FOR IMMEDIATE RELEASE
Contact: Nan Gibson (202) 331-5546 · Tom Kiley (202) 331-5540
BUDGET SURPLUS WOULD BE $1.5 TRILLION LOWER USING 10-YEAR FORECAST OF SOCIAL SECURITY, INSTEAD OF CBO
Washington, D.C. – The economic scenario envisioned by the Social Security trustees for the next 10 years differs quite markedly from that laid-out by the Congressional Budget Office (CBO) about a month ago. If the projections released today by the Social Security trustees are correct, then budget surpluses are likely to be $1.5 trillion lower than CBO predicts, according to an analysis by the Economic Policy Institute.
CBO’s projections for the next 10 years show an on-budget surplus of $3.1 trillion for the years 2002 to 2011. Underlying this forecast is an assumed average economic growth rate of 3.0% for the next 10 years.
However, the Social Security’s trustees assume an average growth rate of 2.4% for the same 10-year period. If Social Security’s projections for the next 10 years are correct, CBO’s prediction would have to be off the mark.
In its latest round of surplus projections, CBO indicated that if economic growth was on average 0.1 percentage points lower, the cumulative surplus would be $245 billion lower. Therefore, if Social Security’s growth forecasts are accurate, the combined 10-year budget surpluses could be about $1.5 trillion lower than CBO predicts, according to EPI economist Christian Weller.
“CBO’s 10-year outlook on the budget runs counter to the projections from Social Security,” says Weller. “This dramatically reveals the wide range of expert judgments about our economic future. Setting policy — such as the proposed tax cut — on the basis of such forecasts is obviously risky,” he concludes.
EPI today released an analysis of the trustees’ annual reports of the Social Security and Medicare programs. The full-text of Trust Funds’ Rainy Day Postponed Again, by Edith Rasell and Christian Weller, is available online.
The Economic Policy Institute is a nonprofit, non-partisan economic think tank founded in 1986.
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