Section 3. Social Security Financing

                                OVERVIEW

    This section presents an overview of the financing of the
old-age, survivors, and disability insurance (OASDI) trust
funds and provides a summary of the short- and long-term
projections for the financial solvency of these funds.

                         CURRENT LAW FINANCING

    The Social Security programs, or old-age, survivors, and
disability insurance and hospital insurance trust funds
(OASDHI), are primarily financed through the payroll tax and
from income taxes paid on Social Security benefits. The payroll
tax is imposed on covered earnings up to a specific dollar
amount. Workers who earn more than the maximum taxable earnings
base do not pay FICA (Federal Insurance Contributions Act) or
SECA (Self-Employed Contributions Act) tax on their earnings
above the base. Table 3-1 shows income to the OASI and DI trust
funds for selected years.
    Most of current income to the system goes out directly to
meet current benefit obligations. Benefit outlays are made
under a permanent appropriation, equal to the amount to which
beneficiaries are entitled based on their earnings records, and
are not limited to the amount of revenue credited to the trust
fund from contributions and interest. If, as occurred in the
early 1980's, yearly income is insufficient to cover benefit
payments, reserves are used to make up the difference.
    Any funds collected in excess of the amount needed to make
benefit payments are credited to the trust funds as reserves,
in the form of Government securities. These reserves serve as a
cushion against temporary shortfalls in revenues or large
increases in outlays due to economic fluctuations; the reserves
also provide interest income to the trust funds. As a result of
the Social Security Amendments of 1983, OASDI reserves are
projected to build rapidly in the next quarter century.
    The payroll tax is levied on earnings in employment covered
by Social Security, with portions of the total tax rate
allocated by law to each of the three trust funds (OASI, DI and
HI). All persons who work in covered employment pay this
mandatory tax on their earnings up to a maximum dollar amount
(known as the maximum taxable earnings base, or wage base).
Employers pay an equal tax for these workers. Beginning in
1991, two separate wage bases were made effective, one for the
OASDI tax and another for the HI tax. As a result of the
Omnibus Budget Reconciliation Act of 1993, the wage base for
the HI portion of the payroll tax was eliminated beginning in
1994.
    Prior to 1984, self-employed workers paid a tax rate which
was less than the combined employee-employer rate. Effective in
1984, self-employed workers began to pay Social Security taxes
that were equivalent to the combined employer-employee rate and
to receive a partial credit against that tax through 1989.
Effective in 1990 and thereafter, the credit was replaced with
a system designed to achieve parity between employees and the
self-employed. Under this system:
          1. The base of the self-employment tax is adjusted
        downward to reflect the fact that employees do not pay
        FICA tax on the value of the employer's FICA tax. The
        base is equivalent to net earnings from self-employment
        (up to the taxable wage base) less 7.65 percent.
          2. A deduction is allowed for income tax purposes,
        for half of SECA liability, to allow for the fact that
        employees do not pay income tax on the value of the
        employer's FICA tax.

              TABLE 3-1.--INCOME TO THE OASI AND DI TRUST FUNDS FOR SELECTED FISCAL YEARS
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                   Fiscal year\1\
                                    ----------------------------------------------------------------------------
                                       1970       1975       1980       1985       1990      1994\2\    1998\2\
----------------------------------------------------------------------------------------------------------------
OASI:
    Net contributions..............    $29,955    $56,017    $97,608   $175,305   $261,506   $309,518   $386,793
    Income from taxation of
     benefits......................  .........  .........  .........      3,151      2,924      5,392      7,461
    Payments from the general fund.        442        447        557        105         34         10          3
    Net interest...................      1,350      2,292      1,886      1,321     14,143     28,388     43,088
                                    ----------------------------------------------------------------------------
      Total........................     31,746     58,757    100,051    179,881    278,607    343,308    437,345
                                    ============================================================================
DI:
    Net contributions..............      4,141      7,356     16,805     16,876     27,291     33,158     41,448
    Income from taxation of
     benefits......................  .........  .........  .........        218        158        303        439
    Payments from the general fund.         16         52        118  .........  .........  .........  .........
    Net interest\3\................        223        512        453        890        766        685     -1,274
                                    ----------------------------------------------------------------------------
      Total........................      4,380      7,920     17,376     17,984     28,215     34,146     40,613
                                    ============================================================================
      Grand total--OASI and DI.....     36,126     66,677    117,427    197,865    306,822    377,454    477,958
----------------------------------------------------------------------------------------------------------------
\1\Under the Congressional Budget Act for 1974, fiscal years 1977 and later consist of the 12 months ending on
  September 30 of each year. Fiscal years prior to 1977 consist of the 12 months ending on June 30 of each year.
\2\Based on President Clinton's fiscal year 1995 budget assumptions.
\3\Assets of the DI Trust Fund are estimated to be exhausted in 1996. For projection purposes, it is assumed
  that the DI Trust Fund could borrow money, to be repaid with interest, on the same terms that it normally
  would invest positive trust fund balances.

Source: Office of the Actuary, Social Security Administration.

    Under current law, as of January 1994, the employer and
employee each pay an OASDI tax equal to 6.20 percent of the
first $60,600 of earnings and an HI tax equal to 1.45 percent
on all earnings. (Self-employed persons pay 15.30 percent.) In
general, increases in the wage base are automatic, based on the
increase in average wages in the economy (excluding self-
employment earnings) each year.\1\ (The Omnibus Reconciliation
Act of 1989 raised the wage base beyond the automatic increase
by including certain types of ``deferred compensation,'' such
as contributions to section 401(k) retirement plans, in the
calculation of the average wages.)
---------------------------------------------------------------------------
    \1\Increases in the wage base are triggered whenever cost-of-living
adjustments are granted to Social Security beneficiaries and are
effective on a calendar year basis.
---------------------------------------------------------------------------

    Tables 3-2, 3-3, and 3-4 show payroll tax rates, annual
wage bases and maximum annual contributions.

 TABLE 3-2.--PAYROLL TAX RATES FOR EMPLOYEES AND EMPLOYERS AND WAGE
                            BASE LEVELS
------------------------------------------------------------------------
                                       Tax rates (percent) for employer
                              OASDI           and employee, each
      Calendar years          wage   -----------------------------------
                             base\1\   Total     OASI      DI       HI
------------------------------------------------------------------------
1937-49...................    $3,000    1.000    1.000  .......  .......
1950......................     3,000    1.500    1.500  .......  .......
1951-53...................     3,600    1.500    1.500  .......  .......
1954......................     3,600    2.000    2.000  .......  .......
1955-56...................     4,200    2.000    2.000  .......  .......
1957-58...................     4,200    2.250    2.000    0.250  .......
1959......................     4,800    2.500    2.250    0.250  .......
1960-61...................     4,800    3.000    2.750    0.250  .......
1962......................     4,800    3.125    2.875    0.250  .......
1963-65...................     4,800    3.625    3.375    0.250  .......
1966......................     6,600    4.200    3.500    0.350    0.350
1967......................     6,600    4.400    3.550    0.350    0.500
1968......................     7,800    4.400    3.325    0.475    0.600
1969......................     7,800    4.800    3.725    0.475    0.600
1970......................     7,800    4.800    3.650    0.550    0.600
1971......................     7,800    5.200    4.050    0.550    0.600
1972......................     9,000    5.200    4.050    0.550    0.600
1973......................    10,800    5.850    4.300    0.550    1.000
1974......................    13,200    5.850    4.375    0.575    0.900
1975......................    14,100    5.850    4.375    0.575    0.900
1976......................    15,300    5.850    4.375    0.575    0.900
1977......................    16,500    5.850    4.375    0.575    0.900
1978......................    17,700    6.050    4.275    0.775    1.000
1979......................    22,900    6.130    4.330    0.750    1.050
1980......................    25,900    6.130    4.520    0.560    1.050
1981......................    29,700    6.650    4.700    0.650    1.300
1982......................    32,400    6.700    4.575    0.825    1.300
1983......................    35,700    6.700    4.775    0.625    1.300
1984......................    37,800    7.000    5.200    0.500    1.300
1985......................    39,600    7.050    5.200    0.500    1.350
1986......................    42,000    7.150    5.200    0.500    1.450
1987......................    43,800    7.150    5.200    0.500    1.450
1988......................    45,000    7.510    5.530    0.530    1.450
1989......................    48,000    7.510    5.530    0.530    1.450
1990......................    51,300    7.650    5.600    0.600    1.450
1991......................    53,400    7.650    5.600    0.600    1.450
1992......................    55,500    7.650    5.600    0.600    1.450
1993......................    57,600    7.650    5.600    0.600    1.450
1994......................    60,600    7.650    5.600    0.600    1.450
1995-99...................     (\2\)    7.650    5.600    0.600    1.450
2000+.....................     (\2\)    7.650    5.490    0.710   1.450
------------------------------------------------------------------------
\1\The maximum amount of taxable earnings for the HI program is the same
  as that for the OASDI program for 1966-90. Separate HI taxable
  maximums of $125,000, $130,200, and $135,000 were applicable to the
  years 1991-93, respectively. After 1993, the limitation on taxable
  earnings for the HI program does not apply.
\2\Increases automatically with increases in the average wage index. The
  CBO estimates that the OASDI wage base will be $60,600 in 1995;
  $62,100 in 1996; $63,900 in 1997; $66,900 in 1998; and $72,000 in
  1999.

Source: Office of the Actuary, Social Security Administration.


              TABLE 3-3.--PAYROLL TAX RATES FOR SELF-EMPLOYED INDIVIDUALS, 1980 AND AFTER
----------------------------------------------------------------------------------------------------------------
                                                                                   OASDI                 OASDHI
                      Calendar year                          OASI        DI      combined      HI       combined
----------------------------------------------------------------------------------------------------------------
1980.....................................................     6.2725      .7775       7.05       1.05       8.10
1981.....................................................     7.0250      .9750       8.00       1.30       9.30
1982.....................................................     6.8125     1.2375       8.05       1.30       9.35
1983.....................................................     7.1125      .9375       8.05       1.30       9.35
1984.....................................................    10.4000     1.0000      11.40       2.60   \1\14.00
1985.....................................................    10.4000     1.0000      11.40       2.70   \1\14.10
1986-87..................................................    10.4000     1.0000      11.40       2.90   \1\14.30
1988-89..................................................    11.0600     1.0600      12.12       2.90   \1\15.02
1990-99..................................................    11.2000     1.2000      12.40       2.90      15.30
2000 and after...........................................    10.9800     1.4200      12.40       2.90      15.30
----------------------------------------------------------------------------------------------------------------
\1\Excludes tax credits for the self-employed which equaled 2.7 percent in 1984, 2.3 percent in 1985, and 2.0
  percent for the years 1986 through 1989. See text for explanation of change in tax treatment of the self-
  employed.



                            TABLE 3-4.--MAXIMUM ANNUAL CONTRIBUTION, 1937-94
----------------------------------------------------------------------------------------------------------------
                                                                      Employee taxes                     Self-
                   Calendar years                    ------------------------------------------------  employed
                                                         Total       OASI         DI          HI         total
----------------------------------------------------------------------------------------------------------------
1937-49.............................................     $390.00     $390.00  ..........  ..........  ..........
1950................................................       45.00       45.00  ..........  ..........  ..........
1951-53.............................................      162.00      162.00  ..........  ..........     $243.00
1954................................................       72.00       72.00  ..........  ..........      108.00
1955-56.............................................      168.00      168.00  ..........  ..........      252.00
1957-58.............................................      189.00      168.00      $21.00  ..........      283.50
1959................................................      120.00      108.00       12.00  ..........      180.00
1960-61.............................................      288.00      264.00       24.00  ..........      432.00
1962................................................      150.00      138.00       12.00  ..........      225.60
1963-65.............................................      522.00      486.00       36.00  ..........      777.60
1966................................................      277.20      231.00       23.10      $23.10      405.90
1967................................................      290.40      234.30       23.10       33.00      422.40
1968................................................      343.20      259.35       37.05       46.80      499.20
1969................................................      374.40      290.55       37.05       46.80      538.20
1970................................................      374.40      284.70       42.90       46.80      538.20
1971................................................      405.60      315.90       42.90       46.80      585.00
1972................................................      468.00      364.50       49.50       54.00      675.00
1973................................................      631.80      464.40       59.40      108.00      864.00
1974................................................      772.20      577.50       75.90      118.80    1,042.80
1975................................................      824.85      616.88       81.08      126.90    1,113.90
1976................................................      895.05      669.38       87.98      137.70    1,208.70
1977................................................      965.25      721.88       94.88      148.50    1,303.50
1978................................................    1,070.85      756.68      137.18      177.00    1,433.70
1979................................................    1,403.77      991.57      171.75      240.45    1,854.90
1980................................................    1,587.67    1,170.68      145.04      271.95    2,097.90
1981................................................    1,975.05    1,395.90      193.05      386.10    2,762.10
1982................................................    2,170.80    1,482.30      267.30      421.20    3,029.40
1983................................................    2,391.90    1,704.68      223.13      464.10    3,337.95
1984................................................    2,532.60    1,862.15      179.05      491.40    4,271.40
1985................................................    2,791.80    2,059.20      198.00      534.60    4,672.80
1986................................................    3,003.00    2,184.00      210.00      609.00    5,166.00
1987................................................    3,131.70    2,277.60      219.00      635.10    5,387.40
1988................................................    3,379.50    2,488.50      238.50      652.50    5,859.00
1989................................................    3,604.80    2,654.40      254.40      696.00    6,249.60
1990................................................    3,924.45    2,872.80      307.80      743.85    7,848.90
1991................................................    4,085.10    2,990.40      320.40      774.30    8,170.20
1992................................................    4,245.75    3,108.00      333.00      804.75    8,491.50
1993................................................    4,406.40    3,225.60      345.60      835.20    8,812.80
1994................................................    4,635.90    3,393.60      363.60      878.70    9,271.80
----------------------------------------------------------------------------------------------------------------
Note.--In 1984 only, an immediate credit of 0.3 percent of taxable wages was allowed against the OASDI
  contribution paid by employees. Credits of 2.7 percent, 2.3 percent, and 2.0 percent were allowed against the
  combined OASDI and HI taxes on net earnings from self-employment in 1984, 1985, and 1986-89, respectively.
  Figures in table are reduced to reflect this credit.

Source: Office of the Actuary, Social Security Administration.

                                COVERAGE

    In 1940, approximately 24 million persons worked in
employment covered by the Social Security system. Over the
years, major categories of workers were brought under the
system, such as State and local government employees (on a
voluntary basis), regularly employed farm and domestic workers,
members of the armed services, and self-employed professionals
such as physicians and lawyers. In 1993, about 135 million
workers and an estimated 96 percent of all jobs in the United
States were covered under Social Security. The present-law
Social Security wage base is updated automatically according to
wage increases in the economy. In 1993, an estimated 86 percent
of all earnings from jobs covered by Social Security were
taxable.

                TABLE 3-5.--CIVILIAN WORKERS COVERED BY SOCIAL SECURITY SYSTEM, 1939-92
                                                  [In millions]
----------------------------------------------------------------------------------------------------------------
                                                           Paid civilian    OASDI    Percent   OASDHI    Percent
                           Year                             employees\1\  coverage   covered  coverage   covered
----------------------------------------------------------------------------------------------------------------
1939\2\..................................................         43.6        24.0      55.1      24.0      55.1
1944\2\..................................................         51.2        30.8      60.2      30.8      60.2
1949\2\..................................................         56.7        34.3      60.5      34.3      60.5
1955.....................................................         62.8        51.8      82.5      51.8      82.5
1960.....................................................         64.6        55.7      86.2      55.7      86.2

1961.....................................................         65.3        56.1      85.9      56.1      85.9
1962.....................................................         66.4        57.3      86.3      57.3      86.3
1963.....................................................         67.6        58.5      86.5      58.5      86.5
1964.....................................................         69.3        60.1      86.7      60.1      86.7
1965.....................................................         71.6        62.7      87.6      62.7      87.6

1966.....................................................         73.6        64.9      88.2      64.9      88.2
1967.....................................................         74.4        65.7      88.3      65.7      88.3
1968.....................................................         75.9        67.1      88.4      67.1      88.4
1969.....................................................         78.0        68.6      87.9      68.6      87.9
1970.....................................................         77.8        69.9      89.9      69.9      89.9

1971.....................................................         79.6        71.7      90.1      71.7      90.1
1972.....................................................         82.6        74.7      90.4      74.7      90.4
1973.....................................................         85.6        77.6      90.6      77.6      90.6
1974.....................................................         85.4        77.3      90.5      77.3      90.5
1975.....................................................         86.0        77.9      90.6      77.9      90.6

1976.....................................................         89.2        81.0      90.9      81.0      90.9
1977.....................................................         93.5        85.1      91.0      85.1      91.0
1978.....................................................         97.0        88.4      91.2      88.4      91.2
1979.....................................................         99.4        90.7      91.3      90.7      91.3
1980.....................................................         98.9        89.3      90.3      89.3      90.3

1981.....................................................         99.0        90.2      91.1      90.2      91.1
1982.....................................................         98.3        89.8      91.4      89.8      91.4
1983.....................................................        102.2        93.6      91.6      96.0      94.0
1984.....................................................        105.5        97.9      92.7     100.3      95.0
1985.....................................................        107.7       100.0      92.9     102.4      95.1

1986.....................................................        110.2       104.1      94.4     106.5      96.6
1987.....................................................        113.3       107.5      94.8     110.0      97.1
1988.....................................................        115.6       109.8      95.0     112.4      97.3
1989.....................................................        117.4       111.7      95.2     114.4      97.4
1990.....................................................        117.0       111.3      95.2     114.1      97.5
1991.....................................................        116.3       111.0      95.5     113.3      97.5
1992.....................................................        117.8       112.7      95.7     114.8      97.5
----------------------------------------------------------------------------------------------------------------
\1\Includes paid employees and self-employed for all years.
\2\Monthly average for these years, all other years as of December.

Source: Office of Research and Statistics, Social Security Administration.


                     TABLE 3-6.--CIVILIAN WAGES COVERED BY OASDI SYSTEM, 1950-92\1\
                                              [Dollars in billions]
----------------------------------------------------------------------------------------------------------------
                                                      Earnings in                                       Taxable
                                                  covered employment               Covered             earnings
                                                 --------------------    Total    earnings               as a
                                          Total                        earnings     as a     Taxable  percent of
                 Year                   earnings                      in covered   percent  earnings     total
                                                  Employed    Self-   employment  of total             earnings
                                                            employed              earnings            in covered
                                                                                                      employment
----------------------------------------------------------------------------------------------------------------
1950..................................     186.1     109.8  ........      109.8       59.0      87.5       79.7
1955..................................     257.4     171.6      24.5      196.1       76.2     157.5       80.3
1960..................................     324.9     236.0      29.2      265.2       81.6     207.0       78.1
1965..................................     428.8     311.4      40.3      351.7       82.0     250.7       71.3
1970..................................     631.7     483.6      48.0      531.6       85.2     415.6       78.2

1975..................................     940.1     717.2      70.4      787.6       83.8     664.7       84.4
1976..................................   1,037.2     797.2      76.8      874.7       84.3     737.7       84.3
1977..................................   1,140.4     879.5      80.6      960.1       84.2     816.6       85.0
1978..................................   1,288.6     998.9      93.7    1,092.6       84.8     915.6       83.8
1979..................................   1,437.1   1,122.0     100.2    1,222.2       85.0   1,067.0       87.3

1980..................................   1,548.4   1,231.0      97.8    1,328.8       85.8   1,180.7       88.9
1981..................................   1,696.5   1,352.0      98.9    1,450.9       85.5   1,294.1       89.2
1982..................................   1,764.0   1,418.0      98.6    1,516.6       86.0   1,365.3       90.0
1983..................................   1,870.8   1,502.0     113.2    1,615.2       86.3   1,454.1       90.0
1984..................................   2,086.0   1,671.5     129.3    1,800.8       86.3   1,608.8       89.3

1985..................................   2,246.2   1,794.5     142.3    1,936.8       86.2   1,722.6       88.9
1986..................................   2,389.2   1,921.0     160.8    2,081.8       87.1   1,844.4       88.6
1987..................................   2,571.4   2,057.1     179.9    2,237.0       87.0   1,960.0       87.6
1988\2\...............................   2,767.3   2,224.7     208.1    2,432.8       87.9   2,088.4       85.8
1989\2\...............................   2,933.7   2,367.8     221.0    2,588.8       88.2   2,241.1       86.6

1990\2\...............................   3,108.4   2,507.5     213.0    2,720.5       87.5   2,367.8       86.9
1991\2\...............................   3,191.3   2,583.0     187.1    2,770.1       86.8   2,418.9       87.3
1992\2\...............................   3,387.4   2,692.0     204.8    2,896.8       85.5   2,529.9       87.3
----------------------------------------------------------------------------------------------------------------
\1\Sum of wages and salaries and proprietors' income with inventory valuation and capital consumption
  adjustments, as estimated by the Bureau of Economic Analysis in the National Income and Product Accounts.
\2\Preliminary.

Source: Social Security Bulletin, Annual Statistical Supplement, 1993, and Office of Research and Statistics,
  Social Security Administration.

    While coverage is compulsory for most types of employment,
approximately 4.3 million workers were exempt from coverage
under Social Security in 1993. The majority of these noncovered
workers were and still are in the Federal Government and in
State and local governments. Beginning January 1, 1983, Federal
employees were covered under the Medicare portion of the Social
Security tax, and all Federal employees hired after 1983 are
covered under the OASDI portion as well. In 1990, about 67
percent of State and local government workers (13.5 million out
of 20.3 million jobs), were covered by Social Security.
Beginning January 1, 1984, all employees of nonprofit
organizations became covered, and terminations of Social
Security coverage by State government entities were no longer
allowed.\2\ State and local employees hired after March 31,
1986 are mandatorily covered under the Medicare program and
must pay HI payroll taxes. Beginning July 1, 1991, State and
local employees who were not members of a public retirement
system were mandatorily covered under Social Security. This
requirement was contained in the 1990 Omnibus Budget
Reconciliation Act (OBRA).
---------------------------------------------------------------------------
    \2\Terminations were prohibited as of April 1983.
---------------------------------------------------------------------------

    While the most recent year for which actual data are
available is 1990, the Social Security Administration estimates
that in 1993, 21.5 million individuals will work at some time
during the year for a State or local government, and the wages
of 77 percent of these individuals will be covered by Social
Security. Some 2.2 million of the 16.6 million covered State
and local workers are estimated to have been covered as a
result of OBRA 1990. Table 3-8 shows State-by-State data on
State and local government jobs covered in 1990.

           TABLE 3-7.--SOCIAL SECURITY COVERAGE, 1990
                              [In millions]
------------------------------------------------------------------------
                                                          Covered
           Occupational group            Number of ---------------------
                                         employees   Number     Percent
------------------------------------------------------------------------
Specifically exempt from OASDI
 coverage:
    Federal Civilian employees.........        4.3        2.5       58.1
Voluntary coverage:
    State and local government.........       20.2       13.5       66.8
    Industry and commerce..............       92.6       92.4       99.8
    Nonprofit..........................        7.9        7.8       98.7
    Farm...............................        1.2        1.0       83.3
    Domestic...........................        1.0        0.5       50.0
    Self-employed......................       10.6        8.1       76.4
------------------------------------------------------------------------


  TABLE 3-8.--ESTIMATES OF SOCIAL SECURITY COVERAGE OF WORKERS WITH
            STATE AND LOCAL GOVERNMENT EMPLOYMENT, 1990
            [Based on 1-percent sample; numbers in thousands]
------------------------------------------------------------------------
                                           All       Covered    Percent
                State                   workers\1\   workers    covered
------------------------------------------------------------------------
      Total..........................      20,254      13,538         67
Alabama..............................         339         309         91
Alaska...............................          81          30         37
Arizona..............................         360         321         89
Arkansas.............................         181         166         92
California...........................       2,185         743         34

Colorado.............................         310         105         34
Connecticut..........................         251         151         60
Delaware.............................          60          44         73
Florida..............................         971         776         80
Georgia..............................         560         443         79

Hawaii...............................          94          59         63
Idaho................................         101         102        101
Illinois.............................         981         461         47
Indiana..............................         428         356         83
Iowa.................................         270         235         87

Kansas...............................         249         222         89
Kentucky.............................         300         225         75
Louisiana............................         350          74         21
Maine................................         104          47         45
Maryland.............................         393         347         88

Massachusetts........................         473          19          4
Michigan.............................         784         643         82
Minnesota............................         401         256         64
Mississippi..........................         220         200         91
Missouri.............................         381         286         75

Montana..............................          84          72         86
Nebraska.............................         160         144         90
Nevada...............................          82          21         26
New Hampshire........................          88          77         88
New Jersey...........................         578         544         94

New Mexico...........................         165         129         78
New York.............................       1,673       1,343         80
North Carolina.......................         562         501         89
North Dakota.........................          69          61         88
Ohio.................................         828          25          3

Oklahoma.............................         263         238         90
Oregon...............................         259         231         89
Pennsylvania.........................         733         673         92
Rhode Island.........................          73          44         60
South Carolina.......................         310         276         89

South Dakota.........................          70          64         91
Tennessee............................         390         308         79
Texas................................       1,275         638         50
Utah.................................         158         142         90
Vermont..............................          54          51         94

Virginia.............................         498         463         93
Washington...........................         398         335         84
West Virginia........................         155         138         89
Wisconsin............................         439         343         78
Wyoming..............................          63          57         90
------------------------------------------------------------------------
\1\Includes seasonal and part-time workers for whom State and local
  government employment was not the major job.

Source: Social Security Administration Office of Research and
  Statistics.

                SOCIAL SECURITY ADMINISTRATIVE EXPENSES

    The costs of administering the Social Security retirement
and disability programs are financed from the Social Security
trust funds, subject to annual appropriations. Traditionally
these costs are low, comprising between 1 and 2 percent of
annual benefit payments. During fiscal year 1993, they amounted
to $3.0 billion.
    These trust-fund financed administrative funds comprised 51
percent of the Social Security Administration's 1993
administrative budget. The agency received another 14 percent
from the Medicare trust funds, as well as 35 percent from
general revenues for administration of Supplemental Security
Income (SSI). This brought SSA's total administrative budget to
$4.8 billion (excluding the special appropriation for
disability and automation investment).
    While Social Security benefit payments were taken off-
budget in 1990, the budgetary treatment of administrative
expenses remains controversial. On the one hand, the Office of
Management and Budget interprets the 1990 statute as applying
to benefit payments only; and it has placed administrative
costs under the budgetary cap on domestic discretionary
spending. The Congressional Budget Office, on the other hand,
interprets the 1990 statute as applying to all Social Security
trust funds payments, including both benefits and
administrative expenses. Legislation mandating that OMB comply
with the CBO interpretation has been introduced in the 103d
Congress.

 TABLE 3-9.--NET ADMINISTRATIVE EXPENSES IN MILLIONS OF DOLLARS AND
     AS A PERCENTAGE OF BENEFIT PAYMENTS, FISCAL YEARS 1989-93
------------------------------------------------------------------------
                                            OASI
                              Total        trust     DI trust    Total
      Fiscal year        administrative     fund       fund     benefit
                            expenses      benefit    benefit    payments
                                          payments   payments
------------------------------------------------------------------------
1989...................         2,407           .8        3.3        1.1
1990...................         2,280           .7        3.0         .9
1991...................         2,535           .7        2.9        1.0
1992...................         2,668           .7        2.8         .9
1993...................         2,955           .8        2.8        1.0
------------------------------------------------------------------------
Source: Social Security Office of the Actuary.

             CURRENT SHORT-RANGE STATUS OF THE TRUST FUNDS

    An assessment of the short-range status of the trust funds
depends heavily on the economic assumptions underlying the
estimates because both the revenues and expenditures of the
program are tremendously affected by general economic trends
such as unemployment, wage growth, and inflation. Table 3-10
presents short-term projections of the financial status of the
trust funds under the assumptions contained in the
Congressional Budget Office baseline.

Status of OASDI trust funds

    Under the President's budget as well as CBO baseline
assumptions, the combined OASDI trust funds will continue the
growth begun in 1984 throughout the 5-year projection period
incorporated in the President's and CBO's forecasts. Under
CBO's assumptions, the annual excess of revenues over benefit
outlays (sometimes called the ``surplus'') will reach almost
$100 billion by 1999. Throughout the 1990's, and for some
period into the next century, the favorable demographic pattern
of a large baby-boom generation at peak earning years combined
with the retirement of the relatively small generation born
during the Depression should ensure large trust fund reserves.
    For the combined OASDI funds, the trust fund reserve ratio
is estimated to increase from 114 percent at the beginning of
1994 to 127 percent for 1995, and then continue to increase
each year thereafter, reaching 182 percent by 1999.

 TABLE 3-10.--CURRENT LAW PROJECTIONS OF THE OLD-AGE AND SURVIVORS INSURANCE AND DISABILITY INSURANCE TRUST
               FUND OUTLAYS, INCOME, AND BALANCES UNDER CBO'S BASELINE ECONOMIC ASSUMPTIONS 
                                    [By fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                             Fiscal year--
                                                      ----------------------------------------------------------
                                                        1993    1994    1995    1996    1997     1998      1999
----------------------------------------------------------------------------------------------------------------
Old-age survivors insurance:
  Total outlays......................................     270   282.6   296.2   311.4    324.7    339.7    355.5
  Income.............................................   319.3   348.4   371.3   393.8    417.5    442.9    488.8
  Year-end balance...................................   355.7   421.4   496.5   578.8    871.6    774.7    887.9
  Start-of-year balance as a percent of outlays\1\...     113     126     142     159      178      198      218
Disability insurance:
  Total outlays......................................    34.6    38.2    41.5    45.0     48.5     52.1     55.9
  Income.............................................    32.1    34.7    36.3    37.9     39.4     40.8     42.1
  Year-end balance...................................    10.3     6.8     1.6    -5.5    -14.6    -25.9    -39.7
  Start-of-year balance as a percent of outlays\1\...      37      27      10       4      -11      -28      -45
Combined OASI and DI:
  Total outlays......................................   304.6   320.8   337.7   356.4    373.2    391.9    411.4
  Income.............................................   351.4   383.1   407.6   431.7    456.8    483.7    510.8
  Year-end balance...................................   388.0   428.2   498.1   573.4    657.0    748.8    848.3
  Start-of-year balance as a percent of outlays\1\...     105     114     127     140      164      168      182
----------------------------------------------------------------------------------------------------------------
\1\Start-of-year balances are computed as the balances at the end of the previous fiscal year. Beginning in
  1996, they also include advanced tax transfers on October 1 for the DI trust fund.

Source: Based on Congressional Budget Office January 1994 baseline economic assumptions.

Budgetary treatment of OASDI trust funds

    Social Security and other Federal programs that operate
through trust funds were counted officially in the Federal
budget beginning in fiscal year 1969. This was done
administratively by President Johnson. At the time Congress did
not have a budget-making process. In 1974, Congress began
setting budget goals annually through passage of budget
resolutions. Like the budgets the President prepared, these
resolutions reflected a unified budget approach that included
trust fund programs such as Social Security in the budget
totals. Although Social Security continued to be counted in the
budget throughout the 1970s and 1980s, measures were enacted in
1983, 1985, and 1987 making the program a more visible
component of the budget and imposing potential procedural
hurdles for budgetary bills containing Social Security changes.
Most significant among them was the Balanced Budget and
Emergency Deficit Control Act of 1985 (P.L. 99-177), which
incorporated the original Gramm-Rudman-Hollings deficit-
reduction procedures and contained specific provisions setting
forth the budgetary treatment of the OASDI trust funds. The act
required that the OASDI trust funds be taken off-budget
beginning in fiscal year 1986. (The 1983 Social Security
Amendments had previously required that the funds be taken off
budget in fiscal year 1993.) However, the act also required
that the income and outgo of the OASDI trust funds be taken
into account in determining if Federal spending had to be cut
to meet the Gramm-Rudman-Hollings deficit-reduction goals. This
meant that the OASDI trust funds would be counted in the budget
figures throughout the period in which Gramm-Rudman-Hollings
was in force which originally was fiscal years 1986-91, but was
extended for 2 years--to fiscal year 1993--by the Balanced
Budget and Emergency Deficit Control Reaffirmation Act of 1987
(P.L. 100-119).
    Other provisions of the balanced budget act exempted OASDI
benefits from automatic reductions, or so-called sequestration.
Thus, while OASDI income and outgo were counted to determine
the size of the Federal deficit, OASDI benefits were not
subject to automatic reduction if the deficit was too high.\3\
The act further included provisions making it ``out of order''
for either the House or Senate to take up changes in OASDI as
part of a budget reconciliation measure. Separate votes in each
body--suspending or otherwise altering the rules under which
the respective bodies operate--were required to make
consideration of any proposed OASDI change permissible. In the
Senate, this would require approval by three-fifths of its
members.
---------------------------------------------------------------------------
    \3\However, administrative expenses of the Social Security
Administration were subject to sequestration.
---------------------------------------------------------------------------

    Social Security also was affected by restrictions in the
Act on bringing up legislative changes that would violate
budget resolution totals or separate spending and revenue
allocations for programs under the jurisdiction of each
committee made subsequent to passage of budget resolutions.
Social Security was affected by these restrictions in the same
way as other programs and tax provisions; points of order (so-
called sections 302 and 311 objections) could be raised against
legislation involving revenue reductions or spending increases
that violated the budget resolution totals or subsequent
spending allocations by committees for the first year to which
the budget resolution applied. These, too, could be overridden
only by a vote of three-fifths of the Senate.
    The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-
508) made major changes in the Federal budget process. Among
them was the removal of the Social Security trust funds from
all Federal budget calculations, including calculations of
budget deficits and surpluses. As a result, OASDI no longer
affects or is affected by limitations caused by Federal
deficits or the budget process in general (with the exception
of administrative expenses).
    The 1990 law established specific dollar limits on
discretionary spending (mostly annual appropriations) and a so-
called pay-as-you-go requirement for direct spending (mostly
entitlement programs) and revenues. For fiscal years 1991-95,
these new limits and the pay-as-you-go requirement replaced the
overall deficit-reduction targets established under the former
Gramm-Rudman-Hollings procedures. As under the old law, if any
spending limit or the pay-as-you-go rule is violated, the
President may be required to issue sequestration orders
bringing spending down to the prescribed limits.
    Social Security spending and revenues are excluded from
these new limits and overall targets, with the exception of
administrative expenditures, which, under an OMB
interpretation, are incorporated in a limit on discretionary
domestic spending.\4\ Social Security is also exempt from
sequestration orders, as it was under the old law (again, with
the exception of administrative expenses).
---------------------------------------------------------------------------
    \4\Under the law prior to passage of the Budget Enforcement Act of
1990, Social Security administrative expenses were subject to
sequestration if Gramm-Rudman-Hollings deficit targets were exceeded.
The 1990 law states that Social Security is not to be counted as budget
authority or outlays for purposes of the Gramm-Rudman deficit reduction
law (which the new law amends). However, it also lists Social Security
among the programs subject to the discretionary domestic spending
limit. One interpretation of this is that Social Security
administrative expenses, as discretionary spending, are subject to the
domestic discretionary limit. An alternative interpretation is that the
provision excluding Social Security from all aspects of the budget law
exempts these expenses from the discretionary limit. The inconsistency
appears to give OMB latitude to make either interpretation.
---------------------------------------------------------------------------

    Finally, the new law continues the old law provision
(section 310(g)) that permits points of order against
reconciliation bills that contain Social Security measures.
    OASDI tax receipts are expected to exceed benefits and
other expenses continuously over the budget forecast period,
i.e., the next 5 years. Barring a major recession, the excess
receipts should grow substantially. What this means is that,
with all other things held constant, surplus OASDI receipts
would have offset a substantial portion of the deficits the
Government incurs with respect to its other activities if
Social Security had continued to be counted in the budget. The
following table and chart show how the removal of the
operations of the OASDI trust funds from the budget
calculations affects CBO's 5-year forecast of Federal budget
deficits.

    TABLE 3-11.--PROJECTED FEDERAL BUDGET DEFICITS, INCLUDING AND
           EXCLUDING OASDI TRUST FUNDS IN THE CALCULATION
                [By fiscal year, in billions of dollars]
------------------------------------------------------------------------
       Fiscal year         1994    1995    1996    1997    1998    1999
------------------------------------------------------------------------
Projected budget
 deficit:
    Including OASDI.....     228     180     180     192     187     213
    Excluding OASDI.....     290     249     255     275     279     312
Increase in projected
 deficit from excluding
 OASDI..................      82      70      75      84      92      99
------------------------------------------------------------------------
Note.--Details may not add to totals due to rounding.

Source: Congressional Budget Office based on January 1994 economic
  assumptions.

       CHART 3-1. FEDERAL BUDGET DEFICITS WITH AND WITHOUT OASDI

<CHART 3-1>

               NEW PROCEDURES TO PROTECT THE TRUST FUNDS

    Since the fiscal constraints of the budget process no
longer apply to Social Security, the 1990 budget law
established separate rules for the House and Senate that make
it difficult to bring measures to a floor vote if they would
weaken the financial condition of the program.
    In the House, a point of order can be raised against a bill
that includes more than $250 million in Social Security
spending increases or revenue reductions over a 5-year period,
unless the bill also contains offsetting spending reductions or
tax increases that bring its net impact within the limit. In
determining whether a bill falls within the $250 million limit,
any costs from prior legislation (i.e., enacted in the current
or previous 4 years) that fall within the 5-year budgeting
period would be counted. Also, a point of order can be raised
against a measure that would increase long-range (75 year)
program costs or reduce long-range revenues by at least 0.02
percent of taxable payroll.
    In the Senate, budget resolutions must set specific amounts
for Social Security income and outgo for the first fiscal year
to which the budget resolution applies and cumulative amounts
for a 5-year period. These amounts must be completely separate
from budget resolution totals. Further, the Social Security
income and outgo recommended in budget resolutions reported by
the Senate Budget Committee cannot narrow the difference
between Social Security income and outgo projected under
current law. (Doing so could draw an objection). Once a
conference agreement on a budget resolution is reached,
allocations made to the Finance Committee must include a Social
Security outlay allocation. Budget Act points of order can then
be raised against Social Security bills that would cause
outlays to be increased or revenues to be reduced (without
offsetting changes) from those reflected in the budget
resolution and Finance Committee allocation. Overriding such an
objection requires a vote of three-fifths of the Senate.

  THE IMPACT OF THE OASDI SURPLUSES ON THE FINANCIAL CONDITIONS OF THE
                               GOVERNMENT

    As attention is increasingly drawn to the surplus OASDI
receipts, questions have emerged about how the money is
actually used. The basic concern is that the money was intended
to be invested in the OASDI trust funds, to be set aside for
future years, and not to be used to finance other Government
spending today. However, the issue is a complex one and is
often confusing and poorly described.
    Part of the confusion arises from a lack of understanding
that OASDI taxes are not deposited in trust funds and OASDI
benefits are not paid from trust funds. OASDI taxes are
deposited in the Federal Treasury like other taxes and become
part of the general pool of funds through which the Government
functions. Airport and highway taxes, civil service retirement
contributions, Medicare receipts, and many other forms of
dedicated Federal revenues--all of which have corresponding
trust funds--are treated likewise. The trust funds themselves
receive credit for the revenues when the Government receives
them, usually in the form of postings of non-marketable,
interest-bearing Federal securities. Conversely, when the
Government makes expenditures for trust fund programs, the
money is paid from the Treasury, and the securities posted to
the trust funds are reduced by a corresponding amount. Simply
stated, the OASDI trust funds are given IOUs when OASDI taxes
are received by the Treasury, and those IOUs are taken back
when the Treasury makes expenditures on the program's behalf.
This handling of OASDI's finances goes back to the inception of
the program and has not been altered by the inclusion or
exclusion of the OASDI trust funds in or from the Federal
budget.
    In effect, whether or not OASDI is counted as part of the
Federal budget, OASDI taxes will continue to be deposited in
the Federal Treasury and the trust funds will continue to
receive credit for them as they are collected. Moreover, this
credit will continue to give the Treasury Department
``authority,'' or what might be described as a ``permanent
appropriation,'' to spend for OASDI.\5\
---------------------------------------------------------------------------
    \5\Meaning that as long as there are securities posted to the OASDI
trust funds, the Treasury Department can continue to make OASDI
expenditures.
---------------------------------------------------------------------------

    The more fundamental issue about the use of surplus OASDI
taxes revolves around perceptions of how the existence of this
money will influence Congress and the administration in making
future fiscal policy decisions for the Government as a whole.
Since surplus OASDI taxes are deposited in the Federal
Treasury, there is no way of knowing their ultimate use. In the
course of fiscal policymaking, three basic uses can be made of
the money: (1) It can be spent on other programs; (2) it can
cause other taxes to be lower than they otherwise would be; or
(3) it can cause Government borrowing from financial markets to
be lower.\6\
---------------------------------------------------------------------------
    \6\While the Government is said to ``borrow'' these surplus
receipts, technically, it is crediting one of its accounts and debiting
another--i.e., borrowing money from itself.
---------------------------------------------------------------------------

    It is sometimes stated, ipso facto, that surplus OASDI
taxes cause the Government to borrow less from financial
markets. However, this perspective represents an
oversimplification. The law has always dictated that OASDI
trust funds be credited with Federal securities to reflect
OASDI tax receipts, but it has never dictated how the surplus
receipts themselves are to be used by the Federal Government.
The outcome--what happens to the money--basically depends on
what one assumes fiscal policymakers would decide about
spending and taxation for the Government overall if the surplus
OASDI taxes were not levied. If levying them influences
Congress to avoid cutting spending elsewhere or raising other
taxes, Government borrowing from financial markets is not being
reduced.
    The Government has the potential to increase savings in the
economy by reducing the amount of borrowing it does in
financial markets. However, this outcome depends on its ability
to reduce the difference between its overall income and outgo.
It is the Government's net deficit overall that determines how
much is really being borrowed from financial markets, not a
surplus arising in one of its accounts. All other things held
constant, cutting Social Security taxes or increasing Social
Security spending would impede efforts to reduce Federal
borrowing from financial markets in the same way as any other
tax reductions or spending increases, and thereby curtail
efforts by the Government to increase savings in the economy.

The long-range impact of the OASDI surpluses

    In their 1994 report, the Social Security trustees
projected that surplus OASDI taxes would continue until the
early years of the post-World War II baby-boom generation's
retirement--i.e., until sometime between 2010 and 2015. After
that, OASDI taxes would fall short of expenditures
indefinitely. The program then would have to draw on the IOUs
accumulated in its trust funds, and the Government would have
to make good on them. In essence, beginning sometime between
2010 and 2015, the Government would no longer have the benefit
of surplus OASDI taxes and, in fact, would have to find other
resources to cover the trust funds' IOUs. How these resources
will be obtained poses a major long-range fiscal policy
question. Although the OASDI trust funds would have grown
substantially--reaching approximately $1.3 trillion in 2015 as
measured in constant 1994 dollars--and would continue to
provide authority for the Treasury Department to keep spending
for the program until almost the middle of the next century,
the trust funds themselves will not provide the resources to
pay the benefits. They simply give the Social Security system a
claim on other Government resources. What this means in
practice is that when the trust funds' IOUs are needed because
OASDI tax receipts fall below expenditures, the Government will
have to raise other taxes, curtail other expenditures, or
increase its borrowing from the public.
        CHART 3-2. PROJECTED SIZE OF SOCIAL SECURITY TRUST FUNDS

<CHART 3-2>

      CHART 3-3. SOCIAL SECURITY INCOME AND COST RATES, 1995-2065

<CHART 3-3>

    Economists argue that if the surplus OASDI taxes arising
over the next two decades were to result in a reduction in
Government borrowing from the public, more money would exist in
investment markets, which could lead to greater economic
growth. If this were to occur, extracting resources from the
economy in the future to honor the OASDI claims would not
necessarily be burdensome. Said another way, if one accepts the
premise that reductions in the unified budget deficit today
will lead to economic growth by increasing the amount of
resources available for investment, then surplus OASDI taxes
today could aid in building a higher economic base in the
future from which to draw the resources to pay future OASDI
benefits.
    Even if fiscal policy decisions do lead to enhanced
savings, and the Nation's growth rate is augmented in the
coming decades, OASDI costs would grow automatically with the
economy. In essence, larger OASDI claims would accompany
greater economic growth (since that growth would manifest
itself in higher wages and entitlement to larger benefits).
Further, the post-World War II baby-boom generation and future
retirees will raise financial demands across the board, not
just for OASDI, as the ratio of workers to retirees falls in
the next century. The goods and services to be consumed by
society cannot be stockpiled in advance, and the economy will
have to adjust. Whether this would be a mild or severe
adjustment is largely conjecture, but the manner in which
retirement claims are accumulated (publicly or privately) does
not necessarily determine it. It may revolve just as much on
how the future elderly feel about retiring versus working. No
matter how much nominal wealth can be cashed in to produce
given levels of retirement income, the amount of goods and
services that can be furnished will depend heavily on the
proportion of the population able and willing to do the
furnishing.

                  LONG RANGE STATUS OF THE TRUST FUNDS

OASDI trust funds

    Because the Social Security program has been designed as a
contributory system in which those who pay the taxes supporting
it are considered to be earning the right to future benefits,
Congress has traditionally required long-range estimates of the
program's actuarial balance and has set future tax rates with a
view to assuring that the income of the program will be
sufficient to cover its outgo. Under current procedures, the
long-range actuarial analysis of the cash benefits program
covers a 75-year period--this would generally be long enough to
cover the anticipated retirement years of those currently in
the work force.
    The long-range status of the Social Security trust funds is
ordinarily expressed in terms of ``percent of taxable payroll''
rather than in dollar amounts. This permits a direct comparison
between the tax rate actually in the law and the cost of the
program. For example, if the program is projected to have a
deficit of ``1 percent of taxable payroll,'' this means that
the Social Security tax rates now in the law would have to be
increased by 0.5 percent points for employee and employer,
each, in order to pay for the benefits due under present law.
(Alternatively, the program could be brought back into balance
by an equivalent reduction in benefit outgo or by a combination
of revenue increases and outgo reductions.) If the program is
projected to have a deficit of 1.5 percent of taxable payroll
and expenditures are projected to be 10 percent of taxable
payroll, then, under the given set of assumptions, 15 percent
(1.5 divided by 10) of expenditures could not be met with that
tax schedule. In 1994, the total taxable payroll is estimated
to be $2.8 trillion so that in 1994 terms, 1.5 percent of
payroll represented about $42 billion.
    In the short range, the financial soundness of each of the
trust funds can be assessed by considering the size of the
trust fund balance, in absolute terms and as a percentage of
the annual expenditures, and whether the balance is growing or
declining. In the long range, the traditional measure of
financial soundness has been the actuarial balance of the
system. The actuarial balance is defined as the difference
between the total summarized income rate and the total
summarized cost rate.
    Projections of the long-range financial condition of the
Social Security programs are affected by three basic types of
factors: (1) demographic factors, such as rates of fertility,
life expectancy, and labor force participation, which determine
how many workers there will be in the society in relation to
nonworking beneficiaries; (2) economic factors such as
unemployment, productivity, and inflation; and (3) factors
specifically related to the Social Security program, such as
benefit levels, total number of covered workers, and percent of
eligible workers drawing early retirement benefits.
    In projecting the long-term condition of the OASDI trust
funds, the actuaries at the Social Security Administration
employ three sets of alternative economic and demographic
assumptions. Alternative I is based on optimistic assumptions,
alternative II on moderate assumptions, and alternative III on
pessimistic assumptions. In general, alternative II is
considered the most balanced estimate of long-term solvency.
    It is clear that these factors cannot be predicted with any
certainty as far into the future as 75 years, and the long-
range projections should not be taken as absolute predictions
of deficits or surpluses in the funds.
    Beginning with the 1988 trustees report, the Social
Security trustees used an alternative method of determining
actuarial balance. Under the ``present value'' method, interest
earnings on the fund are more fully recognized. Calculations
were based on the present value of future income, outgo and
taxable payroll by discounting the future annual amounts at an
assumed rate of interest.
    Traditionally, the trustees based their conclusion about
the long-range actuarial condition of the program on the
``closeness'' of the income and cost rates when averaged over a
75-year period. If the income rate was between 95 and 105
percent of the cost rate over this projection period, the
system was said to be in close actuarial balance.
    The 1991 trustees report incorporated a more refined
measure of actuarial soundness ``designed to reveal problems
occurring at any time during the'' 75-year measuring period.
The 5 percent ``tolerance'' (i.e., the amount of acceptable
actuarial deficit) was retained in measuring the program's
actuarial soundness for the 75-year period as a whole, but less
tolerance is now permitted for shorter periods of valuation.
The spread between income and outgo is evaluated throughout the
measuring period in reaching a conclusion of whether close
actuarial balance exists, with the amount of acceptable
deviation gradually declining from 5 percent for the full 75-
year period to 0 (or no acceptable deviation) for the first 10-
year segment of the measuring period. (To meet the short-range
test of financial adequacy, the reserve balance at the end of
the first 10-year segment must be at or higher than 100 percent
of annual expenditures, which condition is consistent with the
10-year segment of the long-range test of close actuarial
balance, and also must be expected to reach that level within
the first 5 years and then remain there.) Under this new test,
if income were at least 95 percent of the cost level for the
75-year period as a whole, the trust fund still could be deemed
to be out of close actuarial balance if income and outgo were
too small, compared to cost, for shorter segments of the
measuring period.
    Under this new measure, the trustees concluded in their
1994 report, as they did in their 1991, 1992, and 1993 reports,
that OASDI is not in close actuarial balance over the long run.

                         1994 TRUSTEES' REPORT

    The 1994 Trustees Report was released just prior to the
publication of the 1994 Greenbook. Following are highlights of
the 1994 report, accompanied by tables showing projections for
the trust funds.
    o  In the short range, the assets of the OASI and DI
Trust Funds, if combined, would be expected to increase under
intermediate assumptions from the current level of $378.3
billion, or 116 percent of annual expenditures, to $1,048
billion, or 197 percent of annual expenditures, at the
beginning of the year 2003.
    o  The OASI Trust Fund is expected to increase
rapidly during the next 10 years, from 129 percent of annual
expenditures at the beginning of 1994 to about 259 percent of
annual expenditures at the beginning of the year 2003, based on
the intermediate assumptions.
    o  The assets of the DI Trust Fund are expected to
decline steadily from $9.0 billion at the end of 1993 until the
fund is exhausted in 1995, unless corrective legislation is
enacted promptly to strengthen the financing of the DI program.
The Board of Trustees is again recommending a reallocation of
contribution rates between the OASI and DI Trust Funds, to
remedy the expected financial shortfalls in the DI Trust Fund.
    o  In the long range, income and expenditures are
generally expressed as a percentage of the total amount of
earnings subject to taxation under the OASDI program (referred
to as ``taxable payroll''). Summarized income and cost rates
over the 75-year long-range period are determined through
present-value calculations and by taking into account actual
beginning fund balances and targeted ending fund balances (or
reserves) of 100 percent of annual expenditures.
    Overall, for the period 1994-2068, the difference between
the summarized income and cost rates for the OASDI program is a
deficit of 2.13 percent of taxable payroll based on the
intermediate assumptions. This is a substantial increase over
the estimated deficit of 1.46 percent of taxable payroll shown
in the 1993 Annual Report for the period 1993-2067, based on
the intermediate assumptions. The increase in the deficit is
attributable to a number of factors, including an increase in
the estimated level of future average benefits, a decrease in
the assumed ultimate level of average real-wage gains in the
future, an increase in the assumed ultimate levels of
disability incidence rates, and the change in the 75-year
projection period to include the relatively large annual
deficit for the year 2068.
    o  On a combined basis, the OASDI program is not in
close actuarial balance over the next 75 years. In addition,
the individual OASI and DI Trust Funds are not in close
actuarial balance. These results are the same as those shown in
the 1993 Annual Report.
    o  Income from OASDI payroll taxes represents 12.4
percent of taxable payroll. Since the tax rate is not scheduled
to change in the future under present law, OASDI payroll tax
income as a percentage of taxable payroll remains constant at
12.4 percent. Adding the OASDI income from the income taxation
of benefits to the income from payroll taxes yields a total
``income rate'' of 12.6 percent. This rate is estimated to
increase gradually to 13.3 percent of taxable payroll by the
end of the 75-year projection period based on the intermediate
assumptions. The growth is attributable, in part, to increasing
proportions in both the number of beneficiaries and the amount
of their benefits subject to taxation in the future. These
proportions will increase because the income thresholds, above
which benefits are taxable, are not indexed to future increases
in average prices or average income.
    o  OASDI expenditures for benefit payments and
administrative expenses currently represent about 11.6 percent
of taxable payroll. This ``cost rate'' is estimated to remain
below the corresponding income rate for the next 19 years,
based on the intermediate assumptions. With the retirement of
the ``baby-boom'' generation starting in about 2010, OASDI
costs will increase rapidly relative to the taxable earnings of
workers. By the end of the 75-year projection period, the OASDI
cost rate is estimated to reach 18.9 percent under the
intermediate assumptions, resulting in an annual deficit of
about 5.6 percent.
    o  Under the intermediate assumptions, the excess of
OASDI tax revenues over expenditures for the next 19 years,
together with interest earnings on the trust funds, will result
in a rapid accumulation of assets for the combined OASI and DI
Trust Funds during this period. However, total income is
estimated to fall short of expenditures beginning in 2019 and
continuing thereafter, under the intermediate assumptions. In
this circumstance, trust fund assets would be redeemed to cover
the difference. The assets of the combined OASI and DI Trust
Funds are estimated to be depleted under present law in 2029
based on the intermediate assumptions.

  TABLE 3-12.--MAXIMUM TRUST FUND RATIOS AND YEAR OF EXHAUSTION FOR
THE OASI, DI AND COMBINED TRUST FUNDS UNDER ALTERNATIVE ASSUMPTIONS
------------------------------------------------------------------------
                                              OASI       DI     Combined
------------------------------------------------------------------------
Alternative I:
    Maximum trust fund ratio (percent)....     1,014        23       882
    Year attained.........................      2070      1994      2070
    Year of exhaustion....................  ........      1995  ........
Alternative II:
    Maximum trust fund ratio (percent)....       361        23       241
    Year attained.........................      2014      1994      2012
    Year of exhaustion....................      2036      1995      2029
Alternative III:
    Maximum trust fund ratio (percent)....       180        22       131
    Year attained.........................      2007      1994      1998
    Year of exhaustion....................      2023      1995      2014
------------------------------------------------------------------------
Source: 1994 OASDI Trustees' report.


         TABLE 3-13.--ESTIMATED INCOME RATES AND COST RATES UNDER ALTERNATIVE II OF THE 1994 TRUSTEES' REPORT, CALENDAR YEARS 1994-2070
                                                          [As a percentage of taxable payroll]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     OASI                              DI                            Combined
                                                      --------------------------------------------------------------------------------------------------
                    Calendar year                        Income                           Income                           Income
                                                          rate    Cost rate   Balance      rate    Cost rate   Balance      rate    Cost rate   Balance
--------------------------------------------------------------------------------------------------------------------------------------------------------
1994.................................................      11.42      10.24       1.18       1.21       1.40      -0.19      12.63      11.64       0.98
1995.................................................      11.39      10.21       1.19       1.21       1.47       -.26      12.60      11.67        .93
1996.................................................      11.42      10.19       1.23       1.21       1.52       -.31      12.63      11.71        .92
1997.................................................      11.42      10.15       1.27       1.21       1.57       -.35      12.63      11.72        .92
1998.................................................      11.42      10.12       1.30       1.21       1.62       -.41      12.64      11.74        .90
1999.................................................      11.42      10.09       1.34       1.21       1.67       -.45      12.64      11.75        .88
2000.................................................      11.20      10.06       1.14       1.43       1.71       -.27      12.64      11.77        .87
2001.................................................      11.21      10.05       1.15       1.43       1.75       -.32      12.64      11.80        .84
2002.................................................      11.21      10.04       1.16       1.44       1.79       -.36      12.64      11.83        .81
2003.................................................      11.21      10.03       1.18       1.44       1.83       -.40      12.64      11.86        .78
2005.................................................      11.23       9.99       1.25       1.44       1.90       -.46      12.67      11.89        .78
2010.................................................      11.31      10.24       1.07       1.44       2.03       -.59      12.75      12.27        .48
2015.................................................      11.40      11.31        .09       1.45       2.10       -.66      12.85      13.42       -.56
2020.................................................      11.50      12.82      -1.31       1.45       2.14       -.69      12.96      14.96      -2.01
2025.................................................      11.60      14.15      -2.55       1.45       2.21       -.76      13.05      16.36      -3.31
2030.................................................      11.67      15.03      -3.36       1.46       2.20       -.74      13.13      17.22      -4.10
2035.................................................      11.71      15.37      -3.66       1.46       2.15       -.69      13.17      17.52      -4.35
2040.................................................      11.73      15.27      -3.54       1.46       2.15       -.69      13.19      17.42      -4.23
2045.................................................      11.74      15.18      -3.44       1.46       2.24       -.78      13.20      17.42      -4.22
2050.................................................      11.77      15.35      -3.58       1.46       2.29       -.83      13.23      17.64      -4.41
2055.................................................      11.80      15.75      -3.95       1.46       2.32       -.86      13.26      18.07      -4.81
2060.................................................      11.83      16.19      -4.35       1.46       2.29       -.83      13.30      18.48      -5.18
2065.................................................      11.86      16.49      -4.64       1.46       2.28       -.81      13.32      18.77      -5.45
2070.................................................      11.87      16.71      -4.84       1.46       2.29       -.83      13.34      19.00      -5.67
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--Totals do not necessarily equal the sums of rounded components.

Source: 1994 OASDI Trustees' report.


TABLE 3-14.--ESTIMATED TRUST FUND RATIOS UNDER ALTERNATIVE II OF THE
          1994 TRUSTEES' REPORT, CALENDAR YEARS 1994-2070
                              [In percent]
------------------------------------------------------------------------
          Calendar year                OASI          DI        Combined
------------------------------------------------------------------------
1994.............................          129           23          116
1995.............................          143            8          126
1996.............................          157        (\1\)          136
1997.............................          173        (\1\)          146
1998.............................          188        (\1\)          156
1999.............................          204        (\1\)          165
2000.............................          219        (\1\)          173
2001.............................          233        (\1\)          182
2002.............................          246        (\1\)          189
2003.............................          259        (\1\)          197
2005.............................          286        (\1\)          211
2010.............................          346        (\1\)          239
2015.............................          359        (\1\)          231
2020.............................          316        (\1\)          180
2025.............................          238        (\1\)           96
2030.............................          139        (\1\)        (\1\)
2035.............................           28        (\1\)        (\1\)
2040.............................        (\1\)        (\1\)        (\1\)
2045.............................        (\1\)        (\1\)        (\1\)
2050.............................        (\1\)        (\1\)        (\1\)
2055.............................        (\1\)        (\1\)        (\1\)
2060.............................        (\1\)        (\1\)        (\1\)
2065.............................        (\1\)        (\1\)        (\1\)
2070.............................        (\1\)        (\1\)        (\1\)
Trust fund is estimated to be
 exhausted in....................         2036         1995         2029
------------------------------------------------------------------------
\1\The trust fund is estimated to have been exhausted by the beginning
  of this year. The last line of the table shows the specific year of
  trust fund exhaustion.

Note.--The OASDI ratios shown for years after a given fund is estimated
  to be exhausted are theoretical and are shown for informations
  purposes only.

Source: 1994 OASDI Trustees' report.


 TABLE 3-15.--ESTIMATED OPERATIONS OF THE COMBINED OASI AND DI TRUST FUNDS IN CONSTANT 1994 DOLLARS\1\ UNDER
                                  ALTERNATIVE II, CALENDAR YEARS 1994-2070
                                                  [In billions]
----------------------------------------------------------------------------------------------------------------
                                                             Income                                    Assets at
                      Calendar year                        excluding   Interest    Total      Outgo      end of
                                                            interest    income     income                 year
----------------------------------------------------------------------------------------------------------------
1994.....................................................     $347.0      $30.4     $377.4     $324.8     $430.9
1995.....................................................      357.5       32.2      389.7      332.0      475.4
1996.....................................................      365.4       34.2      399.6      338.9      521.0
1997.....................................................      372.1       36.3      408.4      345.6      566.8
1998.....................................................      378.1       38.5      416.6      352.1      612.3
1999.....................................................      384.4       40.7      425.1      358.5      657.1
2000.....................................................      390.9       42.9      433.8      364.8      701.5
2001.....................................................      397.3       45.2      442.5      371.5      745.5
2002.....................................................      403.5       47.7      451.2      378.6      789.5
2003.....................................................      410.4       50.1      460.6      385.9      833.8
2005.....................................................      426.6       55.3      481.9      401.2      925.9
2010.....................................................      467.0       68.7      535.7      450.2    1,159.8
2015.....................................................      504.1       76.6      580.8      527.3    1,273.6
2020.....................................................      537.8       68.2      606.1      622.3    1,106.4
2025\2\..................................................      570.9       38.2      609.0      716.9      578.8
----------------------------------------------------------------------------------------------------------------
\1\The adjustment from current to constant dollars is by the CPI.
\2\Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to become
  exhausted in 2029 under alternative II and in 2014 under alternative III.

Note.--Totals do not necessarily equal the sums of rounded components.

Source: 1994 OASDI Trustees' Report.


  TABLE 3-16.--ESTIMATED COST OF OASDI AND HI SYSTEMS AS PERCENT OF
                GDP UNDER ALTERNATIVE II, 1994-2070
                              [In percent]
------------------------------------------------------------------------
                                                              OASDI and
          Calendar year               OASDI         HI            HI
------------------------------------------------------------------------
Alternative II:
    1994.........................         4.83         1.60         6.43
    1995.........................         4.82         1.66         6.47
    1996.........................         4.82         1.71         6.53
    1997.........................         4.82         1.76         6.58
    1998.........................         4.82         1.82         6.64
    1999.........................         4.82         1.89         6.71
    2000.........................         4.82         1.95         6.77
    2001.........................         4.82         2.01         6.84
    2002.........................         4.83         2.07         6.90
    2003.........................         4.83         2.13         6.97
    2005.........................         4.83         2.24         7.08
    2010.........................         4.96         2.48         7.44
    2015.........................         5.38         2.84         8.22
    2020.........................         5.95         3.22         9.16
    2025.........................         6.44         3.64        10.08
    2030.........................         6.71         4.04        10.75
    2035.........................         6.76         4.33        11.09
    2040.........................         6.66         4.47        11.14
    2045.........................         6.60         4.55        11.15
    2050.........................         6.62         4.59        11.21
    2055.........................         6.72         4.66        11.38
    2060.........................         6.80         4.77        11.57
    2065.........................         6.84         4.90        11.74
    2070.........................         6.86         5.03        11.89

    Summarized rates:\1\
        25-year: 1994-2018.......         5.22         2.39         7.61
        50-year: 1994-2043.......         5.80         3.10         8.90
        75-year: 1994-2068.......         6.02         3.51         9.53
------------------------------------------------------------------------
\1\Summarized rates are calculated on the present-value basis including
  the value of the trust funds on January 1, 1994 and the cost of
  reaching and maintaining a target trust fund level equal to 100
  percent of annual expenditures by the end of the period.

Note.--Totals do not necessarily equal the sums of rounded components.

Source: 1994 Annual Report of the Board of Trustees of the Federal Old-
  Age and Survivors Insurance and Disability Insurance Trust Funds.

                  ECONOMIC AND DEMOGRAPHIC ASSUMPTIONS

    The following tables provide specific information
concerning the economic and demographic assumptions which
underlie the Social Security trustees' 1994 short and long-run
financial projections.

                TABLE 3-17.--ECONOMIC ASSUMPTIONS IN THE 1994 TRUSTEES REPORT, 1960-2070
----------------------------------------------------------------------------------------------------------------
                                                    Average annual percentage
                                                           change in--                                 Average
                                                ---------------------------------     Real-wage        annual
                 Calendar year                               Average               differential\3\  unemployment
                                                   Real     wages in    Consumer      (percent)        rate\4\
                                                  GDP\1\     covered     Price                       (percent)
                                                           employment   Index\2\
----------------------------------------------------------------------------------------------------------------
Historical data:
    1960-64....................................       3.9        3.4         1.3           2.1             5.7
    1965-69....................................       4.4        5.4         3.4           2.0             3.8
    1970-74....................................       2.4        6.3         6.1            .2             5.4
    1975.......................................       -.8        6.7         9.1          -2.4             8.5
    1976.......................................       4.9        8.7         5.7           3.0             7.7
    1977.......................................       4.5        7.3         6.5            .8             7.1
    1978.......................................       4.8        9.7         7.7           2.0             6.1
    1979.......................................       2.5        9.8        11.4          -1.6             5.8
    1980.......................................       -.5        9.0        13.4          -4.4             7.1
    1981.......................................       1.8        9.8        10.3           -.5             7.6
    1982.......................................      -2.2        6.5         6.0            .5             9.7
    1983.......................................       3.9        5.1         3.0           2.1             9.6
    1984.......................................       6.2        7.3         3.5           3.8             7.5
    1985.......................................       3.2        4.3         3.5            .8             7.2
    1986.......................................       2.9        5.1         1.6           3.5             7.0
    1987.......................................       3.1        4.7         3.6           1.1             6.2
    1988.......................................       3.9        4.8         4.0            .8             5.5
    1989.......................................       2.5        4.3         4.8           -.5             5.3
    1990.......................................       1.2     \5\4.8         5.2           -.4             5.5
    1991.......................................       -.7     \5\3.8         4.0           -.2             6.7
    1992.......................................       2.6     \5\5.2         2.9           2.3             7.4
    1993.......................................    \5\2.9     \5\2.4         2.8           -.5             6.8
Intermediate assumptions:
    1994.......................................       3.2        2.7         2.7            .0             6.3
    1995.......................................       2.8        4.8         3.2           1.6             6.2
    1996.......................................       2.6        4.3         3.3           1.0             6.0
    1997.......................................       2.4        4.3         3.4           1.0             6.0
    1998.......................................       2.2        4.3         3.5            .9             6.0
    1999.......................................       2.2        4.6         3.7            .9             6.0
    2000.......................................       2.1        4.8         3.9            .9             6.0
    2001.......................................       2.0        4.8         4.0            .8             5.9
    2002.......................................       2.0        5.0         4.0           1.0             5.9
    2003.......................................       2.0        5.1         4.0           1.1             5.9
    2010.......................................       1.7        5.1         4.0           1.1             6.0
    2020.......................................       1.3        5.0         4.0           1.0             6.0
    2030.......................................       1.3        5.0         4.0           1.0             6.0
    2040.......................................       1.2        5.0         4.0           1.0             6.0
    2050.......................................       1.2        5.0         4.0           1.0             6.0
    2060.......................................       1.2        5.0         4.0           1.0             6.0
    2070.......................................       1.2        5.0         4.0           1.0             6.0
----------------------------------------------------------------------------------------------------------------
\1\The real GDP (gross domestic product) is the value of total output of goods and services, expressed in 1987
  dollars.
\2\The Consumer Price Index is the annual average value for the calendar year of the Consumer Price Index for
  Urban Wage Earners and Clerical Workers (CPI-W).
\3\The real-wage differential is the difference between the percentage increases, before rounding, in (1) the
  average annual wage in covered employment, and (2) the average annual Consumer Price Index.
\4\Through 2003, the rates shown are unadjusted civilian unemployment rates. After 2003, the rates are total
  rates (inclduing military personnel), adjusted by age and sex based on the estimated total labor force for
  July 1, 1992.
\5\Preliminary.

Source: 1994 Trustees Report.


    TABLE 3-18.--PROJECTED EARNINGS FOR HYPOTHETICAL WORKERS
------------------------------------------------------------------------
                                                Average\2\
              Year                   Low\1\                   Maximum\3\
------------------------------------------------------------------------
1994.............................      $10,840      $24,090      $60,600
1995.............................       11,338       25,196       62,100
1996.............................       11,811       26,246       63,600
1997.............................       12,308       27,352       66,600
1998.............................       12,832       28,516       69,300
1999.............................       13,407       29,794       72,300
------------------------------------------------------------------------
\1\Worker with earnings equal to 45 percent of the SSA average wage
  index.
\2\Worker with earnings equal to the SSA average wage index.
\3\Worker with earnings equal to the Social Security maximum taxable
  earnings.

Source: Office of the Actuary, Social Security Administration.


                          TABLE 3-19.--MAJOR LONG-TERM DEMOGRAPHIC ASSUMPTIONS
                               [1994 trustees' report alternative II assumptions]
----------------------------------------------------------------------------------------------------------------
                                                                   Age-sex-           Life expectancy\3\
                                                                   adjusted  -----------------------------------
                                                        Total       death         At birth          At age 65
                   Calendar year                      fertility    rate\2\   -----------------------------------
                                                       rate\1\       (per
                                                                   100,000)     Male    Female    Male    Female
----------------------------------------------------------------------------------------------------------------
1995................................................      2.04         761.6     72.3     79.2     15.4     19.2
2000................................................      2.01         731.0     73.0     79.7     15.6     19.4
2005................................................      1.98         701.1     73.8     80.2     15.8     19.5
2010................................................      1.95         678.4     74.3     80.5     16.0     19.7
2015................................................      1.92         659.2     74.7     80.9     16.3     19.9
2020................................................      1.90         641.0     75.0     81.2     16.5     20.2
2025................................................      1.90         623.8     75.3     81.5     16.7     20.4
2030................................................      1.90         607.3     75.6     81.8     16.9     20.6
2035................................................      1.90         591.6     75.9     82.1     17.1     20.9
2040................................................      1.90         576.7     76.2     82.3     17.3     21.1
2045................................................      1.90         562.4     76.5     82.6     17.5     21.3
2050................................................      1.90         548.8     76.8     82.9     17.7     21.5
2055................................................      1.90         535.7     77.1     83.2     17.9     21.7
2060................................................      1.90         523.3     77.4     83.5     18.1     21.9
2065................................................      1.90         511.4     77.6     83.7     18.3     22.1
2070................................................      1.90         500.0     77.9     84.0     18.5     22.3
----------------------------------------------------------------------------------------------------------------
\1\The total fertility rate for any year is the average number of children who would be born to a woman in her
  lifetime if she were to experience the birth rates by age observed in, or assumed for, the selected year, and
  if she were to survive the entire child-bearing period. The ultimate total fertility rate is assumed to be
  reached in 2018.
\2\The age-sex-adjusted death rate is the crude rate that would occur in the enumerated total population as of
  April 1, 1980, if that population were to experience the death rates by age and sex observed in, or assumed
  for, the selected year.
\3\The life expectancy for any year is the average number of years of life remaining for a person if that person
  were to experience the death rates by age observed in, or assumed for, the selected year.


    TABLE 3-20.--COVERED WORK FORCE--NUMBER OF BENEFICIARIES AND
                          DEPENDENCY RATES
------------------------------------------------------------------------
                               1960     1980     2000     2020     2040
------------------------------------------------------------------------
Total population (in
 millions).................      190      235      285      325      349
Covered workers............       73      112      147      161      166
Beneficiaries (OASI and DI)       14       35       47       68       84
Aged dependency ratio\1\...     .173     .195     .210     .279     .372
Total dependency ratio\2\..     .904     .749     .691     .701     .791
Worker/beneficiary ratio...      5.1      3.2      3.1      2.4      2.0
------------------------------------------------------------------------
\1\Ratio of persons aged 65 and over to the number of persons aged 20-
  64.
\2\Ratio of non-working-age to working-age population--population under
  20 plus population 65 and over divided by population 20-64.

Source: 1994 Trustees Report.

                 SENSITIVITY OF LONG-RANGE PROJECTIONS

    Long-range estimates of the financial status of the OASDI
trust funds are extremely sensitive to the basic social,
economic, and demographic variables that underpin the
projections. Slight variations in assumptions about future
demographic or economic trends can lead to substantially
different financial projections, and thus any longer term
estimate is necessarily very uncertain. In general terms, the
income to the funds crucially depends on long-run trends in
covered wages paid to employees, which in turn depends on many
fundamental economic and demographic factors, such as real wage
growth in the economy, fluctuations in the size of the work
force, productivity, and overall rates of fertility and
immigration. The expenditures of the program depend on the
amount of benefits that are paid, which is of course affected
by the level of consumer inflation, changes in mortality rates
and life expectancy, disability incidence, and work and
retirement patterns among the elderly population.
    As a way of illustrating the sensitivity of long-term
projections to variations in basic assumptions, table 3-21
presents data on the effects of varying assumptions about real
wage growth in the alternative II estimates. This table is
based on the premise that all other alternative II demographic
and economic assumptions are held constant. (Under alternative
II, the real wage growth assumption is 1.0 percent.)

  TABLE 3-21.--ESTIMATED OASDI SUMMARIZED INCOME RATES, COST RATES,
 AND ACTUARIAL BALANCES, BASED ON ALTERNATIVE II WITH VARIOUS REAL-WAGE
                            ASSUMPTIONS
                  [As a percentage of taxable payroll]
------------------------------------------------------------------------
                                         Ultimate percentage increase in
                                                  wages--CPI\1\
            Valuation period            --------------------------------
                                          4.5-4.0    5.0-4.0    5.5-4.0
------------------------------------------------------------------------
Summarized income rate:
    25-year: 1994-2018.................      13.39      13.35      13.31
    50-year: 1994-2043.................      13.29      13.24      13.19
    75-year: 1994-2068.................      13.30      13.24      13.19
Summarized cost rate:
    25-year: 1994-2018.................      13.25      12.85      12.45
    50-year: 1994-2043.................      15.09      14.53      13.97
    75-year: 1994-2068.................      15.97      15.37      14.77
Balance:
    25-year: 1994-2018.................       +.14       +.50       +.86
    50-year: 1994-2043.................      -1.80      -1.29       -.79
    75-year: 1994-2068.................      -2.67      -2.13      -1.58
------------------------------------------------------------------------
\1\The first value in each pair is the assumed ultimate annual
  percentage increase in average wages in covered employment. The second
  value is the assumed ultimate annual percentage increase in the
  Consumer Price Index. The difference between the two values is the
  real-wage differential.

Source: 1994 Trustees' Report.