The Trustees of the Social Security Trust Fund issued their 2000 annual report on March 31, 2000 announcing the program was fully funded for at least 37 years. The trustees evaluate the health of the trust fund in light of the performance of the economy, demographic trends, and projections of future economic growth. In each of the last three years, the trustees have pushed back the date when projected Social Security revenues will fund only partial benefits. With the U.S. economy growing at an annual rate of 4.3% since 1996 and continued increases in worker productivity, the trustees’ report for spring 2000 extended full solvency for Social Security for three additional years, to 2037.
Trust Fund Projections
There are six trustees: the Secretaries of the Treasury, Labor, and Health and Human Services, the Commissioner of Social Security, and two members appointed by the President and confirmed by the Senate. The trustees make 75-year projections for the Social Security Trust Fund based on economic growth, wages, inflation, unemployment, fertility, lengthening life expectancy, and other factors. Because no one can accurately predict the future, the trustees use three different sets of demographic and economic assumptions, creating three alternative projections. The “low-cost” alternative predicts a moderate rate of economic growth and only slightly longer life expectancies. The “high-cost” alternative predicts a very slow rate of growth and much longer life spans. The middle level projection is most commonly cited, and projects at least 37 years of full funding.
The Trustees’ Projections Are Too Pessimistic
This middle estimate is based on the very cautious assumption that the long-term rate of economic growth will be only 1.7%annually between 2020 and 2050 and 1.6% after 2050. In contrast, the actual rate of economic growth has averaged 3% for the past 75 years, including periods of depression and recession. Since the mid-1980s, the Trustees have been gradually lowering their projections for long term annual growth.