Presentation by Julie Topoleski, the director of CBO’s Labor, Income Security, and Long-Term Analysis Division, at the NBER’s Summer Institute 2023: Economics of Social Security.
Presentation by Molly Dahl, CBO’s Long-Term Analysis Unit Chief, at the American Enterprise Institute’s panel discussion “Methodologies in Fiscal, Economic, and Health Spending Projections.”
CBO’s long-term Social Security projections are based on a detailed microsimulation model that starts with data about individuals from a representative sample of the population and projects economic and demographic outcomes for that sample through time. Differences in projections of four major factors—population, earnings subject to Social Security taxes, real interest rates, and key components of nominal GDP growth—account for four-fifths of the difference between CBO’s and the Social Security Trustees’ projections of Social Security’s 75-year actuarial balance.
Presentation by Julie Topoleski, Chief of the Long-Term Analysis Unit in CBO’s Health, Retirement, and Long-Term Analysis Division, to the Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods.
Presentation by Molly Dahl, Chief of CBO’s Long-Term Analysis Unit, at a meeting of the National Conference of State Legislatures’ Budget Working Group.
Presentation by Julie Topoleski, Chief of the Long-Term Analysis Unit in CBO’s Health, Retirement, and Long-Term Analysis Division, to the Social Security Advisory Board.
Both CBO and the Social Security Trustees project a shortfall in Social Security’s finances, but they differ in their assessment of its magnitude. This presentation describes that difference and the major factors that contribute to it.
Presentation by Lara Robillard, an analyst in CBO’s Budget Analysis Division, to the Leadership Fellowship Program at the National Hispanic Medical Association.
Presentation by Julie Topoleski, Director of CBO’s Labor, Income Security, and Long-Term Analysis Division, at the 15th Annual Meeting of the OECD’s Working Party of Parliamentary Budget Officials and Independent Fiscal Institutions.
This presentation provides information about how CBO estimates the effects of employer matching and default deferral rates on federal employees’ contribution rates to the Thrift Savings Plan and on employers’ costs.
Presentation by Molly Dahl, CBO’s Long-Term Analysis Unit Chief, at the American Enterprise Institute’s panel discussion “Methodologies in Fiscal, Economic, and Health Spending Projections.”
CBO’s long-term Social Security projections are based on a detailed microsimulation model that starts with data about individuals from a representative sample of the population and projects economic and demographic outcomes for that sample through time. Differences in projections of four major factors—population, earnings subject to Social Security taxes, real interest rates, and key components of nominal GDP growth—account for four-fifths of the difference between CBO’s and the Social Security Trustees’ projections of Social Security’s 75-year actuarial balance.
Presentation by Julie Topoleski, Chief of the Long-Term Analysis Unit in CBO’s Health, Retirement, and Long-Term Analysis Division, to the Social Security Advisory Board’s 2019 Technical Panel on Assumptions and Methods.
Presentation by Molly Dahl, Chief of CBO’s Long-Term Analysis Unit, at a meeting of the National Conference of State Legislatures’ Budget Working Group.
Presentation by Julie Topoleski, Chief of the Long-Term Analysis Unit in CBO’s Health, Retirement, and Long-Term Analysis Division, to the Social Security Advisory Board.
Both CBO and the Social Security Trustees project a shortfall in Social Security’s finances, but they differ in their assessment of its magnitude. This presentation describes that difference and the major factors that contribute to it.
Presentation by Lara Robillard, an analyst in CBO’s Budget Analysis Division, to the Leadership Fellowship Program at the National Hispanic Medical Association.
Presentation by Julie Topoleski, Director of CBO’s Labor, Income Security, and Long-Term Analysis Division, at the 15th Annual Meeting of the OECD’s Working Party of Parliamentary Budget Officials and Independent Fiscal Institutions.
This presentation provides information about how CBO estimates the effects of employer matching and default deferral rates on federal employees’ contribution rates to the Thrift Savings Plan and on employers’ costs.
Presentation by Joyce Manchester, Chief, Long-Term Analysis Unit, to the Committee on the Long-Run Macro-Economic Effects of the Aging U.S. Population, National Academy of Sciences
Presentation by Lara Robillard, an analyst in CBO’s Budget Analysis Division, at AcademyHealth’s 2023 Health Policy Orientation, "Information Sources for Policymaking."
The federal government subsidizes health insurance for most Americans through a variety of programs and tax provisions. In 2017, net subsidies for people under age 65 will total $705 billion, CBO and the staff of the Joint Committee on Taxation (JCT) estimate.
This presentation provides an overview of CBO and JCT’s current baseline projections of health insurance coverage and how those projections have changed since March 2016, highlighting changes in Medicaid and CHIP enrollment and nongroup coverage.
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CONGRESS OF THE UNITED STATESCONGRESSIONAL BUDGET OFFICEAlleneMcclendon878
CONGRESS OF THE UNITED STATES
CONGRESSIONAL BUDGET OFFICE
CBO
Social Security
Policy Options
JULY 2010
Pub. No. 4140
A
S T U D Y
CBO
Social Security Policy Options
July 2010
The Congress of the United States O Congressional Budget Office
CBO
Notes
Unless otherwise noted, all years are calendar years.
Numbers in the text and tables may not add up to totals because of rounding.
Preface
Social Security is the federal government’s largest single program, and as the
U.S. population grows older in the coming decades, its cost is projected to increase more
rapidly than its revenues. As a result, under current law, resources dedicated to the program
will become insufficient to pay full benefits in 2039, the Congressional Budget Office (CBO)
projects. Long-run sustainability for the program could be attained through various
combinations of raising taxes and cutting benefits; such changes would also affect the
Social Security taxes paid and the benefits received by various groups of people. This CBO
study examines a variety of approaches to changing Social Security, updating an earlier work,
Menu of Social Security Options, which CBO published in May 2005. In keeping with CBO’s
mandate to provide objective, impartial analysis, the current study makes no
recommendations.
The study was written by Noah Meyerson, Charles Pineles-Mark, and Michael Simpson of
CBO’s Health and Human Resources Division, under the direction of Joyce Manchester and
Bruce Vavrichek. Research assistance was provided by Philip Armour, Sarah Axeen, and
L. Daniel Muldoon. James Baumgardner, Sheila Dacey, Benjamin Page, David Rafferty,
Jonathan Schwabish, and Julie Topoleski provided helpful comments on earlier drafts.
Andrew Biggs of the American Enterprise Institute and Paul Van de Water of the Center for
Budget and Policy Priorities also provided useful comments. (The assistance of external
reviewers implies no responsibility for the final product, which rests solely with CBO.)
Kate Kelly edited the manuscript, and Leah Mazade and Sherry Snyder proofread it.
Maureen Costantino took the cover photograph and designed the cover, and Jeanine Rees
prepared the study for publication. Jonathan Schwabish provided help with graphics.
Monte Ruffin produced the initial printed copies, Linda Schimmel coordinated the print
distribution, and Simone Thomas prepared the electronic version for CBO’s Web site
(www.cbo.gov).
Douglas W. Elmendorf
Director
July 2010
CBO
www.cbo.gov
http://www.cbo.gov/doc.cfm?index=6377
MaureenC
Doug Elmendorf
Contents
Summary ix
Introduction 1
An Overview of Social Security 1
Social Security Projections 4
Assessing Options for Changing Social Security 7
Key Elements of Social Security 8
Scope of the Options 9
Effects of the Options on the System’s Finances 11
Effects of the Options on Payroll Taxes Paid and Benefits Received by
Various Groups 13
Effects of the Options on Work and Saving 15
Options That Wo ...
Presentation by Julie Topoleski, Chief of the Long-Term Analysis Unit in CBO's Health, Retirement, and Long-Term Analysis Division, at the 2016 Annual Meeting of the Population Association of America.
CBO uses a variety of demographic data. Those data underlie CBO’s budget and economic projections, and some cost estimates for legislation. Demographic data played an important role in estimating savings from an increase in the full retirement age for Social Security, estimating the costs of federal subsidies for health insurance coverage, and estimating the impact of changes in immigration policy, for example.
HISIM2 is an updated version of the model CBO uses to generate estimates of health insurance coverage and premiums for people under age 65. The model is used along with other models to develop CBO’s baseline budget projections (which incorporate the assumption that current law generally remains the same). It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
Presentation by Peter Fontaine, CBO's Assistant Director for Budget Analysis, to a Global Network of Parliamentary Budget Offices Community Meeting Sponsored by the World Bank Institute
If current laws governing taxes and spending did not change, the condition of the federal budget would worsen considerably over the next three decades. Growth in federal spending would continue to outpace growth in federal revenues, leading to ever larger budget deficits.
Federal spending is projected to rise noticeably in relation to the economy because of growth in spending in Social Security, the major health programs, and interest on the government’s debt. Federal revenues would also increase if current laws remained generally unchanged, but they would increase much more slowly than federal spending.
Presentation by Keith Hall, CBO Director, at the 19th annual meeting of the Retirement Research Consortium.
Presentation by Lara Robillard, Principal Analyst, CBO’s Budget Analysis Division, to the Leadership Fellowship Program at the National Hispanic Medical Association.
Spending on federal health care programs is growing rapidly, driven by rising enrollment and rising health care spending per enrollee. This presentation describes CBO’s analyses related to health care, explains how the agency uses its health insurance simulation model, and provides examples of how CBO documents its work.
Presentation by Robert Sunshine, Senior Advisor in CBO’s Office of the Director, at the 10th Annual Meeting of the OECD Network of Parliamentary Budget Officials and Independent Fiscal Institutions.
Presentation by Jared Jageler, David Adler, Noelia Duchovny, and Evan Herrnstadt, analysts in CBO’s Microeconomic Studies and Health Analysis Divisions, at the Association of Environmental and Resource Economists Summer Conference.
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CONGRESS OF THE UNITED STATESCONGRESSIONAL BUDGET OFFICEAlleneMcclendon878
CONGRESS OF THE UNITED STATES
CONGRESSIONAL BUDGET OFFICE
CBO
Social Security
Policy Options
JULY 2010
Pub. No. 4140
A
S T U D Y
CBO
Social Security Policy Options
July 2010
The Congress of the United States O Congressional Budget Office
CBO
Notes
Unless otherwise noted, all years are calendar years.
Numbers in the text and tables may not add up to totals because of rounding.
Preface
Social Security is the federal government’s largest single program, and as the
U.S. population grows older in the coming decades, its cost is projected to increase more
rapidly than its revenues. As a result, under current law, resources dedicated to the program
will become insufficient to pay full benefits in 2039, the Congressional Budget Office (CBO)
projects. Long-run sustainability for the program could be attained through various
combinations of raising taxes and cutting benefits; such changes would also affect the
Social Security taxes paid and the benefits received by various groups of people. This CBO
study examines a variety of approaches to changing Social Security, updating an earlier work,
Menu of Social Security Options, which CBO published in May 2005. In keeping with CBO’s
mandate to provide objective, impartial analysis, the current study makes no
recommendations.
The study was written by Noah Meyerson, Charles Pineles-Mark, and Michael Simpson of
CBO’s Health and Human Resources Division, under the direction of Joyce Manchester and
Bruce Vavrichek. Research assistance was provided by Philip Armour, Sarah Axeen, and
L. Daniel Muldoon. James Baumgardner, Sheila Dacey, Benjamin Page, David Rafferty,
Jonathan Schwabish, and Julie Topoleski provided helpful comments on earlier drafts.
Andrew Biggs of the American Enterprise Institute and Paul Van de Water of the Center for
Budget and Policy Priorities also provided useful comments. (The assistance of external
reviewers implies no responsibility for the final product, which rests solely with CBO.)
Kate Kelly edited the manuscript, and Leah Mazade and Sherry Snyder proofread it.
Maureen Costantino took the cover photograph and designed the cover, and Jeanine Rees
prepared the study for publication. Jonathan Schwabish provided help with graphics.
Monte Ruffin produced the initial printed copies, Linda Schimmel coordinated the print
distribution, and Simone Thomas prepared the electronic version for CBO’s Web site
(www.cbo.gov).
Douglas W. Elmendorf
Director
July 2010
CBO
www.cbo.gov
http://www.cbo.gov/doc.cfm?index=6377
MaureenC
Doug Elmendorf
Contents
Summary ix
Introduction 1
An Overview of Social Security 1
Social Security Projections 4
Assessing Options for Changing Social Security 7
Key Elements of Social Security 8
Scope of the Options 9
Effects of the Options on the System’s Finances 11
Effects of the Options on Payroll Taxes Paid and Benefits Received by
Various Groups 13
Effects of the Options on Work and Saving 15
Options That Wo ...
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CBO uses a variety of demographic data. Those data underlie CBO’s budget and economic projections, and some cost estimates for legislation. Demographic data played an important role in estimating savings from an increase in the full retirement age for Social Security, estimating the costs of federal subsidies for health insurance coverage, and estimating the impact of changes in immigration policy, for example.
HISIM2 is an updated version of the model CBO uses to generate estimates of health insurance coverage and premiums for people under age 65. The model is used along with other models to develop CBO’s baseline budget projections (which incorporate the assumption that current law generally remains the same). It is also used to estimate the effects of proposed changes in policies that affect health insurance coverage.
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If current laws governing taxes and spending did not change, the condition of the federal budget would worsen considerably over the next three decades. Growth in federal spending would continue to outpace growth in federal revenues, leading to ever larger budget deficits.
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CBO’s Long-Term Projections of Labor Force Participation Rates
1. Presentation at the NBER’s Summer Institute 2023:
Economics of Social Security
July 26, 2023
Julie Topoleski
Labor, Income Security, and Long-Term Analysis Division
CBO’s Long-Term Projections of
Labor Force Participation Rates
For information about the conference, see www.nber.org/conferences/si-2023-economics-social-security.
2. 1
CBO prepares, and periodically updates, a budget baseline that serves as a
benchmark for measuring the effects of proposed legislation. That baseline spans
the next 10 years.
The baseline, which reflects the assumption that current laws governing spending
and revenues generally remain unchanged, relies on CBO’s forecasts of key
economic factors, including labor force participation rates.
CBO is required to produce a formal cost estimate for nearly every bill approved
by a full Congressional committee. The agency also fulfills thousands of requests
for technical assistance as lawmakers draft legislation.
CBO’s Baseline Budget Projections and Cost Estimates
3. 2
Congressional Budget Office, The 2023 Long-Term Budget Outlook (June 2023), www.cbo.gov/publication/59014, and CBO’s 2023 Long-Term Projections for Social Security
(June 2023), www.cbo.gov/publication/59184.
CBO provides the Congress with long-term budget projections that extend
20 years beyond the standard 10-year period. Those projections show the
estimated effects of demographic trends, economic developments, and health
care costs on federal spending, revenues, deficits, and debt over the next
30 years.
CBO publishes an annual report that provides long-term projections for the Social
Security system. Those projections span 75 years—the same projection period
that the Social Security trustees use in their annual report.
CBO’s Long-Term Projections
4. 3
Some examples of data sources that CBO uses regularly are the national income and product accounts, surveys of labor market conditions and prices, the Statistics of Income
database, the Current Population Survey, the Survey of Income and Program Participation, data on national health expenditures, various health care surveys, and data on financial
transactions.
All of CBO’s work reflects the agency’s objective, impartial, and nonpartisan
analytical assessments. Those assessments are based on several factors:
▪ A detailed understanding of federal programs and revenue sources;
▪ Careful reading of the relevant research literature;
▪ Extensive analysis of data collected and reported by the government’s
statistical agencies and by private organizations; and
▪ Consultation with numerous outside experts, including professors, think-tank
analysts, representatives of industry groups, other private-sector experts, and
employees of federal, state, and local governments.
The demographic and economic projections that CBO uses in its Social Security
analysis are consistent with those that it uses to produce its baseline projections
and for other purposes.
Independent Analysis
5. 4
Congressional Budget Office, CBO’s 2023 Long-Term Projections for Social Security (June 2023), www.cbo.gov/publication/59184.
Social Security Outlays and Revenues, With Scheduled Benefits
In CBO’s projections, the gap
between Social Security’s
outlays and revenues widens
over the long term. Total
spending on the program in
2023 is equal to 5.2 percent of
GDP; by 2097, spending on
the program reaches
7.0 percent of GDP. Over the
same period, revenues remain
at about 4.6 percent of GDP.
6. 5
Labor Force Participation Rates, 1970 to 2097
The aging of the population
continues to be the main
driver of the decline in labor
force participation in CBO’s
projections, but it is not the
only factor affecting those
projections. Some factors,
such as increases in
educational attainment and
life expectancy, tend to
increase labor force
participation and thus
partially offset the effects of
the aging of the population.
But other factors, along with
aging, push down CBO’s
projections of labor force
participation.
Percent
40
45
50
55
60
65
70
75
80
85
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090
All Women Men
7. 6
To assess the importance of aging in its projections of the overall labor force
participation rate, CBO calculated what the rate would be if in each year of the
projection period the age-and-sex composition of the population remained the
same as it was in 2023.
Under that hypothetical scenario, the labor force participation rate would increase
from 61.9 percent in 2023 to 63.7 percent in 2053—3.4 percentage points higher
than the labor force participation rate in that year in CBO’s projections.
Thus, CBO estimates that aging causes the labor force participation rate to drop
by 3.4 percentage points over the 2023–2053 period—double the
1.7 percentage-point decline in the rate over that period in CBO’s projections.
Quantifying the Effect of Aging on Labor Force Participation
8. 7
Number of People in and out of the Labor Force,
by Age Group and Year
0 20 40 60 80 100
20-29
30-39
40-49
50-59
60-69
70+
Age
Group
2023
In Labor Force Not in Labor Force
0 20 40 60 80 100
20-29
30-39
40-49
50-59
60-69
70+
2053
In Labor Force Not in Labor Force
0 20 40 60 80 100
20-29
30-39
40-49
50-59
60-69
70+
2097
In Labor Force Not in Labor Force
Millions of People
9. 8
See Joshua Montes, CBO’s Projection of Labor Force Participation Rates, Working Paper 2018-04 (Congressional Budget Office, March 2018), www.cbo.gov/publication/53616.
CBO projects rates of labor force participation by using a model that is an
extension of those used by Stephanie Aaronson et al. (2006), Kudlyak (2013),
Stephanie Aaronson et al. (2014), and Daniel Aaronson et al. (2014).
That model is a cohort model that estimates labor force participation rates by
age-sex-education-race/ethnicity subgroups. CBO treats age groups within each
sex-education-race/ethnicity subgroup as a separate system of equations and
estimates cohort effects that are constrained across the age group equations
within each system. Those constraints keep the values of the estimated cohort
effects the same for all age groups within each system.
How CBO Projects Labor Force Participation
10. 9
Each age group equation includes an age group–specific fixed effect, cohort fixed
effects, and an array of time-varying covariates.
CBO separates cyclical variation in labor force participation rates from underlying
structural trends through the time-varying covariates to identify the potential labor
force participation rate—that is, the rate that would occur if the economy’s output
was at its maximum sustainable amount and other inputs were at their potential
rates.
How CBO Projects Labor Force Participation (Continued)
11. 10
In the future, will the relationships between labor force participation and age,
education, and immigration status be similar to those in the past?
Will the relationships between labor force participation and changes to tax policy
and transfer programs be similar to those in the past?
Will the relationships between data about earnings from payrolls and survey
measures of labor force participation be similar to those in the past?
Can a more parsimonious and tractable model than CBO’s current one produce
more accurate projections?
CBO Is Revisiting How It Projects Labor Force Participation