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| FIGURE 33 (continued)
The long-range actuarial imbalance is almost 61/2% of taxable payroll under pessimistic cost estimate. The optimistic cost estimate (Alternative I) shows a favorable actuarial balance of 1.29% of taxable payroll, while the more optimistic of the two intermediate cost estimates (Alternative II-A) shows an actuarial deficiency of .82% of taxable payroll. When successive 25-year periods are considered, the intermediate cost estimate for the OASDI program shows a small positive balance (.64% of taxable ... Appendix J, page 25 FIGURE 34 ... payroll) for the first period. This occurs because the "deficits" of income over outgo in the 1980s are more than offset by the "surpluses" following 1990 (and up through 2006). Increasingly larger deficits are shown for the next two 25-year periods — 1.68% of taxable payroll for the second period and 4.41% of taxable payroll for the third period. The deficit in the second period is 12% of the average cost rate (which means that, if benefit outgo were to be decreased sufficiently to be financed by the average tax rate, a reduction of 12% would be necessary). The deficit for the third period is 26% of the average cost of rate. When the first 50-year period is considered as a whole, there is a "deficit" of income over outgo of .52% of taxable payroll for the OASDI program, according to the intermediate cost estimate. The corresponding figure for the pessimistic cost estimate is a "deficit" of 3.08% of taxable payroll, while under the optimistic estimate, there is a "surplus" of 1.68% of taxable payroll. FIGURE 34 (continued) It is important to note that, if an economic stabilizing mechanism (such as is described in Chapter 2) were in effect in the 1990s and after, then the adverse results shown for present law under the pessimistic cost estimate would not occur. Rather, there would be excesses of tax income over outgo for benefit payments and administrative expenses throughout the period. The estimated significant annual excesses of the OASDI tax rate over the cost rate in the 1990s and early 2000s result in a sizable build-up of... Appendix J, page 26 FIGURE 35 ... trust-fund assets under the intermediate cost estimate (assuming that, in the 1980s, the deficits occurring then were financed in some manner, even though they might be repaid later). Table 7 indicates that a fund ratio of about 180% is estimated to occur between 2010 and 2015, but thereafter it decreases rapidly until the fund would be exhausted shortly after 2025. Under the pessimistic cost estimate, the OASDI fund ratio would never become positive, because the cost rates always exceed the tax rates. Quite naturally, under the more optimistic of the cost estimates, the cost rates are lower than the tax rates in almost all years after 1990, and so the fund ratio increases steadily over the 75-year valuation period. After admitting that a prior government committee was totally off the mark in predicting Social Security receipts only 3 years away, the Committee (in all seriousness) proceeded to examine Social Security income and outgo until the year 2050! Why didn't the Committee understand that it could have, with equal logic, issued a report speculating on how many angels could dance on the head of a pin!? Now we read even more exciting stuff, reported verbatim from pages J-27, 28, 29, 30 and 31 of the Report (Figures 36 — 40). FIGURE 36 Effect of the Real-Wage Differential Perhaps the most significant economic factor affecting costs in the actuarial estimates for the OASDI program is the real-wage differentia!, which is (1) the annual percentage increase in wages and salaries in covered employment, minus (2) the annual percentage increase in the CPI(W). The assumptions for the differential are based primarily on a projection of historical trends, which in turn reflect productivity gains and the factors that link such gains with the real-wage differential. Such differential has a direct effect on the cost estimates, but the associated assumptions for productivity gains and the factors linking such gains with the real-wage differential (as discussed in the next paragraph) do not have a direct effect on the long-range cost estimates expressed as a percentage of taxable payroll. Appendix J, page 27
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