The Trustees of the Social Security Trust Fund issued their 2001 annual report on March 19, 2001 showing a system that is fundamentally healthy, and confirming that fears of a “Social Security crisis” are unfounded. The trustees project program costs and income a full 75 years into the future based on numerous assumptions about population trends and the economy. Under a pessimistic scenario of slow economic growth, the trustees project that with no program changes Social Security revenues will fund full promised benefits until 2038 and about 70% of benefits thereafter. Under a slightly more optimistic but still cautious scenario, the trustees project the system fully able to pay all promised benefits through 2075 and beyond, with no program changes. For 65 years, Social Security has provided a sure foundation of economic security for America’s working families. This new report confirms that Social Security is in good shape to face the retirement of the baby boomers and continue providing insurance of a secure future income to all retirees, workers, and their family members.
The Social Security Trustees and Their Annual Reports
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. As required by law, the trustees make 75-year projections of Social Security finances based on economic growth, wages, inflation, unemployment, fertility, lengthening life expectancy, immigration, and other factors. Because as the trustees state, “any estimation of the future is uncertain,” they use three different sets of demographic and economic assumptions, creating three alternative projections.
In their 2001 report, for the “low-cost” alternative the trustees project long term economic growth at a little under the long term historical level and moderately longer life expectancies. These assumptions result in a prediction of full funding for Social Security through the entire 75 year period. For the “high-cost” alternative which forecasts the trust fund being exhausted in 2030, the trustees assume extremely slow rates of economic growth and much longer life spans. The middle projection uses assumptions between these two. This middle scenario projects full funding for at least 37 years to 2038.
In 1997, the trustees’ mid-range projection predicted Social Security running short of funds in 2029. That date has been pushed back in each report since then, largely because of the strong productivity gains and thriving economy of the past five years. The 2000 report projected 2037 as the probable date when the trust fund would be spent down and payroll taxes and would not cover full benefits. Throughout the 1990s, the trustees low cost projection always forecast full funding through the entire 75 year period.