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UE/Labor Party On-Line Social Security Workshop

The Facts

By law, the Social Security Trustees must try to predict how well it will do over a 75 year period. To do this, they make 3 different assumptions: a gloomy one, an optimistic one, and an official, moderate one. Slow economic growth means slow wage growth and less tax revenue to pay for benefits, so it matters what you think the economy is going to do.

In 1981 the Trustees projected a long-term growth rate of:

2.1% in the gloomy scenario
3.1% in their official, moderate scenario

BUT in 1998, they predicted:

.6% in the gloomy scenario
1.4% in their official moderate scenario
2.1% is their optimistic scenario

So what happened? Previously 2.1% was as gloomy as it got!

In fact, the average growth of the U.S. economy over the last 75 years has been nearly 3.5% despite the Great Depression and the slow growth of the last two decades. (Even the last twenty years have averaged more than 2.5% each year.) According to the Social Security actuaries, if the projections are run using 2.5% as the growth rate, assets will exceed expenditures through 2075 and beyond.

Percentage by
which assets
will exceed
through 2075:

(assuming 2.5%
average annual

Chart: Trust Fund Solvency at 2.5% Economic Growth

Source: 1998 Annual report of the Board of Trustees of the
Federal Old-Age and Survivors Insurance and Disability Trust Fund



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