Description:
As shown in Table 1, CBO and JCT estimate that over the current baseline projection period (2020 to 2029), enactment of H.R. 860 would: Increase Social Security outlays by $386 billion; Increase federal revenues by $911 billion, the net effect of a decrease in on-budget revenues of $719 billion and an increase in off-budget revenues of $1.629 trillion; and Reduce the federal deficit by $525 billion (excluding any effects on direct spending for programs other than Social Security). To help the House and Senate Budget Committees determine whether certain budgetary points of order apply to legislation, CBO typically provides information in cost estimates about whether a bill would increase on-budget deficits by more than $5 billion in any of the four decades after the baseline projection period. Although H.R. 860 would reduce the overall federal deficit over that period, CBO estimates that enacting the bill would increase on-budget deficits by hundreds of billions of dollars in each decade. Those increased deficits would occur because a portion of income taxes paid on Social Security benefits would no longer be allocated to the Medicare Hospital Insurance (HI) trust fund (which is on-budget) and because of the reductions in income tax revenues that would result from the increase in payroll taxes. CBO also has completed a more extensive analysis of the bill’s long-term effects on the Social Security system, described below. In the long term, H.R. 860 would increase Social Security revenues more than it would increase benefits, nearly closing the funding shortfall that is currently projected. Under the bill, the 75-year summarized value of revenues would increase by 1.7 percent of gross domestic product (GDP), and the 75-year summarized value of outlays would increase by 0.3 percent of GDP, CBO estimates. The net effect of those changes would be to reduce the Social Security system’s 75-year actuarial deficit from 1.5 percent of GDP under current law to 0.1 percent under the bill (see Table 2). At the end of the 75-year period in 2093, CBO projects, under H.R. 860, spending would increase by 0.4 percent of GDP and revenues would increase by 2.2 percent of GDP, compared with the amounts projected under current law. This would significantly reduce but not eliminate the annual gap between Social Security’s costs and its revenues. Under H.R. 860, that annual gap would be widening by the end of the 75-year period and would continue to widen thereafter, causing the program’s financial shortfall to increase in subsequent years. Under H.R. 860, the newly established Social Security Trust Fund would be exhausted in calendar year 2041. Under current law, CBO projects, the existing Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds will be exhausted in calendar year 2032 and fiscal year 2028, respectively. If their balances were combined, the OASDI trust funds would be exhausted in calendar year 2032. (Following common analytical conventions, CBO often considers the two trust funds as combined.) The estimated effects of H.R. 860 are subject to significant uncertainty, particularly over the longer term, and the effect of the legislation on the trust funds could be larger or smaller than described here.
