 215(i)(1)(G) of the Social Security Act. SSA uses this index to annually adjust the contribution and benefit base and other earnings-related program amounts. The Trustees assume that the average wage will grow by an average rate of 3.5, 3.9, and 4.3 percent under the low-cost, intermediate, and high-cost assumptions, respectively, between 2021 and 2086. Wage-indexed values indicate the level of a series relative to the standard of living of workers over time.The taxable payroll index adjusts for the effects of changes in the number of workers and changes in the proportion of earnings that are taxable, as well as for the effects of price inflation and real-wage growth. The OASDI taxable payroll consists of all earnings subject to OASDI taxation, with an adjustment for the lower effective tax rate on multiple-employer excess wages. A series of values, divided by the taxable payroll, indicates the percentage of payroll that each value represents, and thus the extent to which the series of values increases or decreases as a percent of payroll over time.The GDP index adjusts for the growth in the aggregate amount of goods and services produced in the United States. Values adjusted by GDP (see section 2 of this appendix) indicate their relative share of the total output of the economy. The Trustees make no explicit assumption about growth in taxable payroll or GDP. These series reflect the basic demographic and economic assumptions, as discussed in sections V.A and V.B, respectively.Discounting at the rate of interest is another way of adjusting current dollars. Each interest-rate factor shown in table VI.F6 equals the average of the assumed annual interest rates for special public-debt obligations issuable to the trust funds in that year. The Trustees use a slightly different series of interest rates, the actual annual yields on currently-held trust fund assets, to calculate the summarized values presented elsewhere in this report. The Trustees assume that ultimate nominal interest rates, which in practice are compounded semiannually, will equal approximately 5.2, 5.7, and 6.2 percent for the low-cost, intermediate, and high-cost assumptions, respectively.

Table VI.F6.—Selected Economic Variables, Calendar Years 2011-90 Average

wage index

Total earnings subject to OASDI contribution rates, adjusted to reflect the lower effective contribution rates (compared to the combined employee-employer rate) that apply to multiple-employer “excess wages.”

Incorporates the average of the assumed annual interest rates for special public-debt obligations issuable to the trust funds in the 12 months of the year, under each alternative.

Table VI.F7 shows the operations of the combined OASI and DI Trust Funds in CPI-indexed 2012 dollars—that is, adjusted by the CPI indexing series as discussed above. The following items are presented in the table: (1) non-interest income; (2) interest income; (3) total income; (4) total cost; and (5) assets at the end of the year. Non-interest income consists of payroll tax contributions, income from taxation of benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of benefit payments, administrative expenses, financial interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. Table VI.F7 shows trust fund operations under the low-cost, intermediate, and high-cost sets of assumptions.

Table VI.F7.—Operations of the Combined OASI and DI Trust Funds,

in CPI-indexed 2012 Dollars,^{}Calendar Years 2012-90 Non-interest

income Interest

income Total

income Assets at

end of year

The combined OASI and DI Trust Funds become exhausted in 2033 under the intermediate assumptions and in 2027 under the high-cost assumptions, so estimates for later years are not shown.

Figure VI.F1 compares annual cost with annual total income and annual non-interest income. The figure shows only the OASDI program under intermediate assumptions, and presents values in CPI-indexed 2012 dollars, consistent with table VI.F7. The difference between the income values for each year is equal to the trust fund interest earnings. The figure illustrates that, under intermediate assumptions: (1) annual cost exceeds non-interest income in each year of the projection period; (2) total annual income, which includes interest earnings on trust fund assets, is sufficient to cover annual cost for years 2012 through 2020; and (3) total annual income is not sufficient to cover annual cost for years beginning in 2021. From 2021 through 2032 (the year preceding the year of trust fund exhaustion), annual cost is covered by drawing down combined trust fund assets.

Figure VI.F1.—Estimated OASDI Income and Cost in CPI-indexed 2012 Dollars,

Based on Intermediate Assumptions Table VI.F8 shows the operations of the combined OASI and DI Trust Funds in current dollars —that is, in dollars unadjusted for price inflation. The following items are presented in the table: (1) non-interest income; (2) interest income; (3) total income; (4) total cost; and (5) assets at the end of the year. The Trustees present these estimates, using the low-cost, intermediate, and high-cost sets of demographic and economic assumptions, to facilitate independent analysis.

Table VI.F8.—Operations of the Combined OASI and DI Trust Funds,

in Current Dollars, Calendar Years 2012-90 Non-interest income Interest

income Total

income Assets at

end of year

The combined OASI and DI Trust Funds become exhausted in 2033 under the intermediate assumptions and in 2027 under the high-cost assumptions, so estimates for later years are not shown.

Table VI.F9 shows, in current dollars, the annual non-interest income and cost of the combined OASI and DI Trust Funds, of the HI Trust Fund, and of the combined OASI, DI, and HI Trust Funds, based on the low-cost, intermediate, and high-cost sets of assumptions. For OASDI, non-interest income consists of payroll tax contributions, proceeds from taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Cost consists of benefit payments, administrative expenses, financial interchange with the Railroad Retirement program, and payments for vocational rehabilitation services for disabled beneficiaries. For HI, non-interest income consists of payroll tax contributions (including contributions from railroad employment), up to an additional 0.9 percent tax on earned income for relatively high earners, proceeds from the taxation of OASDI benefits, and reimbursements from the General Fund of the Treasury, if any. Total cost consists of outlays (scheduled benefits and administrative expenses) for insured beneficiaries. The Trustees show income and cost estimates on a cash basis for the OASDI program and on an incurred basis for the HI program. Table VI.F9 also shows the balance, which equals the difference between income excluding interest and cost.

Table VI.F9.—OASDI and HI Annual Non-interest Income, Cost, and

Balance in Current Dollars, Calendar Years 2012-90 Calendar

year Non-interest income Non-interest income Non-interest income