[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)]
[Program Descriptions]
[Section 1. Social Security: The Old Age, Survivors, and Disability Insurance (OASDI) Programs]
[From the U.S. Government Printing Office, www.gpo.gov]




 
  SECTION 1. SOCIAL SECURITY: THE OLD-AGE, SURVIVORS, AND DISABILITY 
                       INSURANCE (OASDI) PROGRAMS

                                CONTENTS

General
  Brief History of Social Security Programs
  Who is Covered by Social Security?
 Social Security's Financing and the Social Security Trust 
        Funds
  Current Law
  Where Do Social Security Taxes Go and How Are They Used?
  How the Solvency of the Trust Funds is Measured
  Findings in Latest Trustees' Report
  Historical Status of the Trust Funds
Trends Affecting the Financial Status of the Social Security 
        Trust Funds
Social Security Benefits and Eligibility
  Benefit Eligibility
  Benefit Computation
  Taxation of Benefits
  Disability Determination and the Claims Process
Social Security's Treatment in the Federal Budget
  Social Security's Off-Budget Status
  Budget Rules Pertaining to Social Security
House and Senate Budget Procedures to Protect Social Security 
        Balances
Legislative History
  Changes in the 104th Congress
  Changes in the 105th Congress
  Changes in the 106th Congress
Statistical Tables
  Tax Rates and Covered Earnings
  Covered Workers
  Benefit and Recipient Data
  Benefit Adjustments
  Effect of Current Earnings and Taxation of Benefits
  Trust Fund Data
  Disability Program Data
Appendix: Relationship of Taxes to Benefits for Social Security 
        Retirees--How Long It Takes To Recover the Value of 
        Taxes Paid Plus Interest
References

                                 GENERAL

                Brief History of Social Security Programs

    Prior to the 20th century, the majority of people in the 
United States lived and worked on farms and economic security 
was provided by the extended family. However, this arrangement 
changed as America underwent the Industrial Revolution. The 
extended family and the family farm as sources of economic 
security became less common. Then, the Great Depression 
triggered a crisis in the Nation's economic life. It was 
against this backdrop that the Social Security Programs 
emerged.
    Beginning in 1932, the Federal Government first made loans, 
then grants, to States to pay for direct relief and work 
relief. After that, special Federal emergency relief and public 
works programs were started. In 1935, President Franklin D. 
Roosevelt proposed to Congress economic security legislation 
embodying the recommendations of a specially created Committee 
on Economic Security. There followed the passage of the Social 
Security Act, signed into law August 14, 1935.
    This law established two social insurance programs on a 
national scale to help meet the risks of old age and 
unemployment: a Federal system of old-age benefits for retired 
workers who had been employed in industry and commerce, and a 
Federal-State system of unemployment insurance. The choice of 
old age and unemployment as the risks to be covered by social 
insurance was a natural development, since the Depression had 
wiped out much of the lifetime savings of the aged and reduced 
opportunities for gainful employment. The act also provided 
Federal grants-in-aid to the States for the means-tested 
programs of Old-Age Assistance and Aid to the Blind. These 
programs supplemented the incomes of persons who were either 
ineligible for Social Security (Old-Age and Survivors Insurance 
(OASI)) or whose benefits could not provide a basic living. The 
intent of Federal participation was to encourage States to 
adopt such programs. The law established other Federal grants 
to enable States to extend and strengthen maternal and child 
health and welfare services. These latter grants became the Aid 
to Families with Dependent Children Program, which was replaced 
in 1996 with a new block grant program, Temporary Assistance 
for Needy Families. The act also provided Federal grants to 
States for public health services and services of vocational 
rehabilitation. Provisions for these grants were later removed 
from the Social Security Act and incorporated into other 
legislation.
    The Old-Age Insurance Program was not yet in full operation 
when significant changes were adopted. In 1939, Congress made 
the old-age insurance system a family program when it added 
benefits for dependents of retired workers and surviving 
dependents of deceased workers. Benefits also first became 
payable in 1940, instead of 1942 as originally planned. No 
major changes were made again in the program until the 1950s, 
when it was broadened to cover many jobs that previously had 
been excluded--in some cases because experience was needed to 
work out procedures for reporting the earnings and collecting 
the taxes of persons in certain occupational groups. The scope 
of the basic national social insurance system was significantly 
broadened in 1956 through the addition of disability insurance 
(DI). Benefits were provided for severely disabled workers aged 
50 or older and for adult disabled children of deceased or 
retired workers. In 1958, the Social Security Act was further 
amended to provide benefits for dependents of disabled workers 
similar to those already provided for dependents of retired 
workers. In 1960, the age 50 requirement for disabled worker 
benefits was removed. The 1967 amendments provided disability 
benefits for widows and widowers aged 50 or older.
    The 1972 amendments provided for automatic cost-of-living 
increases in benefits tied to increases in the Consumer Price 
Index (CPI), and created the delayed retirement credit, which 
increased benefits for workers who retire after the full 
retirement age (FRA) (currently age 65).
    The 1977 amendments changed the method of benefit 
computation to ensure stable replacement rates over time. 
Earnings included in the computation were to be indexed to 
account for changes in the economy from the time they were 
earned.
    The 1983 amendments made coverage compulsory for Federal 
civilian employees and for employees of nonprofit 
organizations. State and local governments were prohibited from 
opting out of the system once they had joined. The amendments 
also provided for gradual increases in the age of eligibility 
for full retirement benefits from 65 to 67, beginning with 
persons who attain age 62 in the year 2000. For certain higher 
income beneficiaries, benefits became subject to income tax. 
(Amendments in 1993 increased the amount of benefits subject to 
taxation.)
    The 1996 amendments relaxed earnings limits for seniors who 
have reached the FRA, currently age 65.
    The 1999 amendments reformed certain provisions under the 
DI Program, specifically to create stronger incentives and 
better supports for individuals to work.
    An amendment passed in April 2000, Public Law 106-182, 
eliminated the earnings limit for seniors who have reached the 
FRA, effective for the year 2000.
Concept of social insurance
    When the OASDI Programs were created, ``insurance'' was 
included in their titles to show that their purpose is to 
replace income lost to a family through the retirement, death, 
or disability of a worker who has earned protection against 
these risks. This protection was to be obtained by working in 
jobs that are covered under Social Security and therefore 
subject to payroll taxes that finance Social Security benefits. 
Once workers worked long enough in covered jobs to be insured, 
they and their families would have eligibility for their 
benefits as a matter of earned right. The level of benefits is 
based on the amount the worker earned in covered jobs, and is 
paid without a test of economic need. However, the social ends 
the programs serve diverge somewhat from the insurance analogy. 
The programs are national, and coverage is generally compulsory 
and nearly universal. They are designed to address such social 
purposes as alleviating poverty, providing added protection of 
families versus single workers, and providing a larger degree 
of earnings replacement for low-paid versus high-paid workers. 
The OASDI Programs were therefore described as ``social'' 
insurance.

                   Who is Covered by Social Security?

    In 1937, approximately 33 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 self-employed individuals, State and local 
government employees (on a voluntary basis at the option of the 
State), regularly employed farm and domestic workers, members 
of the armed services, and members of the clergy and religious 
orders (on a voluntary basis). In 1999, of a total work force 
of approximately 158.5 million workers, about 151.7 million 
workers and an estimated 96 percent of all jobs in the United 
States were covered under Social Security (table 1-6). In 1999, 
an estimated 85 percent of all earnings from jobs covered by 
Social Security were taxable (tables 1-3 and 1-6).
    While coverage is compulsory for most types of employment, 
approximately 6.8 million workers did not have any coverage 
under Social Security in 1999. The majority of these noncovered 
workers are in State and local governments or the Federal 
Government (table 1-8). Beginning January 1, 1983, Federal 
employees were covered under the Medicare (HI) portion of the 
Social Security tax, and all Federal employees hired after 1983 
are covered under the OASDI portion as well. In 1997, 71 
percent of State and local government workers (16.1 million out 
of 22.6 million) were covered by Social Security. Beginning 
January 1, 1984, all employees of nonprofit organizations 
became covered, and as of April 1983 terminations of Social 
Security coverage by State government entities were no longer 
allowed. State and local employees hired after March 31, 1986 
are mandatorily covered under the Medicare Program and must pay 
hospital insurance (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 1990, Public Law 101-508).

     SOCIAL SECURITY'S FINANCING AND THE SOCIAL SECURITY TRUST FUNDS

                              Current Law

    The OASDI Program and the Medicare HI Program are primarily 
financed through the collection of payroll taxes under the 
Federal Insurance Contributions Act (FICA) and the Self-
Employment Contributions Act (SECA). These taxes are levied on 
the wages and net self-employment income of workers covered by 
Social Security and Medicare.
    The FICA tax is levied at a rate of 15.3 percent. The tax 
is shared by employees and their employers, with each paying 
half of the total amount.\1\ Employers may deduct their share 
of the FICA tax for income tax purposes, but the employee's 
share is not tax deductible. Of the total 15.3 percent FICA 
tax, 12.4 percent is used to finance the OASDI Program, and 2.9 
percent is used to finance the Medicare HI Program. The OASDI 
portion of the tax is levied on earnings up to $76,200 in 2000. 
This ``taxable wage base'' increases annually with average wage 
growth in the economy. The HI portion of the tax is levied on 
all earnings. When the FICA tax was first levied in 1937, the 
tax rate was 2 percent on earnings up to $3,000.
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    \1\ Although the FICA tax is shared between employers and 
employees, most economists agree that the total burden of the tax is 
borne by employees in the form of lower wages or fringe benefits.
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    The SECA tax is also levied at a rate of 15.3 percent, with 
the same 12.4 percent and 2.9 percent split between OASDI and 
HI as the FICA tax. Prior to 1984, the SECA tax rate paid by 
self-employed workers was lower than the total FICA tax rate 
paid by employees and employers. Effective for 1984 through 
1989, self-employed workers paid the same total tax as 
employees and employers, but received a partial credit against 
that tax liability. 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:
  --The base of the SECA tax is adjusted downward to reflect 
        the fact that employees do not pay FICA taxes on the 
        employer's portion of the FICA tax. The adjusted base 
        is equivalent to net earnings from self-employment (up 
        to the taxable wage base) less 7.65 percent.
  --In addition, self-employed workers are allowed to deduct 
        half of their SECA tax liability for income tax 
        purposes to reflect the fact that employees do not pay 
        income tax on the employer's portion of the FICA tax.
    Tables 1-1 and 1-2 show FICA and SECA tax rates and maximum 
taxable earnings, both past and future.
    The following workers are exempt from FICA and SECA taxes:
 1. State and local government workers participating in 
        alternative retirement systems (HI tax is mandatory for 
        State and local government workers hired since April 1, 
        1986);
 2. Election workers earning $1,100 or less a year;
 3. Ministers who choose not to be covered, and certain 
        religious sects;
 4. Federal workers hired before 1984 (the HI portion is 
        mandatory for all Federal workers) \2\;
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    \2\ Elected office holders, political appointees, and judges are 
mandatorily covered by both OASDI and HI regardless of when their 
service began.
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 5. College students working at their academic institutions;
 6. Household workers earning less than $1,200 in 2000, or 
        those under age 18 for whom household work is not their 
        principal occupation; and
 7. Self-employed workers with annual net earnings below $400.
    In addition to payroll taxes, the Social Security system is 
credited with income from the taxation of Social Security 
benefits and interest on trust fund reserves. In combination, 
these sources of income are used to pay Social Security 
benefits and administrative expenses. Administrative expenses 
are subject to an annual limitation set by appropriations acts.

        Where Do Social Security Taxes Go and How Are They Used?

Summary
    The costs of the Social Security Program, both its benefits 
and administrative expenses, are financed primarily by the FICA 
and SECA taxes. These taxes flow each day into thousands of 
depository accounts maintained by the government with financial 
institutions across the country. Along with many other forms of 
revenues, these Social Security taxes become part of the 
government's operating cash pool, or what is more commonly 
referred to as the U.S. Treasury. In effect, once these taxes 
are received, they become indistinguishable from other moneys 
the government takes in. They are accounted for separately 
through the issuance of Federal securities to the Social 
Security Trust Funds--which basically involves a series of 
bookkeeping entries by the Treasury Department--but the trust 
funds themselves do not hold money.\3\ They are simply 
accounts. Similarly, benefits are not paid from the trust 
funds, but from the Treasury. As the checks are paid, 
securities of an equivalent value are removed from the trust 
funds.
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    \3\ Public Law 103-296 requires the Secretary of the Treasury to 
issue ``physical documents'' to the trust funds. Under prior practice, 
trust fund securities were only recorded electronically.
---------------------------------------------------------------------------
    In a sense, the mechanics of a Federal trust fund are 
similar to those of a bank account. The bank takes in a 
depositor's money, credits the amount to the depositor's 
account, and then loans it out. As long as the account shows a 
balance, the depositor can write checks that the bank must 
honor. When more Social Security taxes are received than spent, 
the balance of securities posted to the Social Security Trust 
Funds rises. The surplus taxes themselves are then used for any 
of the many functions of government.
Does this mean that the government borrows Social Security taxes?
    Yes. When more Social Security taxes are received than 
spent, the money does not sit idle in the Treasury, but is used 
to finance other operations of the government. The surplus is 
then reflected in a higher balance of Federal securities being 
posted to the trust funds. These securities, like those sold to 
the public, are legal obligations of the government. Simply 
put, the balances of the Social Security Trust Funds represent 
what the government has borrowed from the Social Security 
system (plus interest). Like those of a bank account, the 
balances represent a promise that if needed to pay Social 
Security benefits, the government will obtain resources equal 
to the value of the securities. The Social Security Trustees 
projected in March 2000 that the balances of the trust funds 
would reach nearly $1.1 trillion by the end of calendar year 
2000 (table 1-28).
Are the Federal securities issued to the trust funds the same sort that 
        individuals and other entities buy?
    Yes. While generally the securities issued to the trust 
funds are not marketable, they do earn interest at market 
rates, have specific maturity dates, and by law represent 
obligations of the U.S. Government. What often confuses people 
is that they see these securities as assets for the government. 
When an individual buys a government bond, she has established 
a financial claim against the government. When the government 
issues a security to one of its own accounts, it hasn't 
purchased anything or established a claim against some other 
person or entity. It is simply creating an IOU from one of its 
accounts to another. Hence, the building up of Federal 
securities in Federal trust funds--like those of Social 
Security--is not a means in and of itself for the government to 
accumulate assets. It certainly establishes claims against the 
government for the Social Security system, but the system is 
part of the government. Those claims are not resources that the 
government has at its disposal to pay future Social Security 
benefits.
What is the purpose of the trust funds?
    Generally speaking, the Federal securities issued to any 
Federal trust fund represent ``permission to spend.'' As long 
as a trust fund has a balance of securities posted to it, the 
Treasury Department has legal authority to keep issuing checks 
for the program. In Social Security's case, its taxes flow into 
the Treasury, and its trust funds are credited with Federal 
securities. The government then uses the money to meet whatever 
expenses are pending. The fact that this money is not set aside 
for Social Security purposes does not dismiss the government's 
responsibility to honor the trust funds' account balances. As 
long as they have balances, the Treasury Department must 
continue to issue Social Security checks. The key point is that 
the trust funds themselves do not hold resources to pay 
benefits--rather, they provide authority for the Treasury 
Department to use whatever money it has on hand to pay them.
    The significance of having trust funds for Social Security 
is that they represent a long-term commitment of the government 
to the program. While the funds do not hold ``resources'' that 
the government can call on to pay Social Security benefits, the 
balances of Federal securities posted to them represent and 
have served as financial claims against the government--claims 
on which the Treasury has never defaulted, nor used directly as 
a basis to finance anything but Social Security expenditures.
Is this trust fund arrangement different from that used by other 
        programs of the government?
    The Treasury Department maintains accounts for all 
government programs. The difference is that many other 
programs, particularly those not accounted for through trust 
funds, get their operating balances--i.e., their permission to 
spend--through the annual appropriations process. Congress must 
pass an appropriations act each year giving the Treasury 
Department permission to expend funds for them. In technical 
jargon, this permission to spend is referred to as ``budget 
authority.'' For many programs accounted for through trust 
funds, annual appropriations are not needed. As long as their 
trust fund accounts show a balance of Federal securities, the 
Treasury Department has ``budget authority'' to expend funds 
for them.
    Another difference between trust fund programs and other 
programs is that a trust fund account earns interest, since it 
is comprised of Federal securities. In the case of the Social 
Security Trust Funds, the interest is equal to the prevailing 
average rate on outstanding Federal securities with a maturity 
of 4 years or longer. This interest is credited to the trust 
funds twice a year (on June 30 and December 31) by issuing more 
securities to them. So in effect, a trust fund account can 
automatically build future ``budget authority'' for the 
program, but other accounts, dependent on annual 
appropriations, cannot.
Does taking Social Security out of the Federal budget change where the 
        surplus taxes go?
    Legislation enacted in 1990 (the Budget Enforcement Act, 
included in Public Law 101-508) removed Social Security taxes 
and benefits from calculations of the budget. In large part 
this was done to prevent Social Security from masking the size 
of Federal budget deficits and to protect it from benefit cuts 
motivated by budgetary concerns. It was based on the 
supposition that Congress would act differently in trying to 
reduce budget deficits if Social Security surpluses were not 
counted in reaching the budget totals; i.e., that Congress 
would ignore Social Security in devising the Nation's overall 
fiscal policies. It was not done to change where Social 
Security taxes go. The Federal budget is not a cash management 
account. It is simply a summary of what policymakers want the 
government's financial flows to be during any given time 
period. Whether this summary is presented in a unified or 
fragmented form will not in and of itself change how much money 
the government receives and spends, and it will not alter where 
Federal tax receipts of any sort go. Social Security taxes will 
go into the Treasury regardless of whether the program is 
counted in the budget. Social Security taxes will go elsewhere 
only if Congress decides they will go elsewhere.
Are surplus Social Security taxes giving the government more money to 
        spend?
    The fact that surplus Social Security taxes are used by the 
government to meet other financial commitments does not 
necessarily mean that the government has more money to spend 
than it otherwise would. Decisions about Social Security and 
the finances of the rest of the government have not been made 
in isolation of one another and those decisions have had 
overlapping influences. Increases in Social Security taxes may 
have made it more difficult for Congress to raise other forms 
of taxes. For instance, Social Security taxes were raised in 
1977 to shore up the program's financing, but the following 
year Congress enacted reductions in income taxes to offset the 
impact of these hikes. Similarly, the earned income credit, 
which reduces income taxes or permits a refundable credit to be 
paid to low-income workers, is intended in part to offset the 
Social Security tax bite. Hence, other taxes might have taken 
the place of the surplus Social Security taxes if Social 
Security tax rates were lower than they are. Thus, whether 
these surplus taxes are allowing the government to spend more 
is largely conjecture.
Are surplus Social Security taxes allowing the government to reduce its 
        publicly-held debt?
    Today, the government has outstanding debts to the public 
totalling approximately $3.5 trillion, an amount which has been 
declining in recent years because of unified budget surpluses. 
When the Treasury Department takes in more than it spends, the 
excess receipts are used automatically to retire outstanding 
Federal debt. In short, the Treasury Department reduces the 
outstanding amount of the government's past borrowings.
    No single activity of the government determines the amount 
of a budget surplus. To say surplus Social Security taxes are 
reducing the amount of the government's publicly-held debt 
assumes that all other past spending and taxation decisions 
have been made without regard for Social Security's income and 
outgo, and vice versa. If increases in Social Security taxes in 
the past caused other taxes to be reduced or kept from rising, 
they may have added little to the government's total revenues. 
By the same token, when Social Security's taxes are less than 
its expenditures--as they were for all but 5 fiscal years from 
1958 to 1984--it is not clear that this shortfall causes the 
government to borrow more than it would otherwise. Government 
borrowing from the public is not clearly linked to any 
particular aspect of what the government does. Thus, whether 
surplus Social Security taxes are now allowing the government 
to reduce its past debt is largely conjecture.
Isn't there some way to actually save the Social Security surpluses?
    Perceiving that surplus Social Security taxes simply give 
the government more money to spend, people sometimes ask why 
they can't be invested in stocks or bonds. They believe that 
this would really save the money for the future.
    Actually, the surplus Social Security taxes being collected 
today are not the means through which much of the future cost 
of the system will be met. Most of today's taxes are used to 
cover payments to today's retirees (in 2000 the system's taxes 
are estimated to be $501 billion; its expenditures, $410 
billion). At their peak in 2024, the balances of the Social 
Security Trust Funds are expected to equal only 3 years' worth 
of payments. The promise of future benefits rests primarily on 
the government's ability to levy taxes in the future, as is the 
case today, not on the balances of the trust funds.
    The more immediate concern about investing the surplus 
taxes elsewhere is that doing so would reduce the government's 
revenues. How would the government make up this loss? What 
other taxes would take their place, what spending would be cut, 
or would the government simply keep its outstanding debt higher 
than it otherwise would be?
    In a sense, the concept of investing surplus Social 
Security taxes in private investments is only half an idea. If 
the government kept its publicly-held debt higher than it 
otherwise would be to make up the loss, it simply would be 
putting money into the markets with one hand and taking it back 
with another. On balance, it would not have added any new money 
to the Nation's pool of investment resources. If, on the other 
hand, the government were to reduce its spending or raise other 
taxes to make up for the loss, it would not have to keep its 
outstanding debt as high. This presumably would result in a net 
increase in savings in the economy. The bottom line is that it 
is not simply how surplus Social Security taxes are invested 
that determines whether real savings are created. Rather, it is 
the steps that policymakers take to reduce the government's 
overall draw on financial markets that really matter.

            How the Solvency of the Trust Funds Is Measured

    Social Security's financial condition is assessed annually 
by its Board of Trustees, comprised of the Secretaries of 
Treasury (who is the Managing Trustee), Labor, and Health and 
Human Services, the Commissioner of Social Security, and two 
representatives of the public. The Social Security Act requires 
that the Board of Trustees, among other duties, report to the 
Congress annually on the financial status of the Social 
Security Trust Funds.
    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, as a percentage of the 
annual expenditures, and with reference to 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 (ratio of 
the present value of tax income to the present value of taxable 
payroll over a 75-year period) and the total summarized cost 
rate (ratio of the present value of expenditures to the present 
value of taxable payroll over a 75-year period).
    Because the Social Security Program has been designed as a 
contributory system in which those who pay the taxes supporting 
the system 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 ensuring that the income of the 
program will be sufficient to cover its outgo. Under current 
procedures, the long-range actuarial analysis of the program 
covers a 75-year period, which would generally be long enough 
to cover the anticipated retirement years of those currently in 
the work force.
    The long-range status of the trust funds is often expressed 
in terms of percent of taxable payroll rather than in dollar 
amounts. This permits a direct comparison between the tax rate 
in the law and the cost of the program. For example, if the 
program is projected to have a deficit of 2 percent of taxable 
payroll, the OASDI tax rates now in the law would have to be 
increased by 1 percentage point each for employee and employer 
(a total of 2 percent) in order to pay for the benefits due. 
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 2 percent of taxable payroll, 
and expenditures are projected to be 10 percent of taxable 
payroll, then, under the given set of assumptions, 20 percent 
(2 divided by 10) of expenditures could not be met with that 
tax schedule. In 2000, the total taxable payroll is estimated 
to be $3,969 billion. Thus, in 2000 terms, 2 percent of payroll 
represented about $79 billion.
    Long-range projections are affected by three basic types of 
factors: (1) demographic factors, such as rates of fertility, 
life expectancy, and labor force participation, which determine 
the number of workers 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 eligibility rules, benefit levels, 
and the total number of covered workers. The actuaries at the 
Social Security Administration (SSA) employ three sets of 
alternative economic and demographic assumptions. Alternative I 
is based on optimistic assumptions; alternative II is based on 
intermediate assumptions; and alternative III is based on 
pessimistic assumptions. Alternative II is considered the 
``best guess'' of long-term solvency and is the most frequently 
cited. It is clear that underlying factors cannot be predicted 
with any certainty as far into the future as 75 years. As a 
result, long-range projections should not be taken as absolute 
predictions of deficits or surpluses in the funds.
    Beginning with their 1988 report, the 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 least 100 percent of annual expenditures, a condition that 
is consistent with the 10-year segment of the long-range test 
of close actuarial balance. The reserve balance also must be 
expected to reach that level within the first 5 years and then 
remain there. Under this revised limit, if income were at least 
95 percent of the cost level for the 75-year period as a whole, 
the trust funds still could be deemed to be out of close 
actuarial balance if financial adequacy requirements are not 
met for shorter periods of valuation.
    Under these measures, the Trustees concluded in their 2000 
report, as they did in their nine previous reports, that OASDI 
is not in close actuarial balance over the long run. Overall, 
for the period 2000-74, the difference between the summarized 
income and cost rates for the OASDI Program is a deficit of 
1.89 percent of taxable payroll based on the intermediate 
assumptions (table 1-35). Therefore, 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.
    Income from OASDI payroll taxes represents 12.4 percent of 
taxable payroll. Since the tax rate is not scheduled to change 
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 12.65 
percent. This rate is estimated to increase gradually to 13.34 
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 fixed dollar amounts, and, as time goes by, 
the incomes of more people will exceed them due to the expected 
rise in wages and prices.
    OASDI expenditures for benefit payments and administrative 
expenses currently represent about 10.34 percent of taxable 
payroll. This cost rate is estimated to remain below the 
corresponding income rate for the next 15 years, based on the 
intermediate assumptions. However, with the retirement of the 
76 million members of the baby boom generation starting in 
about 2010, OASDI costs will increase rapidly relative to the 
taxable earnings of workers. By 2075 the OASDI cost rate is 
estimated to reach 19.53 percent under the intermediate 
assumptions, resulting in an annual deficit of 6.18 percent 
(table 1-34). Table 1-32 shows estimated trust fund balances as 
a percentage of annual expenditures and table 1-29 shows 
estimated trust fund operations for selected calendar years 
2000-35.

                  Findings in Latest Trustees' Report

    The Board of Trustees' 2000 Report was released on March 
30, 2000. The Congressional Budget Office (CBO) also makes 
Social Security projections, the latest of which were released 
in March 2000. The Trustees' projections cover a period of 75 
years, whereas CBO's projections are only for the next 10 
years. Both the Trustees and CBO show that through the next 10 
years 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. Under the Trustees' 
intermediate (or ``best guess'') set of assumptions, the annual 
excess of income over outlays will reach $251 billion by fiscal 
year 2009, and the reserve balance of the trust funds will 
represent 4 years' worth of outgo. Under CBO's most recent 
assumptions, the annual excess of income over outlays will 
reach $280 billion by fiscal year 2009. Table 1-31 shows 
historical and projected operations of the combined OASI and DI 
Trust Funds based on CBO estimates released in March 2000.
    For the long run, the projections are troubling. For a 
number of years, the Trustees' Reports have projected long-
range financing problems for the system. Although their latest 
report continues to show a near-term buildup of trust fund 
reserves, their intermediate forecast for the next 75 years 
shows that, on average, Social Security expenditures will be 14 
percent more than its income. The trust fund buildup would peak 
at $6 trillion in nominal dollars in 2024, and then be drawn 
down as the post-World War II baby boomers retire. The Trustees 
estimate that by 2023 the DI Trust Fund would be exhausted, and 
by 2039 the OASI Trust Fund would be exhausted as shown in 
table 1-33. On a combined basis the two trust funds would be 
exhausted in 2037. (The term ``exhausted'' is commonly used to 
indicate that trust fund reserves plus payroll taxes and other 
revenues would be insufficient to pay all benefits when they 
are due.)

                  Historical Status of the Trust Funds

    For more than three decades after Social Security taxes 
were first levied in 1937, the system's income routinely 
exceeded its outgo, and its trust funds grew. However, the 
situation changed in the early 1970s. Enactment of major 
benefit increases in the 1968-72 period was followed by higher 
inflation and leaner economic conditions than had been 
expected. Prices rose faster than wages, the post-World War II 
baby boom ended precipitously (leading to a large cut in 
projected birth rates), and Congress adopted faulty benefit 
rules in 1972 that overcompensated new Social Security retirees 
for inflation. These factors combined to sour the outlook for 
Social Security and it remained poor through the mid-1980s.
     Before 1971, the balances of the trust funds had never 
fallen below 1 year's worth of outgo. Beginning in 1973, the 
program's income lagged its outgo, and the trust funds declined 
rapidly. Congress had to step in five times during the late 
1970s and early 1980s to keep them from being exhausted. 
Although major changes enacted in 1977 greatly reduced the 
program's long-run deficit, they did not eliminate it, and the 
short-run changes made by the legislation were not large enough 
to enable the program to withstand back-to-back recessions in 
1980 and 1982. A disability bill in 1980 and temporary fixes in 
1980 and 1981 were followed by another major reform package in 
1983.
    The 1983 changes, along with better economic conditions, 
helped alter the short-range picture. Income began to exceed 
outgo in 1983 and the trust funds grew substantially. 
Cumulatively, the changes were projected to yield $96 billion 
in surplus income by 1990, and to raise the trust funds' 
balances to $123 billion. The funds actually were credited with 
$200 billion in surplus income by 1990, and their balances 
reached $225 billion by the end of that year. By the end of 
fiscal year 1999, they reached $855 billion. These balances 
would be equivalent to 211 percent of expenditures in 2000 (or 
more than 2 years' worth of benefits).
    The longer range picture for Social Security has been 
worsening gradually since 1983. By raising Social Security's 
age for receiving full benefits from 65 to 67, subjecting 
benefits to income taxes, and making new Federal and nonprofit 
workers join the system, Congress had attempted in 1983 to 
eliminate the long-run problem. In fact, projections made then 
showed that Congress had stemmed the red ink, at least on 
average, for the following 75 years. However, the average 
condition of the two trust funds did not represent their 
condition over the entire period. The funds were not shown to 
be insolvent at any point, but their expenditures were expected 
to exceed their income by 2025 and to remain higher thereafter. 
Simply stated, 40 years of surpluses were to be followed by an 
indefinite period of deficits. With each passing year since 
1983, the Trustees' 75-year averaging period has picked up 1 
deficit year at the back end and dropped a surplus year from 
the front end. This, by itself, would cause the average 
condition to worsen. However, in recent reports assumptions 
about birth rates, economic growth, and wages have been 
lowered, causing further deterioration in the outlook. A small 
long-range deficit appeared in the 1984 report and the gap grew 
larger (and the point of insolvency came closer) in subsequent 
reports. Projections reported over the last 3 years, however, 
have shown small improvements in part due to favorable near-
term economic conditions. Despite the recent improvements in 
the size of the long-range deficit, the system continues to 
face long-range financing problems.

  TRENDS AFFECTING THE FINANCIAL STATUS OF THE SOCIAL SECURITY TRUST 
                                 FUNDS

     The 2000 report shows an average 75-year deficit equal to 
14 percent of the program's income, and projects that the trust 
funds would be exhausted in 2037 (3 years later than last 
year's projection). As a percent of the Nation's payrolls, 
their income would average 13.51 percent, their outgo 15.40 
percent, and the deficit would be 1.89 percent (compared to 
2.07 and 2.19 percent in the 1999 and 1998 reports 
respectively). This average deficit is slightly lower than the 
deficit tackled by Congress in 1983.
     These long-range projections assume that the gross 
domestic product (GDP) (adjusted for inflation) will rise 
annually at rates ranging from 3.5 percent in 2000 to 1.5 
percent in 2075, wages would rise at an ultimate rate of 4.3 
percent per year, the cost of living would go up at a rate of 
3.3 percent, unemployment would average 5.5 percent, and that 
Social Security benefits would fall in relative terms as the 
age at which full benefits are payable rises from 65 to 67 over 
the 2000-22 period. The higher age for full benefits will mean 
that people retiring at age 67 or younger will get less than 
under the previous rules. These assumptions by themselves would 
seem to bode well for the system; however, looming demographic 
shifts are projected to overwhelm them. During the next two 
decades, the baby boomers will be in their prime productive 
years, and the baby-trough generation of the 1930s will be in 
retirement. Together these factors will lead to a stable ratio 
of workers to recipients. However, as the baby boomers begin 
retiring around 2010, this ratio will erode quickly. By 2025, 
most of the surviving baby boomers will be 65 and older. The 
number of people 65 and older will have risen by 75 percent, 
growing from 35 million today to 62 million then. The number of 
workers will have grown from 154 million to 174 million, or by 
only 13 percent. Consequently, the ratio of workers to 
recipients will have fallen from 3.4 to 1 today to 2.3 to 1 in 
2025 (and, by 2035, 2.1 to 1).
     Under this forecast, the trust funds (on a combined basis) 
would be credited with surplus income through 2024 bringing 
their balances to a level of $6 trillion. They would decline in 
2025 and thereafter, and would be depleted by 2037 (chart 1-1). 
However, tax receipts begin lagging outgo much sooner, in 2015. 
At that point, the program would have to rely on the interest 
credited to its trust funds for part of its income, which would 
have to be drawn from general revenues. In 2025, the reserve 
balance of the trust funds would begin to be drawn down. By 
2025, $1 out of every $5 of the program's outgo would be 
dependent upon general revenues for interest payments and the 
redemption of the government bonds in the trust funds. The 
government has never defaulted on the securities it posts to 
its trust funds, but the magnitude of these potential claims 
has prompted many observers to ask where the government will 
find the money to cover them. Basically, in the absence of 
surpluses for the rest of the government's operations, 
policymakers would have three options: raise other taxes, 
curtail other spending, or borrow money from the financial 
markets. There is nothing in the law that will dictate or 
determine what they actually will (or can) do then.
     Economists argue that if the surplus taxes projected for 
the next 15 years were to cause the government to reduce the 
Federal debt held by the public, more money would be available 
in the financial


      CHART 1-1. SOCIAL SECURITY TRUST FUNDS' END OF YEAR BALANCES


    Source: Board of Trustees (2000; intermediate assumptions).

markets for investment, which could lead to greater economic 
growth. If this occurred, extracting resources from the economy 
in the future to honor Social Security claims would not 
necessarily be so burdensome. Said another way, if one accepts 
the premise that reductions in the Federal debt held by the 
public today will increase the resources available for 
investment, then surplus Social Security taxes today could help 
build a higher economic base from which to draw the needed 
resources in the future.
     However, running Social Security surpluses will not by 
itself reduce government borrowing from the markets. Reductions 
in the debt occur when the government runs an overall or 
unified budget surplus, not when one of its programs generates 
surplus taxes. Even if economic growth were enhanced in the 
coming decades by reductions in government debt, Social 
Security's problems would not necessarily be resolved. Further, 
as their numbers swell, the baby boomers and subsequent 
retirees will raise financial demands on other public programs 
for the elderly such as Medicare.
    These projections are not based on pessimistic economic 
assumptions. A modest but sustained rise in GDP and moderate 
inflation and unemployment are assumed as shown in table 1-39. 
In large part, the projections hinge on demographic factors 
that are in place today--the post-World War II baby boom, the 
subsequent birth dearth, and the general aging of society. 
Table 1-38 shows how life expectancies have increased since 
Social Security benefits were first paid in 1940, and what they 
are projected to be in the future, as well as fertility and 
death rates. These projections suggest that to restore long-run 
solvency, income needs to be raised or expenditures cut.

                SOCIAL SECURITY BENEFITS AND ELIGIBILITY

                          Benefit Eligibility

    Benefits can be paid to workers and their dependents or 
survivors only if the worker has worked long enough in covered 
employment to be insured for these benefits. Insured status is 
measured in terms of ``credits,'' previously called quarters of 
coverage. In determining whether a person has the required 
credits for insured status, Social Security uses the lifetime 
record of the earnings reported under the worker's Social 
Security number (SSN) and counts the number of quarters which 
are covered credits.
    Before 1978, one credit was earned for each calendar 
quarter in which a worker was paid $50 or more in wages for 
covered employment, or received $100 in self-employment income. 
A worker could also receive a credit for each multiple of $100 
in annual agricultural earnings, up to a maximum of four 
credits per year. Since the beginning of 1978, the crediting of 
quarters of coverage has been on an annual rather than a 
quarterly basis up to a maximum of four credits per year. In 
1978, a worker earned one credit (up to a maximum of four) for 
each $250 of annual earnings reported from covered employment 
or self-employment. The amount of annual earnings needed for a 
credit is increased each year in proportion to increases in 
average wages in the economy. In 2000 the amount of earnings 
needed for a credit is $780. Table 1-5 shows amounts needed for 
selected calendar years, 1980-2009.
    For the purpose of the Old-Age and Survivors Insurance 
(OASI) Program, there are two types of insured status: ``fully 
insured'' and ``currently insured.'' Workers are fully insured 
for benefits for themselves and for their eligible dependents 
if they have earned one credit for each year elapsing after the 
year they reached age 21 up to the year in which they reach age 
62, become disabled, or die, whichever occurs earlier. Fully-
insured status is required for eligibility for all types of 
benefits except certain survivor benefits. No matter how young, 
a worker must have at least six credits to be fully insured, 
with the minimum number increasing with age. A worker with 40 
credits is fully insured for life.
    Survivors of a worker who was not fully insured may still 
be eligible for benefits if the worker was currently insured. 
Workers are currently insured if they have 6 credits during the 
13 calendar quarters ending with the quarter in which they 
died.
    Workers are insured for disability if they are fully 
insured and have a total of at least 20 credits during the 40-
quarter period ending with the quarter in which they became 
disabled. Workers who are disabled before age 31 are insured 
for disability if they have credits equal to half the calendar 
quarters which have elapsed since the worker reached age 21, 
ending in the quarter in which they became disabled. However, a 
minimum of six credits is required.
    The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 provides that persons applying for 
Old-Age, Survivors, and Disability Insurance (OASDI) monthly 
benefits in the United States must provide evidence that they 
are U.S. citizens, nationals, or aliens who are lawfully 
present in the United States in order to get Social Security 
benefits. To be considered a lawfully present alien in the 
United States, the beneficiary must be: lawfully admitted for 
permanent residence; admitted as a refugee under section 207 of 
the Immigration and Nationality Act (INA); granted asylum under 
section 208 of the INA; granted conditional entry as a refugee 
under section 203(a)(7) of the INA prior to April 1, 1980; an 
alien who has submitted an application for political asylum 
under section 208 of the INA; or an alien who belongs to any 
class permitted to reside in the United States for humanitarian 
or other reasons.
Retirement benefits
    Workers must be at least age 62 to be eligible for 
retirement benefits. There is no minimum age requirement for 
disability benefits, but disabled workers who attain the full 
retirement age (FRA) (see later section on ``Adjustments 
related to age at retirement'') automatically receive full 
retirement benefits, rather than disability benefits. 
Disability benefits are computed as if the worker reached FRA 
on the day he became totally disabled.
Disability benefits
    Generally, disability is defined as the inability to engage 
in ``substantial gainful activity'' (SGA) by reason of a 
physical or mental impairment. The impairment must be medically 
determinable and expected to last for not less than 12 months, 
or to result in death. Applicants may be determined to be 
disabled only if, due to such an impairment, they are unable to 
engage in any kind of substantial gainful work, considering 
their age, education, and work experience. The work need not 
exist in the immediate area in which the applicant lives, nor 
must a specific job vacancy exist for the individual. Moreover, 
no showing is required that the worker would be hired for the 
job if she applied.
    The Commissioner of Social Security (hereafter 
``Commissioner'') has specific regulatory authority to 
prescribe the criteria for determining at what level earnings 
from employment demonstrate an individual's ability to engage 
in SGA. Effective July 1, 1999, the SGA earnings level for 
nonblind beneficiaries was raised to $700 a month (net of 
impairment-related work expenses), based on regulations 
published by the Commissioner. The SGA earnings level for blind 
beneficiaries is $1,170 a month in 2000, indexed annually to 
average wage growth. Table 1-24 shows SGA amounts applicable 
since 1968.
    An initial 5-month waiting period is required before 
disability insurance (DI) benefits are paid. Benefits are 
payable beginning with the sixth full month of disability. 
However, benefits may be paid for the first full month of 
disability to a worker who becomes disabled within 60 months 
after termination of DI benefits from an earlier period of 
disability (for a disabled widow or widower the period is 84 
months).
Benefits for the worker's family
    Dependents' benefits are payable in addition to benefits 
payable to the worker. What follows is a review of the various 
types of dependents and their benefits.
    Spouse's benefit.--A monthly benefit is payable to a spouse 
of an entitled retired or disabled worker under one of the 
following conditions: (1) a currently-married spouse is at 
least 62 or is caring for one or more of the worker's entitled 
children who are disabled or have not reached age 16; or (2) a 
divorced spouse is at least 62, is not married, and the 
marriage had lasted at least 10 years before the divorce became 
final. A divorced spouse may be entitled independently of the 
worker's retirement if both the worker and divorced spouse are 
age 62, and if the divorce has been final for at least 2 years.
    Widow(er)'s benefit.--A monthly survivor benefit is payable 
to a widow(er) or divorced spouse of a worker who was fully 
insured at the time of death. The widow(er) or divorced spouse 
must be unmarried (unless the remarriage occurred after the 
widow(er) first became eligible for benefits as a widow(er)); 
and must be either (1) age 60 or older or (2) age 50-59 and 
disabled throughout a waiting period of 5 consecutive calendar 
months that began no later than 7 years after the month the 
worker died or after the end of the individual's entitlement to 
benefits as a widowed mother or father.
    Child's benefit.--A monthly benefit is payable to a 
dependent, unmarried biological or adopted child, stepchild, or 
grandchild, of a retired, disabled, or deceased worker who was 
fully or currently insured at death. (To be entitled as a 
grandchild, the child's parents must be deceased or disabled.) 
Dependency is deemed for the insured's biological children and 
most adopted children. The child must be either: (1) under age 
18; (2) a full-time elementary or secondary student under age 
19; or (3) a disabled person age 18 or older whose disability 
began before age 22.
    Mother's/father's benefit.--A monthly survivor benefit is 
payable to a mother (father) or surviving divorced mother 
(father) if: (1) the deceased worker on whose account the 
benefit is payable was fully or currently insured at time of 
death; and (2) the mother (father) or surviving divorced mother 
(father) is not married and has one or more entitled children 
of the worker in his care. In the case of a surviving divorced 
mother or father, the child must also be the applicant's 
natural or legally adopted child. These payments continue as 
long as the youngest child being cared for is under age 16 or 
disabled (see ``Child's benefit'' above).
    Parent's benefit.--A monthly survivor benefit is payable to 
a parent of a deceased fully-insured worker who is age 62 or 
older, and has not married since the worker's death. The parent 
must have been receiving at least one-half of her support from 
the worker at the time of the worker's death or, if the worker 
had a period of disability which continued until death, at the 
beginning of the period of disability. Proof of support must be 
filed within 2 years after the worker's death or the month in 
which the worker filed for disability.
    Lump-sum death benefit.--A one-time lump-sum benefit of 
$255 is payable upon the death of a fully or currently-insured 
worker to the surviving spouse who was living with the deceased 
worker or was eligible to receive monthly cash survivor 
benefits upon the worker's death. If there is no eligible 
spouse, the lump-sum death benefit is payable to any child of 
the deceased worker who is eligible to receive monthly cash 
benefits as a surviving child. If there is no surviving spouse 
or children of the worker eligible for monthly benefits, then 
the lump-sum death benefit is not paid.
    Tables 1-10 and 1-11 provide detailed information on the 
number of OASDI beneficiaries in various categories, and the 
average amount of monthly benefits by type of beneficiary.
    Table 1-42 presents data on the demographic, social, and 
medical characteristics of the disabled population over time. 
For example, the table shows an increase in the receipt of 
disability benefits by women, reflecting larger societal trends 
in female work force participation.

                          Benefit Computation

Primary insurance amount
    All monthly benefits are computed based on a worker's 
primary insurance amount (PIA). The PIA is a monthly amount 
based on the application of the Social Security benefit formula 
to a worker's average lifetime covered earnings. It is also the 
monthly benefit amount payable to a worker who retires at the 
FRA or becomes entitled to disability benefits.
    Except for workers who are eligible for a ``special minimum 
benefit'' (see description below), the PIA is determined 
through a formula applied to the worker's average indexed 
monthly earnings (AIME). The AIME is a dollar amount that 
represents the average monthly earnings from Social Security-
covered employment over most of the worker's adult life indexed 
to the increase in average annual wages. Indexing the earnings 
to changes in wage levels ensures that the same relative value 
is accorded to wages no matter when earned. Because actual 
average-wage data take over a year to become available, past 
earnings are updated to the second calendar year (the 
``indexing year'') before the worker becomes eligible for 
retirement (age 62) or, if earlier, becomes disabled or dies. 
This means that the year a worker turns age 60 is used as the 
indexing year for computing retirement benefits. Earnings in 
and after the indexing year are not indexed.
    In determining the AIME: each year's earnings prior to age 
60 is multiplied by the ratio of the average wage for the 
indexing year to the average wage in the economy for that year; 
and a specific number of ``computation years'' is determined 
based on the number of years elapsing after 1950 (or year of 
attaining age 21, if later) up to the year the worker attains 
age 62, becomes disabled, or dies, minus any ``dropout'' years. 
The law provides for up to 5 dropout years in retirement and 
survivor computations (for workers disabled before age 47, the 
number of dropout years varies from 1 to 4, depending on the 
worker's age and number of child care dropout years). The 
minimum number of computation years is 2.
    The actual years used to compute an AIME are selected from 
the highest indexed yearly earnings in all years of earnings 
after 1950, up to a maximum of 35 years. The highest 35 years 
are selected in computing retirement benefits for all workers 
born after 1929. The sum of the indexed earnings in the 
selected years is divided by the number of months in the 
computation period (i.e, the number of the selected years times 
12) to determine the AIME.
    The indexed earnings histories (rounded to whole dollars) 
are illustrated in table 1-15 for three hypothetical workers 
retiring in 2000 at age 62. The actual earnings for the three 
workers are shown in the first three columns. These are 
multiplied by the indexing factor (column 4) to arrive at 
indexed earnings (last 3 columns). The indexing factor for 1960 
is based on average wages when the individual turned 60 
($28,861.44), divided by average wages for 1960 ($4,007.12). 
The highest 35 years of indexed earnings are used. For example, 
a lifelong full-time worker who had maximum creditable earnings 
would drop low earnings in 1961, 1962, 1963, 1964, and 1965, 
and would have total indexed earnings of $2,005,697. Dividing 
total indexed earnings by the number of months in the 
computation period (35 years  12 months = 420 months) 
results in AIME of $4,775. The corresponding AIMEs for the 
average and low earners are $2,408 and $1,083, respectively. 
Low earners are defined as earning 45 percent of the average 
wage; average earners are defined as earning the average wage 
in the economy; and maximum earners are defined as earning the 
Social Security maximum taxable earnings base.
    The PIA is determined by applying the primary benefit 
formula to the AIME. For a maximum-wage worker becoming 
eligible in 2000, the PIA is determined as follows:


------------------------------------------------------------------------
                                                           Example of
              Factor                 Average indexed    worker with AIME
                                     monthly earnings       of $4,775
------------------------------------------------------------------------
90 percent.......................  first $531, plus...           $477.90
32 percent.......................  over $531 through              854.70
                                    $3,202, plus.
15 percent.......................  over $3,202........            235.90
                                  --------------------------------------
      Total......................  ...................          1,568.50
------------------------------------------------------------------------


    Applying this formula to the AIMEs of the three 
hypothetical workers results in PIAs of $654.50 for the low-
wage worker, $1,078.50 for the average-wage worker, and 
$1,568.50 for the maximum-wage worker. (For the low-wage 
worker, the 2000 special minimum benefit (see below) PIA of 
$580.60 is less than the AIME-based PIA of $654.50, and 
therefore is not used to determine her benefits.) The numbers 
$531 and $3,202 are often referred to as ``bend points'' of the 
PIA formula. These amounts are adjusted each year by the change 
in average wages. After the year of initial eligibility (age 62 
for retired workers), the PIA is increased each year for the 
increase in the Consumer Price Index (CPI). The PIAs of 
$654.50, $1,078.50, and $1,568.50 would be in effect for 
January through November 2000, and will be increased by the 
cost-of-living adjustment (COLA) effective beginning December 
2000 (see section on COLAs below).
    The PIA is recomputed after each year that an entitled 
worker has earnings that may lead to a higher benefit.
    Other methods for determining a PIA also exist, and PIAs 
based on different methods must be compared to select the 
highest one, which is used to determine the worker's benefits. 
The most common of these other methods is the one used to 
determine the special minimum PIA. This PIA is designed to 
assist workers with long-term low earnings.
    The monthly benefit amount payable to a disabled worker 
under the FRA, or to a retired worker who first receives 
benefits at the FRA, is the PIA rounded to the next lower 
dollar, if not already a multiple of $1. Auxiliary benefit 
amounts are also based on the worker's PIA. Table 1-12 lists 
major types of auxiliary benefits and the percent of the 
insured worker's PIA that is applicable to benefits paid at the 
full rate, unreduced for early election of retirement.
    Special minimum benefit.--The special minimum benefit is 
not based on the amount of a worker's average earnings, but 
instead on his number of years of covered employment. It is 
structured to provide a larger benefit than would otherwise be 
payable to those who worked in covered employment for many 
years but had low earnings. The amount of the special minimum 
is computed by multiplying the number of years of coverage in 
excess of 10 years and up to 30 years by $11.50 for monthly 
benefits payable in 1979, with automatic cost-of-living 
increases applicable to years 1979 and later. The number of 
years of coverage for the purpose of qualifying for a special 
minimum benefit equals the number obtained by dividing total 
creditable wages in 1937-50 by $900 (not to exceed 14), plus 
the number of years after 1950 and before 1991 for which the 
worker is credited with at least 25 percent of the annual 
maximum taxable earnings. For this purpose, for years after 
1978, annual maximum taxable earnings are defined as the ``old-
law'' taxable earnings base (i.e., the hypothetical earnings 
base that would be in effect if the ad hoc increases in the 
base enacted in 1977 were disregarded). In addition, for years 
after 1990, a year of coverage is earned if the worker is 
credited with at least 15 percent of the ``old-law'' taxable 
earnings base. The special minimum benefit is not subject to 
the delayed retirement credit provisions described earlier.
Cost-of-living adjustments
    As a result of the Social Security Amendments of 1972, 
monthly cash benefits are automatically adjusted for inflation 
each year to maintain the purchasing power of benefits over 
time. Prior to the 1972 amendments, monthly cash benefits were 
increased on an ad hoc basis 10 times. Automatic annual cost-
of-living adjustments (COLAs) have been provided since 1975, 
except during calendar year 1983 when the adjustment was 
delayed 6 months. Table 1-18 shows Social Security benefit 
increases from the beginning of the program through January 
2000. (The first COLA was paid in October 1950).
    Under section 215(i) of the Social Security Act, COLAs are 
indexed to changes in the Consumer Price Index for Urban Wage 
Earners and Clerical Workers (CPI-W) published by the Bureau of 
Labor Statistics, Department of Labor. Social Security COLAs 
are based on the percentage change in the average CPI-W for the 
third quarter of the previous year to the third quarter of the 
current year. The COLA becomes effective in December of the 
current year and is payable in January of the following year 
(the Social Security check received in January reflects the 
benefit payment for December). The 2.4 percent COLA effective 
in December 1999 (payable in January 2000) is computed as 
follows:


------------------------------------------------------------------------
                                                 CPI-W
------------------------------------------------------------------------
July 1998....................                                     159.8
August 1998..................                                     160.0
September 1998...............                                     160.2
Average for third quarter of                                      160.0
 1998 (rounded to the nearest
 one-tenth of 1 percent).....
July 1999....................                                     163.3
August 1999..................                                     163.8
September 1999...............                                     164.7
Average for third quarter of                                      163.9
 1999 (rounded to the nearest
 one-tenth of 1 percent).....
Percentage increase from the       (163.9 - 160.0)  160.0 = 2.4
 third quarter average for                                      percent
 1998 to the third quarter
 average for 1999 (rounded to
 the nearest one-tenth of 1
 percent)....................
------------------------------------------------------------------------


    Since 1975, the Social Security COLA triggers identical 
percentage increases in Supplemental Security Income (SSI), 
veterans pensions, and railroad retirement benefits, and causes 
other changes in the Social Security Program. Although COLAs 
under the Federal Civil Service Retirement System (CSRS) and 
the Federal Military Retirement Program are not triggered by 
the Social Security COLA, these programs use the same measuring 
period and formula for computing their COLAs. Table 1-19 
compares average wage increases, increases in the average 
annual CPI-W, and benefit increases from 1965 to 1999.
Adjustments related to age at retirement
    Reduction for early retirement.--Benefits for retired 
workers, aged spouses, and widow(er)s taken before the FRA are 
subject to an actuarial reduction, such that over their 
lifetimes on average they receive the same aggregate benefits 
as someone who retires later. The FRA is the earliest age at 
which unreduced retirement benefits can be received. The FRA 
currently is age 65, but it will gradually rise in two steps 
beginning with people born in 1938. First, for workers and 
their spouses, the FRA will increase by 2 months for each year 
that a person is born after 1937, until it reaches age 66 for 
persons born in 1943. The FRA will remain age 66 for persons 
born from 1943 to 1954. Second, it will increase again by 2 
months for each year that a person is born after 1954, until it 
reaches age 67 for those who were born after 1959. For 
widow(er)s, the increase to age 67 will be phased in similarly, 
but will begin for persons born after 1935. Early retirement 
still will be available, but benefits will be lower. The 
actuarial reduction on retirement benefits at age 62 ultimately 
will be 30 percent, instead of the present 20 percent.
    Delayed retirement credits.--Benefits of workers who choose 
to retire after their FRA are increased by delayed retirement 
credits, as are the benefits payable to their widow(er)s. The 
delayed retirement credit was 1 percent per year for workers 
who attained age 65 before 1982, and 3 percent per year for 
workers who attained age 65 between 1982 and 1989. Starting in 
1990, the delayed retirement credit has been increasing by one-
half of 1 percent every other year until it reaches 8 percent 
for workers reaching age 65 after 2007.
    Table 1-20 shows the schedule of increases in the FRA and 
adjustments related to a worker's age at the time he elects to 
receive benefits.
    Table 1-14 shows the percentage of workers electing to 
receive retirement benefits at various ages since the beginning 
of the Social Security Program. The data illustrate a trend 
toward early retirement in the 1960-85 period. Since that time, 
the trend has generally leveled out. For the past two decades, 
the average age (combined average for men and women) at which 
workers elect retirement benefits has hovered around the 
current average age of 63.7. Recently, the average age at which 
women elect to receive retirement benefits has turned upward. 
Table 1-13 shows the number and percentage of retired workers 
electing reduced benefits since they first became available 
(totals for men and women are shown separately).
Adjustments for multiple beneficiaries
    Maximum family benefit.--A maximum family benefit is 
payable based on a worker's PIA. For benefits payable on the 
earnings records of retired and deceased workers, the maximum 
varies from 150 to 188 percent of the PIA. The family maximum 
cannot be exceeded regardless of the number of recipients 
entitled on that earnings record. The family maximum is 
computed by adding fixed percentages of dollar amounts that are 
part of the PIA. For the family of a worker who turns 62 or 
dies in 2000 before attaining age 62, the total amount of 
benefits payable is limited to:

  150 percent of the first $679 of PIA, plus;
  272 percent of PIA over $679 through $980, plus;
  134 percent of PIA over $980 through $1,278 plus;
  175 percent of PIA over $1,278.

The dollar amounts in this benefit formula (i.e., the ``bend 
points'') are indexed to average wage growth as in the primary 
benefit formula.
    Whenever the total of the individual monthly benefits 
payable to all recipients entitled on one earnings record 
exceeds the maximum, each dependent's or survivor's benefit is 
reduced in equal proportion to bring the total within the 
maximum.
    In computing the maximum family benefit for a single 
earnings record, any benefit payable to a divorced spouse or to 
a surviving divorced spouse is not included.
    For the family of a worker who is entitled to disability 
benefits, the maximum family benefit is the smaller of 85 
percent of the worker's AIME, or 150 percent of the worker's 
PIA. However, in no case can the benefit be less than 100 
percent of the worker's PIA.
Adjustments related to earnings and other benefits
    Earnings limit.--The earnings limit is a provision in the 
law that reduces benefits for nondisabled recipients under the 
FRA who earn income from work in excess of a certain sum (the 
``exempt'' amount).
    The earnings limit was part of the original plan that led 
to Social Security. The 1935 report of the Committee on 
Economic Security appointed by President Franklin D. Roosevelt 
recommended that no benefits be paid before a person had 
``retired from gainful employment.'' Initially, the Social 
Security Act provided that benefits would not be paid for any 
month in which the individual had received ``wages with respect 
to regular employment.''
    The earnings limit has been changed many times over the 
years. Effective in 2000, it no longer applies to individuals 
when they attain the FRA. For recipients below the FRA, the law 
provides that recipients who will not attain the FRA in that 
year may earn up to $10,080 a year in wages or self-employment 
income without having their benefits affected. For earnings 
above these amounts, recipients lose $1 of benefits for each $2 
of excess earnings. There is a different reduction factor and 
exempt amount in the year recipients attain the FRA. In 2000, 
these individuals can earn up to $17,000 a year in the months 
before they attain the FRA. For earnings above these amounts, 
they lose $1 in benefits for each $3 of excess earnings. The 
exempt amounts rise each year at the same rate as average wages 
in the economy (however, through 2002 the exempt amounts for 
those who attain the FRA in that year will rise to specific 
amounts set in the law; see table 1-22). The test does not 
apply to recipients at the FRA or older, or to those who are 
disabled (who are subject to separate limits on earnings known 
as substantial gainful activity or SGA).
    Public Law 106-182, enacted in 2000 and which eliminated 
the test for recipients at or above the FRA, is the most recent 
legislative change affecting the earnings limit. Before passage 
of Public Law 106-182, an estimated 1.2 million recipients age 
62-69 lost some or all of their benefits because of the 
earnings limit in 1999. They represented about 3 percent of all 
recipients. Of recipients age 65-69, about 800,000 were 
affected, and an additional 100,000-150,000 persons were 
estimated to be deterred from filing for benefits because of 
the earnings limit.
    Retired workers whose benefits are not paid due to the 
earnings limit for one or more months are compensated through 
future increases in their benefit amount because their 
actuarial reduction factor is lowered.

Example of effect of the earnings limit:


    John--age 63 with $8,000 in annual benefits before the
     earnings limit is applied:
        Earnings in 2000...................................     $11,080
        Exempt amount for under age 65.....................      10,080
                                                            ------------
        Excess over exempt amount..........................       1,000
        Benefit reduction = 50 percent of excess...........         500
        Benefits John will receive in 2000.................       7,500



    The earnings limit does not apply to pensions, rents, 
dividends, interest, and other types of ``unearned'' income. 
These forms of income have always been exempted in order to 
encourage savings for retirement to supplement Social Security.
    Of 9.3 million recipients entitled to retired worker 
benefits who were under the age of 70 in 1997, about 2.8 
million had earnings from work. Table 1-23 shows the 
distribution of the earnings of these workers.
    Dual entitlement.--An individual may be entitled to 
benefits both as a worker, based on her own earnings, and also 
as a dependent (spouse or widow(er)) of another worker. In this 
case, the individual does not collect both benefits. The amount 
of the benefit payable as a spouse or widow(er) is reduced 
dollar for dollar by the amount of any benefit the individual 
is entitled to as a worker. In other words, workers first 
receive the benefit based on their work record. The dependent 
benefit is then payable in the amount that exceeds the worker 
benefit. In effect, the total amount that ``dually entitled'' 
recipients receive is equal to the larger of the benefits they 
are due either as a worker or as a dependent.
    Government pension offset.--Social Security benefits 
payable to spouses of retired, disabled, or deceased workers 
are generally reduced to take account of any public pension the 
spouse receives as a result of work in a government job 
(Federal, State, or local) not covered by Social Security. The 
amount of the reduction is equal to two-thirds of the 
government pension. This provision is intended to place spouses 
who worked in jobs not covered by Social Security in the same 
position as other workers by applying the equivalent of the 
Social Security ``dual entitlement'' rule, which imposes a 
dollar-for-dollar offset of spouses' benefits (discussed 
above). Two-thirds of the government pension represents an 
approximation of the Social Security worker's benefit that 
would be subtracted from any Social Security spousal benefit. 
The offset does not apply to workers whose government job is 
covered by Social Security on the last day of the person's 
employment.
    Generally, Federal workers hired before 1984 are part of 
the CSRS and are not covered by Social Security. Federal 
workers hired after 1983 are covered by the Federal Employee's 
Retirement System Act of 1986 (FERS), which includes coverage 
by Social Security. Employees covered by the CSRS were given 
opportunities in 1987 and 1998 to join FERS and thereby obtain 
Social Security coverage. Workers who switched from CSRS to 
FERS must have at least 5 years of FERS coverage to be exempt 
from the government pension offset.
    Windfall elimination provision.--Under the windfall 
elimination provision of the Social Security Amendments of 
1983, a different benefit formula reduces the Social Security 
benefits of most workers who also have pensions from work that 
was not covered by Social Security (e.g., work under the CSRS). 
To help workers who spend their careers in low-paying jobs, the 
regular benefit formula (see earlier discussion) is weighted to 
provide these workers with a benefit that replaces a higher 
proportion of their earnings than the benefit that is provided 
for workers with high earnings. However, the formula cannot 
differentiate between those who worked in low-paid jobs 
throughout their careers and other workers who appeared to have 
been low paid because they worked many years in jobs not 
covered by Social Security (these noncovered earnings are shown 
as zeros for Social Security benefit purposes). Before the law 
was changed, workers who were employed for only a portion of 
their careers in jobs covered by Social Security also received 
the advantage of the ``weighted'' formula, because their few 
years of covered earnings were averaged over their entire 
working career to determine the average covered earnings on 
which their Social Security benefits were based. This was the 
case even if their noncovered earnings were high.
    The windfall benefit formula is intended to remove this 
advantage for these workers. It does so by substituting 40 
percent for the 90 percent factor in the first bracket of the 
benefit formula (see discussion in earlier section on ``Benefit 
Computation''). The resulting reduction in the worker's Social 
Security benefit is limited to one-half the amount of the 
noncovered pension. The new law was phased in over a 5-year 
period and affects those first eligible for both Social 
Security benefits and noncovered pensions after 1985.
    Workers who have 30 years or more of substantial Social 
Security coverage are fully exempt from this provision. For 
workers who have 21-29 years of coverage, the percentage in the 
first bracket in the formula increases by 5 percentage points 
for each year over 20, as shown in table 1-21.
    Offset for other public disability benefits.--When a worker 
receiving Social Security disability benefits also qualifies 
for other disability benefits that are provided by Federal, 
State or local governments or worker's compensation, any Social 
Security benefits payable to the worker and his family are 
reduced by the amount, if any, that the total monthly benefits 
payable under the two or more programs exceed 80 percent of 
average current earnings before the worker became disabled. 
Needs-tested benefits, Veterans Administration disability 
benefits, and benefits based on public employment covered by 
Social Security are not subject to the reduction. A worker's 
average current earnings for this purpose are the largest of: 
(1) the average monthly earnings used for computing Social 
Security benefits; (2) the average monthly earnings in 
employment or self-employment covered by Social Security during 
the 5 consecutive years of highest covered earnings after 1950; 
or (3) the average monthly earnings for the calendar year of 
highest covered earnings during the year disability began and 
the preceding 5 years (based on total earnings, not limited to 
maximum taxable earnings). The combined payments after the 
reduction are never less than the total amount of the DI 
benefits payable before the reduction. In addition, the Social 
Security benefit after the reduction is increased by the full 
amount of the cost-of-living increase as applied to the 
unreduced benefit. Every 3 years the original amount of 
benefits subject to reduction is redetermined to reflect 
changes in average wage levels. If increases in average 
national wages would result in a higher benefit than that 
payable based on the original computation, the benefit is 
increased effective in January of the redetermination year.
    The reduction begins in the month during which concurrent 
entitlement begins under a Federal or State law. However, the 
offset will not be made if the State workers' compensation law 
provides for an offset against Social Security disability 
benefits.
Suspension of benefits to prisoners
    In 1980, legislation was enacted barring payment of 
disability benefits to prisoners who committed felonies (Public 
Law 96-473). In 1983, the prohibition was broadened to include 
retirement and survivor benefits (Public Law 98-21); and in 
1994, payment of benefits was barred to those in public 
institutions who committed serious crimes, but who were found 
incompetent to stand trial, or not guilty by reason of insanity 
(Public Law 103-387). Only benefits to the prisoner are barred; 
benefits to a prisoner's eligible spouse and children are 
payable.
    The Ticket to Work and Work Incentives Improvement Act of 
1999 (Public Law 106-170) further revised the bar on OASDI 
benefits to include prisoners who are convicted of a criminal 
offense and are confined (for more than 30 days) to (1) a penal 
institution; (2) a public institution if found guilty but 
insane; or (3) a public institution upon completion of a prison 
term for a sex offense, pursuant to a court finding that they 
remain a danger to others. It also provided for incentive 
payments of up to $400 to State and local institutions for each 
Social Security beneficiary found ineligible because of their 
incarceration.

                          Taxation of Benefits

    Beneficiaries with income (defined as adjusted gross income 
plus tax-exempt bond interest plus one-half of Social Security 
benefits) above certain thresholds are required to include a 
portion of their Social Security benefits (and railroad 
retirement tier 1 benefits) in their federally taxable income. 
The Social Security Amendments of 1983 required beneficiaries 
with income of more than $25,000 if single, and $32,000 if 
married filing jointly, to include up to 50 percent of their 
benefits in their taxable income, beginning in 1984. Revenues 
from this provision are credited to the OASDI Trust Funds. The 
Omnibus Budget Reconciliation Act of 1993 required 
beneficiaries with incomes of more than $34,000 if single, and 
$44,000 if married filing jointly, to include up to 85 percent 
of their benefits in their taxable income, beginning in 1994. 
Revenues from this provision are credited to the Medicare 
Hospital Insurance (HI) Trust Fund. (There is no separate 
threshold for married persons who live together and file 
separately.)
    These income thresholds are specified in the law. By 
design, they are not indexed to wage growth. As such, over time 
an increasing number of individuals will be subject to the 
income tax on Social Security benefits. When the first tier of 
benefit taxation was enacted in 1983, the Social Security Trust 
Funds faced almost immediate insolvency. Fixed thresholds were 
established to provide the program with a growing source of 
revenue from the income tax on benefits in an effort to shore 
up the Social Security Trust Funds. When taxes on benefits were 
first imposed, 8 percent of recipients were affected. As shown 
in table 1-25, the Congressional Budget Office (CBO) projects 
that 32 percent of recipients will be affected in calendar year 
2000. Table 1-26 shows amounts credited to the trust funds from 
the taxation of benefits. Table 1-27 provides a worksheet for 
determining the taxable portion of Social Security benefits.
    Examples of the effects of the taxation of benefits are 
shown below:


----------------------------------------------------------------------------------------------------------------
                                                             Single     Single    Married    Married    Married
----------------------------------------------------------------------------------------------------------------
Total income (including Social Security).................    $31,000    $35,000    $38,000    $50,000    $80,000
Social Security benefits.................................     12,000      7,000     12,000     12,000     18,000
Amount of benefits taxable...............................          0      3,250          0      6,000     15,300
Percent of benefits taxable..............................          0         46          0         50         85
Income tax liability on all benefits taxable.............          0        488          0        900      4,284
----------------------------------------------------------------------------------------------------------------

            Disability Determination and the Claims Process

The claims process
    The Social Security claims process is a complex 
multilayered structure that is inextricably linked with the 
disability determination process. Application for disability 
benefits is made at the Social Security field office where the 
applicant is interviewed and the sources of medical evidence 
are recorded. After determining whether the applicant meets the 
insured status requirements, the SSA field office sends the 
case to the State Disability Determination Service (DDS), which 
makes the initial determination of disability. If an applicant 
or beneficiary is dissatisfied with an initial denial or 
termination of disability benefits by the DDS, she can request 
a reconsideration within 60 days of receipt of the notice of 
denial. The reconsideration on the disability claim is carried 
out by the DDS by personnel other than those who made the 
initial determination.
    An applicant denied benefits at the reconsideration stage 
may request a hearing before an administrative law judge (ALJ) 
in SSA's Office of Hearings and Appeals, provided he files a 
request for a hearing within 60 days of receipt of the notice 
of denial. If the claim is denied by the ALJ, the applicant has 
60 days to request review by the appeals council. The appeals 
council is a 24-member body located in the Office of Hearings 
and Appeals. The appeals council may also, on its own motion, 
review a decision within 60 days of the ALJ's decision. The 
1980 disability amendments required the appeals council to 
review a percentage of ALJ hearing decisions.
    The appeals council may affirm, modify, or reverse the 
decision of the ALJ, or may remand it to the ALJ for further 
development. The applicant is notified in writing of the final 
action of the appeals council, and is informed of his right to 
obtain further review by commencing a civil action within 60 
days in a U.S. District Court.
    Under current law, as amended by the 1984 Disability 
Benefits Reform Act, disability insurance (DI) beneficiaries 
whose benefits have been terminated because of recovery or 
improvement in the medical condition that was the basis for the 
disability have the opportunity to receive a hearing at the 
reconsideration stage and can elect to continue to receive 
disability and Medicare benefits through the ALJ hearing stage 
of the appeals process, subject to recovery.
    Chart 1-2 shows the number of cases allowed and appealed at 
various levels of appeal for application decisions and 
continuing disability reviews (CDRs) processed by State 
agencies. Table 1-45 presents information for fiscal years 
1980-99 on the number of cases that were reviewed and reversed 
at the ALJ level. Table 1-46 presents information on the number 
of CDRs that were conducted in fiscal years 1977-99 on DI 
cases. Due to an unprecedented increase in initial claims, the 
number of CDRs processed declined sharply in the early 1990s. 
National implementation of a new review process in 1993 has 
enabled the Social Security Administration to increase the 
number of CDRs significantly.
    Public Law 104-121 authorized significant additional 
administrative funding exempt from the discretionary spending 
cap to enable SSA to clear its CDR backlog of roughly 3.4 
million cases more quickly. Total fiscal year authorizations 
for these reviews are: 1996, $260 million; 1997, $360 million; 
1998, $570 million; and 1999-2002, $720 million each year.
Disability determination
    Disability determinations are generally made by State 
agencies, which are 100 percent federally funded. These 
agencies agree to make such determinations and in doing so to 
substantially comply with the regulations of the Commissioner, 
which specify performance standards, administrative 
requirements, and procedures to be followed in performing the 
disability determination function.
    The law authorizes the Commissioner to terminate State 
administration and assume responsibility for making disability 
determinations when a State DDS is substantially failing to 
make determinations consistent with regulations. The law also 
allows for termination by the State.

   CHART 1-2. DISABILITY DETERMINATIONS AND APPEALS, FISCAL YEAR 1999

TITLE II, TITLE XVI AND CONCURRENT TITLE II AND TITLE XVI DECISIONS FOR 
 DISABILITY CLAIMS BY WORKERS, WIDOWS, AND DISABLED ADULT CHILDREN \1\ 


    \1\ The data relate to workloads processed (but not 
necessarily received) in fiscal year 1999, i.e., the cases 
processed at each adjudicative level may include cases received 
at one or more of the lower adjudicative levels prior to fiscal 
year 1998. The data include determinations on initial 
applications as well as CDRs (both periodic reviews and medical 
diary cases).
    \2\ Includes non-State CDR mailer continuations. Also 
includes 37,135 CDRs where there was ``no decision.'' The 
continuance and termination rates are computed without the ``no 
decision'' cases.
    \3\ Includes administrative law judge decisions not 
appealed further by the claimant but reviewed by the appeals 
council on ``own motion'' authority.
    \4\ Includes affirmations, denials and dismissals of 
requests for review, on own motion reopening cases.

    Source: Office of Disability, Social Security 
Administration.


    Claims are determined on a sequential basis. The first step 
is to determine whether the individual is engaging in SGA. 
Under current regulations, in most cases if a nonblind person 
is earning more than $700 a month (net of impairment-related 
work expenses), he will be considered to be engaging in SGA. In 
the case of blind individuals, SGA is $1,170 a month in 2000, 
indexed annually to average wage growth. If it is determined 
that the individual is engaging in SGA, a decision is made that 
she is not disabled without considering medical factors. If an 
individual is found not to be engaging in SGA, the severity and 
duration of the impairment are explored. If the impairment is 
determined to be ``not severe'' (i.e., it does not 
significantly limit the individual's capacity to perform basic 
work activities), the individual's disability claim is denied. 
If the impairment is ``severe,'' a determination is made as to 
whether the impairment ``meets'' or ``equals'' the medical 
listings published in regulations by SSA,\4\ and whether it 
will last for 12 months. If the impairment neither ``meets'' 
nor ``equals'' the listing (which would result in an 
allowance), but meets the 12-month duration rule, the 
individual's residual functional capacity (what an individual 
still can do despite his limitations) and the physical and 
mental demands of past relevant work must be evaluated. If the 
impairment does not prevent the individual from meeting the 
demands of past relevant work, benefits are denied. If the 
impairment does, then it must be determined whether the 
impairment prevents other work.
---------------------------------------------------------------------------
    \4\ The listing of impairments contains over 100 examples of 
medical conditions that are considered significant enough to prevent an 
individual from engaging in SGA. Each listing describes a degree of 
severity such that an individual who is not working, and has such an 
impairment, is considered unable to work by reason of the medical 
impairment. The listing describes specific medically acceptable 
clinical and laboratory findings and signs which establish the severity 
of the impairments. An impairment or combination of impairments is said 
to ``equal the listings'' if the medical findings for the impairment 
are at least equivalent in severity and duration to the findings of a 
listed impairment.
---------------------------------------------------------------------------
    At this stage in the adjudication process, because of a 
court decision and subsequent administrative and legislative 
ratification of this decision, the burden of proof switches to 
the government to show that the individual can, considering her 
impairment, age, education, and work experience, engage in some 
other kind of SGA that exists in the national economy. Such 
work does not have to exist in the immediate area in which he 
lives, and a specific job vacancy does not have to be available 
to him. Work in the national economy is defined in statute as 
work which exists in significant numbers either in the region 
where such individual lives or in several regions of the 
country.
    SSA has developed a vocational ``grid'' designed to reduce 
the subjectivity and lack of uniformity in applying the 
vocational factor. Through a formula, the grid regulations 
relate certain worker characteristics such as age, education, 
and past work experience to the individual's residual 
functional capacity to perform work-related physical and mental 
activities. If the applicant has a particular level of residual 
work capability--characterized by the terms sedentary, light, 
medium, heavy and very heavy--an automatic finding of 
``disabled'' or ``not disabled'' is required when such 
capability is applied to various combinations of age, 
education, and work experience.
    The Commissioner must review 50 percent of the disability 
allowances and a sufficient number of other determinations to 
ensure a high degree of accuracy. The Commissioner may also, on 
her own initiative, review any determination by a DDS.
    The 1980 disability amendments required that, at least once 
every 3 years, the Social Security Administration reexamine 
every individual on the rolls who is determined to be 
nonpermanently disabled. Where there is a finding of permanent 
disability, the Commissioner may reexamine at such times as are 
determined to be appropriate. These reviews are in addition to 
the administrative eligibility review procedures existing 
before the 1980 amendments. Effective in 2001, these reviews 
cannot begin while an individual is ``using a ticket'' as 
defined by the Commissioner (see ``Changes in the 106th 
Congress'' below).
    The 1984 Disability Benefits Reform Act required that in 
continuing eligibility review cases, benefits may be terminated 
only if the Commissioner finds that there has been medical 
improvement in the person's condition and that the individual 
is now able to engage in SGA.
    Individuals are not considered to be disabled unless they 
furnish such medical and other evidence as the Commissioner may 
require. The Commissioner will generally reimburse physicians 
or hospitals for supplying medical evidence in support of 
claims for DI benefits. The Commissioner also pays for medical 
examinations that are needed to adjudicate the claim.
    Representation and attorneys' fees.--Claimants may appoint 
an attorney or any other qualified person to serve as their 
representative in proceedings before SSA. The representative 
may submit evidence, make statements about facts and law, and 
make any request or give any notice concerning the proceedings. 
The representative may not sign an application on behalf of a 
claimant for rights or benefits, or testify on the claimant's 
behalf in any administrative proceeding.
    The amount of any fee that an attorney or other person may 
charge and collect from the claimant for services performed as 
a representative must be authorized by SSA. SSA has two methods 
of authorizing fees for representation: fee petition and fee 
agreement.
    Under the fee petition process, representatives must 
promptly file a fee petition with SSA after completing their 
services on a claim and send a copy of the fee petition to the 
claimant. SSA determines the amount of the fee authorized under 
the fee petition process based on several factors, including, 
but not limited to, the extent and type of services the 
representative performed, the complexity of the case, and the 
amount of time the representative spent on the case.
    Under the fee agreement process, the claimant and 
representative must file a written agreement with SSA before 
the date SSA makes a favorable determination or decision on the 
claim. SSA usually will approve the fee agreement if: (1) it is 
signed by both the claimant and representative; (2) the fee 
specified in the agreement does not exceed the lesser of 25 
percent of the past-due benefits or $4,000; (3) SSA's 
determination or decision in the claim is fully or partially 
favorable; and (4) the claim results in past-due benefits. If 
the claimant is represented by an attorney and the claim is for 
Social Security benefits, SSA withholds 25 percent of past-due 
benefits owed the claimant and any auxiliary beneficiary or 
beneficiaries, and certifies for direct payment to the attorney 
the lesser of the amount of the authorized fee or 25 percent of 
past-due benefits. SSA assumes no responsibility for the 
payment of any fees if the representative is not an attorney or 
the claim is for SSI benefits.
    The Ticket to Work and Work Incentives Improvement Act of 
1999 (Public Law 106-170, signed December 17, 1999) requires 
the Commissioner to impose an assessment on the attorney's fee 
to cover SSA's costs of determining and certifying these fees. 
Effective January 31, 2000, the assessment is set at 6.3 
percent of the attorney's fee. For years after 2000, the 
percentage rate will be set at a level determined by the 
Commissioner to achieve full recovery of the costs of 
calculating, withholding, and paying fees from the claimant's 
past-due benefits, but not in excess of 6.3 percent. The 
attorney is prohibited from recovering this assessment from the 
claimant.
Work incentives
    The law provides a 45-month period for disabled 
beneficiaries to test their ability to work without losing 
their entitlement to all benefits. The period consists of: (1) 
a ``trial work period'' (TWP), which allows disabled 
beneficiaries to work for up to 9 months (within a 5-year 
period) \5\ with no effect on their disability or Medicare 
benefits; followed by (2) a 36-month ``extended period of 
eligibility,'' during the last 33 of which cash disability 
benefits are suspended for any month in which the individual is 
engaged in SGA. Medicare coverage continues so long as the 
individual remains entitled to disability benefits and, 
depending on when the last month of SGA occurs, may continue 
for 3-24 months after entitlement to disability benefits ends. 
When Medicare entitlement ends because of the individual's work 
activity, if he is still medically disabled, he may purchase 
Medicare protection.
---------------------------------------------------------------------------
    \5\ Only one TWP is allowed in any one period of disability. By 
regulation, earnings of more than $200 a month constitute ``trial 
work.''
---------------------------------------------------------------------------
    If beneficiaries medically recover to the extent that they 
no longer meet the definition of disability, both disability 
and Medicare benefits are terminated after 3 months, regardless 
of the status of the TWP or extended period of eligibility. 
However, a person who contests this determination may elect to 
continue to receive disability benefits (subject to recovery) 
and Medicare while the appeal is being reviewed.
Return to work and rehabilitation
     Public Law 106-170 created a Ticket to Work and Self-
Sufficiency Program to help disability beneficiaries access a 
broader pool of vocational rehabilitation providers to enable 
them to achieve self-sufficiency. Under this legislation, the 
Commissioner of Social Security provides tickets to work to 
disability beneficiaries that can be used as vouchers to obtain 
employment services, case management, vocational 
rehabilitation, and support services under an individual work 
plan from the provider of their choice, including the State 
vocational rehabilitation agencies. Payments to the providers 
entering agreements with SSA are based on employment outcomes 
and long-term results or on a combination of milestones and 
outcomes and come from a portion of the benefits forgone by 
beneficiaries when they return to work. The program is being 
implemented in selected sites beginning 1 year after enactment, 
with services available in every State within 4 years of 
enactment.
     Until the Ticket to Work and Self-Sufficiency Program is 
fully implemented and for States that elect to not participate 
in this program, provisions remain in effect that allow for 
reimbursement from the DI Trust Funds to the State vocational 
rehabilitation agencies for rehabilitation services that result 
in the beneficiary's performance of SGA for a continuous period 
of at least 9 months. Such a 9-month period could begin while 
the individual is under a vocational rehabilitation program and 
may coincide with the TWP or the individual's waiting period 
for benefits. The services must be performed under a State plan 
for vocational rehabilitation services under title I of the 
Vocational Rehabilitation Act. In 1996, SSA established by 
regulations an Alternative Rehabilitation Provider Program 
which allows SSA to refer beneficiaries to private vocational 
rehabilitation providers and public non-State vocational 
rehabilitation providers if SSA does not receive notification 
within a specified period that the State agency has accepted a 
beneficiary for services or extended evaluation.
    The ticket to work law provides for extended health care 
coverage under Medicare up to an additional 54 months effective 
October 1, 2000 for beneficiaries who return to work, for a 
total of 102 months of health coverage once work activity 
begins. In addition, beneficiaries participating in the Ticket 
to Work and Self-Sufficiency Program will not be subject to 
unscheduled CDRs triggered by their work activities. For 
certain former beneficiaries whose entitlement to benefits 
ended solely because of their earnings from work, the ticket to 
work law provides for swift reinstatement of benefits without 
the requirement for a new application. (For more information on 
the Ticket to Work and Self-Sufficiency Program, refer to 
Section 3: Supplemental Security Income.)
Enrollment and applicant backlogs
    Over the past 20 years, the DI Program experienced a period 
of declining enrollment followed by a rebound in growth. The 
number of DI beneficiaries (disabled workers and their 
dependents) receiving benefits first peaked at 4.9 million in 
May 1978. The beneficiary population then declined sharply to 
3.8 million by July 1984. Thereafter, the number of 
beneficiaries has risen steadily, reaching 6.5 million in 
December 1999 (table 1-41).
    Similarly, the number of new DI benefit awards declined 
from 592,000 in 1975 to approximately 299,000 in 1982. As shown 
in table 1-44, awards then rose almost steadily, reaching 
646,000 in 1995 before declining by 1997 to 587,000. In 1999 
there were nearly 621,000 new DI benefit awards. (The large 
1992 increase is partially attributable to SSA's short-term 
measures for dealing with increased DI applications. Increasing 
the volume of applications processed resulted in increases in 
both awards and denials.)
    The incidence of disability (number of awards per 1,000 
insured workers) fell from an all-time high of 7.1 in 1975 to 
an all-time low of 2.9 in 1982. In 1999, the rate was 4.8 
percent (table 1-44).
    Pending claims at DDS, hearings and appeals levels.--Until 
fiscal year 1991, disability claims (including initial claims, 
reconsiderations, hearings and appeals) remained relatively 
constant at about 2.5 million cases per year. In fiscal year 
1991, claims began to increase significantly each year and 
reached 3.7 million in fiscal year 1996. In fiscal year 1999, 
there were over 3.2 million disability claims. During the 
period of fiscal years 1988-94, the number of cases pending at 
the State DDS also increased as the ability to hire and train 
DDS staff did not keep pace with the increases in claims. 
However, in fiscal year 1995 pending cases were significantly 
reduced to 590,000 due largely to increased productivity in the 
State DDSs and the additional budgetary resources directed to 
disability case processing which enabled an aggressive hiring 
effort in the States. In fiscal year 1996, pending cases again 
increased significantly. The major cause of this increase was 
that Congress increased SSA's workload by requiring additional 
drug addiction and alcoholism reviews. These reviews have now 
been completed but pending cases have risen again due to 
workloads mandated by welfare reform legislation (table 1-47).

           SOCIAL SECURITY'S TREATMENT IN THE FEDERAL BUDGET

                  Social Security's Off-Budget Status

    Under an administrative action by President Johnson, Social 
Security and other Federal programs that operate through trust 
funds were counted officially in the budget beginning in fiscal 
year 1969. At the time, the Old-Age, Survivors, and Disability 
Insurance (OASDI) Trust Funds were running a surplus while the 
remainder of the Federal budget was running a deficit that 
reflected the increasing costs of the war in Vietnam. At the 
time, Congress did not have its own formal budgetmaking process 
with statutory rules, restrictions on taxes and spending, and 
its own budget estimating office. In 1974, with passage of the 
Congressional Budget and Impoundment Control Act (Public Law 
93-344), Congress adopted procedures for setting budget goals 
through passage of annual budget resolutions. Like the budgets 
prepared by the President, these resolutions were to reflect a 
``unified'' budget that included trust fund programs such as 
Social Security.
     Financial problems confronting Social Security and concern 
over its growing costs led to enactment of a number of benefit 
changes in 1977, 1980, 1981, and 1983. Measures were enacted in 
1983, 1985, and 1987 making the program a more distinct part of 
the budget and permitting floor objections (points of order) to 
be raised against budget bills containing Social Security 
changes.
    Later in the 1980s, when Social Security surpluses emerged, 
critics argued that the program was masking the size of Federal 
budget deficits. In response, Congress in 1990 excluded Social 
Security from calculations of the budget and largely exempted 
it from procedures for controlling spending (Omnibus Budget 
Reconciliation Act of 1990, Public Law 101-508). By these 
actions, however, Congress excluded Social Security from 
procedural constraints designed to discourage measures that 
would increase deficits. Concerned that this change would 
encourage Social Security spending increases and tax cuts that 
could weaken Social Security's financial condition, Congress 
also included provisions permitting floor objections to be 
raised against bills that would erode the balances of the 
Social Security Trust Funds.
    Table 1-30 shows projected budget surpluses with and 
without Social Security and projected Federal debt published by 
CBO in July 2000.
Budgetary treatment of 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, now comprising less than 1 percent of 
annual benefit payments. During fiscal year 1999, they amounted 
to $3.4 billion (table 1-40).
    These trust-fund-financed administrative funds comprised 
about 48 percent of the Social Security Administration's fiscal 
year 1999 administrative budget. The agency received another 15 
percent from the Medicare Trust Funds, as well as 37 percent 
from general revenues for administration of the Supplemental 
Security Income Program. SSA's total fiscal year 1999 
administrative budget was $6.4 billion.
     Social Security's outlays and receipts were removed from 
the budget in three separate actions by Congress. However, the 
exemption from the discretionary caps was less clearly stated 
when the Budget Enforcement Act of 1990 was passed. Prior to 
discretionary caps, appropriations acts limited expenditures 
for administration through a ``limitation on administrative 
expenses.'' When confusion arose over the intended treatment of 
administrative costs and the discretionary caps, both OMB and 
CBO eventually agreed that those cost would be subject to the 
discretionary caps even though the program was an entitlement 
with the administration paid from Social Security tax receipts.
     In both the President's budget and appropriations acts, 
the limitation on administrative expenses is used to prevent 
the Social Security Administration from an open ended 
administrative budget. In the Senior Citizens' Right to Work 
Act of 1996, a separate exception to the discretionary caps was 
made for CDR funding. Concerned that such reviews were lagging, 
Congress provided for additional spending for CDRs above a base 
amount that would not be constrained by discretionary caps.

               Budget Rules Pertaining to Social Security

    Two key elements of the budget process are: (1) explicit 
dollar limits on discretionary spending (mostly for programs 
requiring annual appropriations); and (2) a ``pay-as-you-go'' 
rule that requires that increases in direct spending (mostly 
for entitlement programs) and/or cuts in revenues must be 
offset by other changes so as not to increase the deficit. 
Originally written to cover the fiscal year 1991-95 period, 
these budget rules now apply through fiscal year 2002 (as a 
result of provisions in OBRA 1993, Public Law 103-66, and the 
Balanced Budget Act of 1997, Public Law 105-33). If the 
explicit spending limits or ``pay-as-you-go'' rules are 
violated during this period, the President may be required to 
sequester funds (i.e., cut spending). Social Security is not to 
be included in these calculations and is exempt from any 
potential sequestration, with the exception of administrative 
expenses (which are counted as discretionary spending). The law 
further permits floor objections to be raised against budget 
bills (so-called ``reconciliation'' bills) that contain Social 
Security measures.

 HOUSE AND SENATE BUDGET PROCEDURES TO PROTECT SOCIAL SECURITY BALANCES

    Under the budget rules that existed before 1991, Social 
Security was included in calculations of the budget deficit. 
This rule had the effect of potentially thwarting attempts to 
expand Social Security benefits or cut taxes if such attempts 
were not accompanied by measures to offset the cost or revenue 
loss. Floor objections could be raised against such actions if 
they violated the budget totals or allocations. If measures 
that raised benefits or cut taxes were enacted, other programs 
were potentially threatened with sequestration because the 
deficit would be made larger. The old process imposed the same 
fiscal discipline on Social Security as applied to other 
programs. Since Social Security is now exempt from the budget 
limits (except its administrative expenses), these fiscal 
constraints no longer apply. In their place are rules intended 
to make it difficult to bring up measures for a vote that would 
weaken the program's financial condition. These procedural 
rules are sometimes referred to as the Social Security 
``firewall'' provisions.
    In the House, a floor objection can be raised against a 
bill that proposes more than $250 million in Social Security 
spending increases or tax cuts over 5 years (counting the 
fiscal year it becomes effective and the following 4 years) 
unless the bill also contains offsetting changes to bring the 
net impact within the $250 million limit. Costs of prior 
legislation that fall within the 5-year period must be counted. 
An objection also can be raised against a measure that would 
increase long-range (75-year) average costs or reduce long-
range revenues by at least 0.02 percent of taxable payroll.
    In the Senate, budget resolutions must include separate 
amounts for Social Security income and outgo for the first year 
and 5-year period covered by the resolution (i.e., separate 
from the budget totals). These amounts cannot cause the 
balances of the Social Security Trust Funds to be lower than 
projected under current law. Measures that would do so are 
subject to an objection, which can be overridden only by a vote 
of three-fifths of the Senate. Once the resolution is enacted, 
subsequent measures that on balance would cause Social Security 
outlay increases or revenue reductions are also subject to 
objection, which again can be overridden only by a three-fifths 
vote.
    The fiscal year 2000 budget cycle resulted in a new budget 
process, not formally written in the congressional or executive 
budget laws, but arising from the projections of a new era of 
budgetary surpluses in both the OASDI off-budget account and 
the on-budget account. With both Congress and the President 
pledging not to spend any of the Social Security surplus by 
running an on-budget deficit, every attempt was made to finance 
increased spending or tax reductions from the surplus in the 
on-budget or non Social Security surplus even if it resulted in 
spending over the discretionary caps or the PAY-GO rules. 
Commonly referred to as the Social Security lock box approach 
by legislators, it was designed to keep the Social Security 
surpluses from being spent; surpluses are instead to be used to 
reduce the public debt until long term Social Security (and 
Medicare) reforms are enacted. This ``political'' process is 
likely to be repeated in the future and perhaps as long as both 
the on- and off-budget portions of the budget are in surplus. 
The resulting fiscal effect of these policies allows the excess 
OASDI income to no longer pay for other parts of government, 
but to be used to reduce the ``publicly'' held debt. While this 
does strengthen the government's fiscal position by lowering 
its indebtedness in advance of the baby boom retirement wave, 
it does not, on its own, provide the money that will be needed 
to pay the rapidly rising Social Security benefit outlays 
starting after 2014 when the current level of Federal Insurance 
Contributions Act (FICA) receipts falls short of benefit costs.

                          LEGISLATIVE HISTORY

    (For a description of legislative changes made in the 95th-
102d Congresses, refer to the 1996 Green Book; for changes in 
the 103d Congress, see the 1998 Green Book.)

                     Changes in the 104th Congress

Senior Citizens' Right To Work Act of 1996 (incorporated into Public 
        Law 104-121, the Contract With America Advancement Act of 1996)
    Authorizing additional CDR funds.--This legislation 
authorized additional administrative funding to enable the 
Social Security Administration to increase CDRs. Amounts spent 
for CDRs above the already assumed base funding levels are not 
subject to the discretionary spending caps through fiscal year 
2002. SSA must report annually on CDR expenditures and savings 
to the Social Security, Supplemental Security Income, Medicaid 
and Medicare Programs.
    Alleviating the Social Security earnings limit.--The act 
gradually raised the earnings limit for those between age 65 
and 70 to $30,000 by the year 2002, phased in over 7 years as 
follows:

------------------------------------------------------------------------
                                                                Law as
                                                              altered by
                     Year                        Prior law    Public Law
                                                               101-121
------------------------------------------------------------------------
1996..........................................      $11,520      $12,500
1997..........................................      $11,880      $13,500
1998..........................................      $12,240      $14,500
1999..........................................      $12,720      $15,500
2000..........................................      $13,200      $17,000
2001..........................................      $13,800      $25,000
2002..........................................      $14,400      $30,000
------------------------------------------------------------------------

    Senior citizens between full retirement age (FRA) (age 65 
for those born in 1937 or before) and 70 who earned over the 
given earnings limit would continue to lose $1 in benefits for 
every $3 earned over the new limit. After 2002, the annual 
exempt amounts

were indexed to growth in average wages. The substantial 
gainful activity (SGA) amount applicable to individuals under 
65 who are eligible for disability benefits on the basis of 
blindness was no longer linked to the earnings limit amount for 
those age 65-69. As under prior law, this SGA amount continued 
to be wage-indexed in the future, and was projected to rise to 
$14,400 by 2002.
    Entitling of stepchildren to child's benefits based on 
actual dependency on stepparent support.--Benefits were made 
payable to a stepchild only if it is established that the 
stepchild is dependent on the stepparent for at least one-half 
of his financial support. In addition, benefits to the 
stepchild are to be terminated if the stepchild's natural 
parent and stepparent are divorced. The dependency requirement 
was made effective for stepchildren who become entitled or 
reentitled to benefits beginning in July 1996. In cases of a 
subsequent divorce, benefits to stepchildren will terminate 1 
month after the divorce becomes final. Stepparents are required 
to notify SSA of the divorce. In addition, SSA is required to 
notify annually those potentially affected by this provision.
    Removing drug addiction and alcoholism as disabling 
conditions.--An individual is no longer considered disabled for 
purposes of entitlement to cash Social Security and 
Supplemental Security Income disability benefits if drug 
addiction or alcoholism is the contributing factor material to 
her disability. Individuals with drug addiction or alcoholism 
who have another severe disabling condition (such as AIDS, 
cancer, cirrhosis) can qualify for benefits based on that 
disabling condition.
    If a person qualifying for benefits based on another 
disability is also determined to be an alcoholic or drug addict 
incapable of managing his benefits, a representative payee will 
be appointed to receive and manage the individual's checks. 
Recipients who are unable to manage their own benefits as a 
result of alcoholism or drug addiction will be referred to the 
appropriate State agency for substance abuse treatment 
services. In each of fiscal years 1997 and 1998, $50 million 
was authorized to fund additional drug (including alcohol) 
treatment programs and services. Individuals entitled to 
benefits before March 1996 remained eligible for benefits until 
January 1, 1997.
    Studying efficacy of providing benefit and contribution 
statements to recipients.--The Commissioner of Social Security 
was required to conduct a 2-year pilot study, beginning in 
1996, of the efficacy of providing individual benefit and 
contribution information to recipients of Old-Age and Survivors 
Insurance (OASI) benefits.
    Protecting the Social Security and Medicare Trust Funds.--
This act codified Congress' understanding of present law that 
the Secretary of the Treasury and other Federal officials are 
not authorized to use Social Security and Medicare funds for 
debt management purposes.
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 
        (Public Law 104-193)
    This act prohibited payment of Social Security benefits to 
any noncitizen in the United States who is not lawfully present 
in the United States, unless the payment is made pursuant to a 
totalization agreement or treaty obligation.
Omnibus Consolidated Rescissions and Appropriations Act of 1996 (Public 
        Law 104-134)
    Providing for mandatory electronic funds transfers.--
Federal payments, including Social Security and Supplemental 
Security Income benefits payable beginning after July 1996 to 
persons with bank accounts, must be paid by electronic funds 
transfer (EFT). All recurring Federal payments made after 
January 1, 1999 will be made by EFT, except that the Secretary 
of the Treasury may waive the requirement under certain 
circumstances.
    Enhancing debt collection.--Provided SSA with permanent 
debt collection authorities, including administrative offset of 
other Federal benefit payments, offset of Federal salaries, 
reporting of delinquent debt to credit bureaus, use of private 
collection agencies, and assessment of late charges.

                     Changes in the 105th Congress

Revenue Reconciliation Act of 1997 (incorporated into Public Law 105-
        34)
    Expanding SSA records for tax collection.--This provision 
provides that, for an application for a Social Security number 
(SSN) for a person under age 18, SSA must collect the SSNs of 
each parent, in addition to currently required evidence of age, 
identity, and citizenship, and share this information with the 
Internal Revenue Service for administration of tax benefits 
based on support or residency of a child.
    Excluding termination payments made to insurance 
salesmen.--Payments made to a self-employed insurance salesman 
after his agreement to work for the insurance company has 
terminated are excluded from Social Security coverage if: he 
performed no additional work for the company in that taxable 
year; he entered into a covenant not to compete with the 
company; and the amount of the payment was based entirely on 
the policies the salesman sold during the last year of the 
agreement which remain in force and not on his length of 
service or overall earnings from the company.

                     Changes in the 106th Congress

Foster Care Independence Act of 1999 (Public Law 106-169, signed 
        December 14, 1999)
    Enforcing benefit restrictions for prisoners.--The 
Commissioner is required to share (on a reimbursable basis) 
information obtained under agreements with institutions 
reporting prisoners with other Federal or federally assisted 
cash, food, or medical assistance programs to ensure that other 
Federal, State or local benefits do not inappropriately flow to 
prisoners.
    Creating new administrative sanctions to deter abuse.--A 
new penalty is added to previous penalties for nonpayment of 
OASDI and SSI benefits for individuals found to have lied or 
misrepresented facts in applying for benefits. The penalty is a 
period of nonpayment of 6 months for the first violation, 12 
months for the second, and 24 months for the third such 
violation. A prior provision banning benefits for 10 years for 
individuals who misrepresent residence to claim benefits in two 
or more States is repealed.
    Protecting Social Security funds.--Representative payees 
are made liable for an OASDI or SSI overpayment caused by a 
payment made to a beneficiary who has died. SSA must establish 
an overpayment control record under the representative payee's 
SSN. The legislation also bars from the OASDI and SSI Programs 
representatives and health care providers found to have helped 
commit fraud; the bar from participation would last for 5 
years, 10 years, and permanently for the first, second and 
third such finding, respectively.
    Adding resources and legislative tools to combat fraud.--
The Commissioner is required to consult with the Inspector 
General of SSA and the Attorney General regarding additional 
measures to combat fraud in Social Security's Disability 
Programs, as well as methods for improving the processing of 
reported changes to beneficiaries' income. In addition, SSA 
must include in its annual budget an itemization of the funds 
needed to combat fraud. The legislation also provides for 
readier data exchanges with State and Federal agencies to 
ensure proper benefit payment.
Ticket to Work and Work Incentives Improvement Act of 1999 (Public Law 
        106-170, signed December 17, 1999)
    Creating new avenues to work and self-sufficiency.--Creates 
a new ``Ticket to Work'' Program, to be implemented in all 
States within 4 years, under which the Social Security 
Administration would provide Social Security Disability 
Insurance (SSDI) and SSI disability beneficiaries with tickets 
they can use to purchase services to help them enter the work 
force. Services would be tailored to individual needs and 
choices, with providers paid for results when beneficiaries 
return to the work force or achieve certain milestones. To 
protect those who attempt to work but must return to benefits, 
certain rules are eased for requalifying for benefits for those 
in need due to failing health.
    Expanding availability of health care services for the 
disabled.--For SSDI beneficiaries who go to work, the 
legislation extends Medicare coverage for an added 4.5 year 
period beyond current law (for a total of 8.5 years). This 
provision also expands State options to provide Medicaid to 
workers with disabilities, provide grants to States to support 
workers with disabilities, create State demonstration programs 
to provide medical aid to workers with potentially severe 
disabilities, and hold down insurance costs for certain 
disabled workers.
    Funding new studies and demonstration projects.--SSDI 
demonstration project authority is renewed for 5 years; SSA 
must conduct a project to study the incentives created by 
gradually reducing SSDI benefits $1 for every $2 in earnings 
over a set level. Several GAO and SSA reports are to be 
conducted on current work incentives for individuals with 
disabilities and on ways to improve such incentives.
    Ensuring changes are paid for.--The ticket to work law made 
a number of technical changes to Social Security to ensure that 
any new benefits are fully paid for, including: awarding 
certain prisons reporting inmate lists with up to $400 per 
inmate found to be collecting Social Security benefits 
(preventing fraud and benefit overpayments); restricting Social 
Security benefits for certain sex offenders and prisoners 
jailed for under 1 year; allowing clergy members a 2 year 
``open season'' to opt into Social Security; assessing 
attorneys who have SSA process their fees for associated 
administrative costs; and clarifying rules related to the 
removal of drug addiction and alcoholism as disabling 
conditions under the SSDI and SSI Programs.
Senior Citizens Freedom To Work Act (Public Law 106-182, signed April 
        7, 2000)
    Eliminates the earnings limit as of the month the recipient 
attains the FRA, effective in 2000. In the year a recipient 
attains the FRA, the 1 for 3 reduction rate and the exempt 
amounts put in place by Public Law 104-121 will continue to 
apply.

                           STATISTICAL TABLES

                     Tax Rates and Covered Earnings

 TABLE 1-1.--FICA AND SELF-EMPLOYMENT CONTRIBUTIONS ACT (SECA) TAX RATES AND MAXIMUM TAXABLE EARNINGS, SELECTED
                                                 YEARS 1937-2001
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                     Rate paid by employee and employer
                                               ---------------------------------------------   Self-    Maximum
                 Calendar year                         Disability           Hospital         employed   taxable
                                                 OASI   insurance   OASDI  insurance  Total    rate     earnings
                                                          (DI)                (HI)
----------------------------------------------------------------------------------------------------------------
1937..........................................   1.0         NA        NA        NA    1.0        NA      $3,000
1950..........................................   1.5         NA        NA        NA    3.0        NA       3,000
1960..........................................   3.0       0.25      2.75        NA    3.0       4.5       4,800
1970..........................................   3.65      0.55      4.20      0.60    4.8       6.9       7,800
1980..........................................   4.52      0.56      5.08      1.05    6.13      8.1      25,900
1990..........................................   5.60      0.60      6.20      1.45    7.65     15.3      51,300
1995..........................................   5.26      0.94      6.20      1.45    7.65     15.3   \1\ 61,20
                                                                                                               0
1999..........................................   5.35      0.85      6.20      1.45    7.65     15.3   \1\ 72,60
                                                                                                               0
2000..........................................   5.30      0.90      6.20      1.45    7.65     15.3   \1\ 76,20
                                                                                                               0
2001 and later................................   5.30      0.90      6.20      1.45    7.65     15.3      (\2\)
----------------------------------------------------------------------------------------------------------------
\1\ OASDI; no limit (HI).
\2\ Not yet determined for OASDI; no limit (HI).

 NA--Not applicable.

Note.--Until 1991 the maximum taxable earnings for HI were the same as for OASDI. In 1991, 1992, and 1993
  maximum taxable earnings were $125,000, $130,200, and $135,000 respectively, with no limit after 1993. Only
  92.35 percent net self-employment earnings are taxable and half of the SECA taxes so computed is deductible
  for income tax purposes.

 Source: Congressional Research Service.


                TABLE 1-2.--OASDI AND HI TAX RATES FOR SELF-EMPLOYED INDIVIDUALS, 1980 AND LATER
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                                                         Total
                      Calendar year                           OASI        DI       OASDI        HI       (OASDI
                                                                                                        and HI)
----------------------------------------------------------------------------------------------------------------
1980.....................................................     6.2725     0.7775       7.05       1.05       8.10
1981.....................................................     7.0250     0.9750       8.00       1.30       9.30
1982.....................................................     6.8125     1.2375       8.05       1.30       9.35
1983.....................................................     7.1125     0.9375       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
1990-93..................................................    11.2000     1.2000      12.40       2.90      15.30
1994-96..................................................    10.5200     1.8800      12.40       2.90      15.30
1997-99..................................................    10.7000     1.7000      12.40       2.90      15.30
2000 and later...........................................    10.6000     1.8000      12.40       2.90     15.30
----------------------------------------------------------------------------------------------------------------
\1\ Tax credits for the self-employed equaled 2.7 percent in 1984, 2.3 percent in 1985, and 2.0 percent in 1986-
  89. The tax rate shown is not reduced for these credits. See text for explanation of change in tax treatment
  of the self-employed.

 Source: Congressional Research Service.


                    TABLE 1-3.--EARNINGS COVERED BY OASDI SYSTEM, SELECTED YEARS 1950-99 \1\
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                     Earnings in                                       Taxable
                                                 covered employment               Covered            earnings as
                                                --------------------    Total    earnings             a percent
                 Year                    Total                        earnings     as a     Taxable    of total
                                       earnings              Self-   in covered   percent  earnings  earnings in
                                                 Employed  employed  employment  of total              covered
                                                                                 earnings             employment
----------------------------------------------------------------------------------------------------------------
1950.................................    $185.9    $109.8        NA     $109.8       59.1     $87.5         79.7
1955.................................     257.7     171.6     $24.5      196.1       76.1     157.5         80.3
1960.................................     324.7     236.0      29.2      265.2       81.7     207.0         78.1
1965.................................     428.9     311.4      40.3      351.7       82.0     250.7         71.3
1970.................................     631.3     483.6      48.0      531.6       84.2     415.6         78.2
1975.................................     936.2     717.2      70.4      787.6       84.1     664.7         84.4
1976.................................    1033.8     797.2      76.8      874.0       84.5     737.7         84.4
1977.................................    1142.2     879.5      80.8      960.3       84.1     816.6         85.0
1978.................................    1290.8    1024.4      94.0     1118.4       86.6     919.0         82.2
1979.................................    1439.5    1147.9     100.6     1248.5       86.7    1074.2         86.0
1980.................................    1555.1    1235.6      97.9     1333.5       85.7    1179.3         88.4
1981.................................    1703.5    1361.2      98.7     1459.9       85.7    1294.2         88.6
1982.................................    1773.3    1430.3      98.6     1528.9       86.2    1364.2         89.2
1983.................................    1880.2    1503.8     109.9     1613.7       85.8    1456.2         90.2
1984.................................    2102.1    1666.3     128.2     1794.5       85.4    1611.0         89.8
1985.................................    2262.5    1802.4     141.8     1944.2       85.9    1727.6         88.9
1986.................................    2393.0    1925.5     158.6     2084.1       87.1    1847.0         88.6
1987.................................    2574.1    2057.2     179.9     2237.1       86.9    1959.0         87.6
1988.................................    2791.5    2232.6     199.7     2432.3       87.1    2092.4         86.0
1989.................................    2958.5    2362.5     210.9     2573.4       87.0    2237.8         87.0
1990.................................    3135.6    2510.4     193.8     2704.2       86.2    2358.6         87.2
1991.................................    3208.5    2566.7     195.5     2762.2       86.1    2422.5         87.7
1992.................................    3416.9    2709.7     206.8     2916.5       85.4    2532.8         86.8
1993.................................    3547.0    2808.9     214.0     3022.9       85.2    2636.1         87.2
1994.................................    3713.3    2950.3     218.8     3169.1       85.3    2785.2         87.9
1995.................................    3922.4    3132.4     226.9     3359.3       85.6    2919.4         86.9
1996 \2\.............................    4171.3    3327.5     239.8     3567.3       85.5    3076.5         86.2
1997 \2\.............................    4467.5    3594.4     253.3     3847.7       86.1    3287.4         85.4
1998 \2\.............................    4792.1    3870.2     270.4     4140.6       86.4    3517.0         84.9
1999 \2\.............................    5130.7    4142.0     296.3     4438.3       86.5    3765.0        84.8
----------------------------------------------------------------------------------------------------------------
\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.

 NA--Not applicable; self-employment tax first took effect in 1951.

Source: Office of the Chief Actuary, Social Security Administration.


  TABLE 1-4.--FICA AND SECA TAX PAYMENTS FOR AVERAGE AND HIGH EARNERS,
                        SELECTED YEARS 1950-2000
------------------------------------------------------------------------
                                            Annual tax payments
                                 ---------------------------------------
          Calendar year           Average earner \1\    High earner \1\
                                 ---------------------------------------
                                  FICA \1\  SECA \2\  FICA \1\  SECA \2\
------------------------------------------------------------------------
1950............................       $38        NA       $45        NA
1960............................       120      $180       144      $216
1970............................       297       427       374       538
1980............................       767     1,014     1,588     2,098
1999............................     2,318     3,682     7,401    11,774
Cumulative 1956-99 \3\..........   134,212   200,804   273,856   419,806
2000............................     2,424     3,850     7,624   12,140
------------------------------------------------------------------------
\1\ Employee share only for FICA column. Average earner means someone
  who earned average wages throughout her working years (average wages
  are estimated for 1999 and 2000). For years before 1994, high earner
  means someone who earned the maximum wage level subject to Old-Age,
  Survivors, and Disability Insurance (OASDI) and HI taxes. For 1994
  onward it is assumed to be someone who earns $200,000 a year.
\2\ Figures in table are net of income tax deduction equal to one half
  of SECA taxes.
\3\ Includes interest compounded at rates of long-term Treasury issues.
  Encompasses a hypothetical 44-year career that began at age 21 and
  ended at age 65.

 NA--Not applicable.

 Source: Congressional Research Service.



    TABLE 1-5.--AMOUNT OF COVERED WAGES NEEDED TO EARN ONE QUARTER OF
               COVERAGE, SELECTED CALENDAR YEARS 1978-2009


------------------------------------------------------------------------
1978.......................................................         $250
1980.......................................................          290
1985.......................................................          410
1990.......................................................          520
1995.......................................................          630
2000.......................................................          780
2005.......................................................      \1\ 970
2009.......................................................   \1\ 1,140
------------------------------------------------------------------------
\1\ Based on economic assumptions in the 2000 Annual Report of the Board
  of Trustees of the Federal OASI and Disability Insurance Trust Funds.

 Source: Office of the Chief Actuary, Social Security Administration.

                            Covered Workers

          TABLE 1-6.--ESTIMATED SOCIAL SECURITY COVERAGE, 1999
                              [In millions]
------------------------------------------------------------------------
                                                               Percent
                                      Total      Noncovered    covered
------------------------------------------------------------------------
Workers \1\......................        158.5          6.8         95.7
Jobs: \2\
    State and local government            23.4          5.8         75.1
     \3\.........................
    Federal civilian.............          3.9          1.0         73.1
    Students \4\.................          2.4          2.2         6.3
------------------------------------------------------------------------
\1\ Includes both employees and self-employed.
\2\ Because workers may work at more than one job during the year, the
  total number of noncovered jobs exceeds the total number of noncovered
  workers. Because this table includes workers who worked in a
  noncovered job at any time during the year, it shows a higher number
  of noncovered workers than does table 1-7, which is based on coverage
  status in December of each year.
\3\ Excludes students.
\4\ Includes students employed at both public and private colleges and
  universities.

 Source: Office of the Chief Actuary, Social Security Administration.


             TABLE 1-7.--CIVILIAN WORKERS COVERED BY SOCIAL SECURITY SYSTEM, SELECTED YEARS 1939-99
                                                  [In millions]
----------------------------------------------------------------------------------------------------------------
                                                                           OASDI coverage     OASDI and HI-only
                                                          Paid civilian --------------------       coverage
                          Year                            employees \1\                     --------------------
                                                                          Number    Percent    Number    Percent
----------------------------------------------------------------------------------------------------------------
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
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       103.1      93.5      105.5      95.8
1987....................................................        113.3       106.5      94.0      109.1      96.3
1988....................................................        115.6       108.9      94.2      111.6      96.5
1989....................................................        117.4       110.8      94.4      113.5      96.7
1990....................................................        117.8       111.3      94.4      114.1      96.9
1991....................................................        117.1       110.8      94.7      113.6      97.0
1992....................................................        118.7       112.8      95.1      115.3      97.1
1993....................................................        121.3       115.6      95.3      118.0      97.2
1994....................................................        124.6       118.9      95.5      121.4      97.4
1995....................................................        125.0       119.4      95.5      121.9      97.5
1996....................................................        127.7       122.2      95.7      124.7      97.6
1997....................................................        130.6       125.2      95.9      127.7      97.8
1998....................................................        132.6       127.2      96.0      129.8      97.9
1999....................................................        134.6       129.2      96.0      131.8     98.0
----------------------------------------------------------------------------------------------------------------
\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 the Chief Actuary, Social Security Administration.


TABLE 1-8.--ESTIMATED SOCIAL SECURITY COVERAGE OF WORKERS WITH STATE AND
                    LOCAL GOVERNMENT EMPLOYMENT, 1997
            [Based on 1-percent sample; numbers in thousands]
------------------------------------------------------------------------
                                       All workers   Covered    Percent
                State                      \1\       workers    covered
------------------------------------------------------------------------
Alabama..............................         374         348         93
Alaska...............................          88          44         50
Arizona..............................         392         355         91
Arkansas.............................         207         191         92
California...........................       2,393       1,060         44
Colorado.............................         375         118         31
Connecticut..........................         258         178         69
Delaware.............................         105          64         61
Florida..............................       1,076         924         86
Georgia..............................         635         463         73
Hawaii...............................         124          82         66
Idaho................................         136         128         94
Illinois.............................       1,009         539         53
Indiana..............................         467         416         89
Iowa.................................         282         246         87
Kansas...............................         289         249         86
Kentucky.............................         356         273         77
Louisiana............................         774         110         14
Maine................................         128          63         49
Maryland.............................         416         381         92
Massachusetts........................         450          40          9
Michigan.............................         820         704         86
Minnesota............................         435         393         90
Mississippi..........................         240         218         91
Missouri.............................         473         367         78
Montana..............................          96          86         90
Nebraska.............................         173         153         88
Nevada...............................         122          38         31
New Hampshire........................         102          89         87
New Jersey...........................         613         573         93
New Mexico...........................         186         156         84
New York.............................       1,639       1,561         95
North Carolina.......................         656         602         92
North Dakota.........................          76          66         87
Ohio.................................         883          26          3
Oklahoma.............................         295         264         89
Oregon...............................         264         243         92
Pennsylvania.........................         768         734         96
Rhode Island.........................          72          58         81
South Carolina.......................         344         319         93
South Dakota.........................          80          74         93
Tennessee............................         449         412         92
Texas................................       1,571         872         56
Utah.................................         200         182         91
Vermont..............................          57          54         95
Virginia.............................         554         512         92
Washington...........................         487         425         87
West Virginia........................         152         134         88
Wisconsin............................         425         416         98
Wyoming..............................          70          59         84
                                      ----------------------------------
      Total..........................      22,636      16,062        71
------------------------------------------------------------------------
\1\ Includes seasonal and part-time workers for whom State and local
  government employment was not the major job.

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

                       Benefit and Recipient Data

         TABLE 1-9.--OASDI BENEFITS PAID, SELECTED YEARS 1940-99
                        [In millions of dollars]
------------------------------------------------------------------------
                  Year                     OASDI       OASI        DI
------------------------------------------------------------------------
1940...................................        $35        $35         NA
1950...................................        961        961         NA
1960...................................     11,245     10,677       $568
1970...................................     31,863     28,796      3,067
1980...................................    120,511    105,074     15,437
1985 \1\...............................    186,196    167,360     18,836
1990 \1\...............................    247,796    222,993     24,803
1995 \1\...............................    332,580    291,682     40,898
1999 \1\...............................    385,768    334,437    51,331
------------------------------------------------------------------------
\1\ Unnegotiated checks not deducted.

 NA--Not applicable.

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



            TABLE 1-10.--OASDI BENEFICIARIES IN CURRENT PAYMENT STATUS AND NEW AWARDS, DECEMBER 1999
----------------------------------------------------------------------------------------------------------------
                                                           Number in
                                                            current    Percent of   Average   Number of  Average
                   Type of beneficiary                      payment   beneficiary   monthly  new awards    new
                                                              (in      population   benefit      (in      award
                                                          thousands)                         thousands)
----------------------------------------------------------------------------------------------------------------
Retired workers.........................................      27,775        62.3       $804      1,690      $795
Wives and husbands of retired workers...................       2,811         6.3        411        276       338
Children of retired workers.............................         442         1.0        373        100       351
Disabled workers........................................       4,879        10.9        754        620       783
Wives and husbands of disabled workers..................         176         0.4        189         46       207
Children of disabled workers............................       1,468         3.3        216        378       212
Widowed mothers and fathers.............................         212         0.5        566         42       569
Surviving children......................................       1,885         4.2        526        295       539
Widows and widowers.....................................       4,745        10.6        775        440       715
Disabled widow(er)s.....................................         199         0.4        500         30       502
Parents.................................................           3       (\1\)        674      (\2\)       688
Special age-72..........................................           1       (\1\)        209      (\2\)       101
                                                         -------------------------------------------------------
    Totals and averages.................................      44,596       100.0        731      3,917      654
----------------------------------------------------------------------------------------------------------------
\1\ Less than 0.05 percent.
\2\ Fewer than 500.

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


  TABLE 1-11.--NUMBER AND PERCENTAGE OF OASDI RECIPIENTS AND AVERAGE BENEFITS BY AGE, SEX, AND MARITAL STATUS,
                                                  DECEMBER 1999
                                         [Based on a 10-percent sample]
----------------------------------------------------------------------------------------------------------------
                                                                                Percent  of   Average   Percent
                        Beneficiary group                            Number        total      monthly   of total
                                                                  (thousands)  beneficiaries  benefit   benefits
----------------------------------------------------------------------------------------------------------------
Retired workers.................................................       27,775        62.3        $804       68.6
    Retired men.................................................       14,321        32.1         905       39.8
    Retired women...............................................       13,453        30.2         698       28.8
Disabled workers................................................        4,879        10.9         754       11.3
    Disabled men................................................        2,801         6.2         846        7.3
    Disabled women..............................................        2,078         4.7         630        4.0
Spouses of retired workers......................................        2,811         6.3         411        3.5
    Wives of retired workers....................................        2,780         6.2         413        3.5
    Wives with entitled children................................           58         0.1         307        0.1
    Wives age 62 and older without entitled children............        2,722         6.1         415        3.5
    Husbands of retired workers.................................           30         0.1         235      (\1\)
Spouses of disabled workers.....................................          176         0.4         189        0.1
    Wives of disabled workers...................................          172         0.4         190        0.1
    Wives with entitled children................................          122         0.3         159        0.1
    Wives age 62 and older without entitled children............           50         0.1         265      (\1\)
    Husbands of disabled workers................................            4       (\1\)         145      (\1\)
Children........................................................        3,795         8.5         388        4.5
    Children of retired workers.................................          442         1.0         373        0.5
        Minor children (age 0-17)...............................          241         0.5         339        0.3
        Student children (age 18 and 19)........................           11       (\1\)         417      (\1\)
        Disabled children (age 18 and older)....................          190         0.4         413        0.2
    Children of deceased workers................................        1,885         4.2         526        3.0
        Minor children (age 0-17)...............................        1,354         3.0         515        2.1
        Student children (age 18 and 19)........................           56         0.1         596        0.1
        Disabled children (age 18 and older)....................          475         1.1         550        0.8
    Children of disabled workers................................        1,468         3.3         216        1.0
        Minor children (age 0-17)...............................        1,375         3.1         210        0.9
        Student children (age 18 and 19)........................           37         0.1         320      (\1\)
        Disabled children (age 18 and older)....................           56         0.1         311        0.1
Widowed mothers and fathers.....................................          212         0.5         566        0.4
    Widowed mothers.............................................          202         0.5         570        0.4
    Widowed fathers.............................................           10       (\1\)         474      (\1\)
Widows and widowers (nondisabled)...............................        4,745        10.6         775       11.3
    Widows (nondisabled)........................................        4,709        10.6         776       11.2
    Widowers (nondisabled)......................................           36         0.1         572        0.1
Widows and widowers (disabled)..................................          199         0.4         500        0.3
    Widows (disabled)...........................................          194         0.4         504        0.3
    Widowers (disabled).........................................            5       (\1\)         340      (\1\)
Parents total...................................................            3       (\1\)         674      (\1\)
Special age 72 (primary)........................................            1       (\1\)         209      (\1\)
                                                                 -----------------------------------------------
      Total OASI beneficiaries..................................       38,072        85.4         750       87.6
      Total DI beneficiaries....................................        6,524        14.6         618       12.4
      Total OASDI beneficiaries.................................       44,596       100.0         731     100.0
----------------------------------------------------------------------------------------------------------------
\1\ Less than 0.05 percent.

 Note.--Columns may not add due to rounding.

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


   TABLE 1-12.--PERCENTAGE OF PRIMARY INSURANCE AMOUNT (PIA) PAID FOR
                   DEPENDENTS' AND SURVIVORS' BENEFITS
------------------------------------------------------------------------
                                                                 Percent
                    Type of monthly benefit                      of PIA
------------------------------------------------------------------------
Dependents: \1\
  Wives, husbands--FRA........................................      50.0
  Mothers, fathers, children, grandchildren...................      50.0
Survivors: \1\
  Widows, widowers--FRA \2\...................................     100.0
  Dependent parent--age 62....................................      82.5
  Widows, widowers--age 60; disabled--ages 50-59..............      71.5
  Mothers, fathers, children..................................     75.0
------------------------------------------------------------------------
\1\ Subject to maximum family benefit limitation.
\2\ Subject to general limitation that the survivor cannot get a higher
  benefit than the deceased worker would be getting if alive.

 Note.--FRA = Full retirement age (currently 65, rising to 67 for
  workers born in 1960 or later).

Source: Congressional Research Service.


 TABLE 1-13.--NUMBER OF SOCIAL SECURITY RETIRED WORKER NEW BENEFIT AWARDS AND PERCENT RECEIVING REDUCED BENEFITS
                        BECAUSE OF ENTITLEMENT BEFORE AGE 65, SELECTED YEARS 1956-99 \1\
                                                  [In millions]
----------------------------------------------------------------------------------------------------------------
                                                                  Total              Men              Women
                         Year \1\                          -----------------------------------------------------
                                                             Number  Percent   Number  Percent   Number  Percent
----------------------------------------------------------------------------------------------------------------
1956......................................................      0.9       12      0.6       NA      0.4       31
1960......................................................      1.0       21      0.6       NA      0.4       60
1965......................................................      1.2       49      0.7       43      0.4       60
1970......................................................      1.3       63      0.8       57      0.5       72
1975......................................................      1.5       73      0.9       69      0.6       79
1980......................................................      1.6       76      0.9       73      0.7       80
1985......................................................      1.7       74      1.0       70      0.7       79
1990......................................................      1.7       74      1.0       71      0.7       78
1995......................................................      1.6       72      0.9       69      0.7       75
1999......................................................      1.7       70      0.9       69      0.7      73
----------------------------------------------------------------------------------------------------------------
\1\ As of December of given year; data for 1985-90 based on a 1-percent sample; data for other years based on
  100 percent. Includes conversions at age 65 from disability to retirement rolls.

 NA--Not applicable.

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



 TABLE 1-14.--PERCENTAGE OF WORKERS ELECTING SOCIAL SECURITY RETIREMENT BENEFITS AT VARIOUS AGES, SELECTED YEARS
                                                   1940-99 \1\
----------------------------------------------------------------------------------------------------------------
                                                                                                Ages 66
                                Year                                  Age 62  Ages 63-  Age 65    and    Average
                                                                                 64              older     age
----------------------------------------------------------------------------------------------------------------
1940...............................................................    (\2\)    (\2\)      8.3     91.7     68.7
1945...............................................................    (\2\)    (\2\)     17.9     82.1     70.0
1950...............................................................    (\2\)    (\2\)     23.1     76.9     68.5
1955...............................................................    (\2\)    (\2\)     41.2     58.8     68.2
1960...............................................................     10.0      7.9     35.3     46.7     66.2
1965...............................................................     23.0     17.7     23.4     35.9     65.9
1970...............................................................     27.8     23.2     36.9     12.1     64.2
1975...............................................................     35.7     24.5     31.1      8.7     63.9
1980...............................................................     40.5     22.2     30.7      6.6     63.7
1985...............................................................     57.2     21.1     17.7      4.0     63.6
1990...............................................................     56.6     20.2     16.6      6.7     63.6
1995...............................................................     58.3     19.5     16.3      6.0     63.6
1999...............................................................     58.6     18.8     15.6      7.0    63.7
----------------------------------------------------------------------------------------------------------------
\1\ The age distribution excludes conversions at age 65 from disability to retirement rolls. Disability
  conversions are included in the computation of the average age. Age in year of award for 1970-80. Age in month
  of award for 1985-99.
\2\ Retirement before age 65 was not available.

 Source: Social Security Administration.


                                         TABLE 1-15.--EARNINGS HISTORIES FOR HYPOTHETICAL WORKERS AGE 62 IN 2000
                                                               [Rounded to nearest dollar]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Nominal earnings                               Indexed earnings
                                Year                                ------------------------------------- Indexing -------------------------------------
                                                                      Low \1\   Average \2\  Maximum \3\   factor    Low \1\   Average \2\   Maximum \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1960...............................................................     $1,803      $4,007      $4,800     $7.2025  \4\ $12,9  \4\ $28,861       $34,572
                                                                                                                           88
1961...............................................................      1,839       4,087       4,800      7.0622  \4\ 12,98  \4\ 28,861     \4\ 33,898
                                                                                                                            8
1962...............................................................      1,931       4,291       4,800      6.7254  \4\ 12,98  \4\ 28,861     \4\ 32,282
                                                                                                                            8
1963...............................................................      1,978       4,397       4,800      6.5644  \4\ 12,98  \4\ 28,861     \4\ 31,509
                                                                                                                            8
1964...............................................................      2,059       4,576       4,800      6.3067  \4\ 12,98  \4\ 28,861     \4\ 30,272
                                                                                                                            8
1965...............................................................      2,096       4,659       4,800      6.1951     12,988      28,861     \4\ 29,737
1966...............................................................      2,222       4,938       6,600      5.8443     12,988      28,861         38,573
1967...............................................................      2,346       5,213       6,600      5.5360     12,988      28,861         36,537
1968...............................................................      2,507       5,572       7,800      5.1800     12,988      28,861         40,404
1969...............................................................      2,652       5,894       7,800      4.8969     12,988      28,861         38,196
1970...............................................................      2,784       6,186       7,800      4.6654     12,988      28,861         36,390
1971...............................................................      2,924       6,497       7,800      4.4422     12,988      28,861         34,649
1972...............................................................      3,210       7,134       9,000      4.0457     12,988      28,861         36,412
1973...............................................................      3,411       7,580      10,800      3.8075     12,988      28,861         41,121
1974...............................................................      3,614       8,031      13,200      3.5939     12,988      28,861         47,439
1975...............................................................      3,884       8,631      14,100      3.3440     12,988      28,861         47,150
1976...............................................................      4,152       9,226      15,300      3.1281     12,988      28,861         47,860
1977...............................................................      4,401       9,779      16,500      2.9512     12,988      28,861         48,695
1978...............................................................      4,750      10,556      17,700      2.7341     12,988      28,861         48,394
1979...............................................................      5,166      11,479      22,900      2.5142     12,988      28,861         57,575
1980...............................................................      5,631      12,513      25,900      2.3064     12,988      28,861         59,737
1981...............................................................      6,198      13,773      29,700      2.0955     12,988      28,861         62,236
1982...............................................................      6,539      14,531      32,400      1.9862     12,988      28,861         64,351
1983...............................................................      6,858      15,239      35,700      1.8939     12,988      28,861         67,612
1984...............................................................      7,261      16,135      37,800      1.7887     12,988      28,861         67,614
1985...............................................................      7,570      16,823      39,600      1.7156     12,988      28,861         67,940
1986...............................................................      7,795      17,322      42,000      1.6662     12,988      28,861         69,980
1987...............................................................      8,292      18,427      43,800      1.5663     12,988      28,861         68,604
1988...............................................................      8,700      19,334      45,000      1.4928     12,988      28,861         67,175
1989...............................................................      9,045      20,100      48,000      1.4359     12,988      28,861         68,924
1990...............................................................      9,463      21,028      51,300      1.3725     12,988      28,861         70,411
1991...............................................................      9,815      21,812      53,400      1.3232     12,988      28,861         70,660
1992...............................................................     10,321      22,935      55,500      1.2584     12,988      28,861         69,840
1993...............................................................     10,410      23,133      57,600      1.2476     12,988      28,861         71,865
1994...............................................................     10,689      23,754      60,600      1.2150     12,988      28,861         73,631
1995...............................................................     11,118      24,706      61,200      1.1682     12,988      28,861         71,495
1996...............................................................     11,661      25,914      62,700      1.1137     12,988      28,861         69,832
1997...............................................................     12,342      27,426      65,400      1.0523     12,988      28,861         68,823
1998...............................................................     12,988      28,861      68,400      1.0000     12,988      28,861         68,400
1999...............................................................  \5\ 13,63  \5\ 30,299      72,600      1.0000  \5\ 13,63  \5\ 30,299        72,600
                                                                             4                                              4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Worker with earnings equal to 45 percent of the Social Security average wage index.
\2\ Worker with earnings equal to the Social Security average wage index.
\3\ Worker with earnings equal to the Social Security maximum taxable earnings.
\4\ Dropout years.
\5\ Estimated.

 Source: Office of the Chief Actuary, Social Security Administration.


 TABLE 1-16.--MONTHLY BENEFIT AMOUNTS FOR SELECTED BENEFICIARY FAMILIES
 WITH FIRST ELIGIBILITY IN 1999, FOR SELECTED WAGE LEVELS, DECEMBER 1999
------------------------------------------------------------------------
                                      Workers with yearly earnings equal
                                                      to
                                     -----------------------------------
         Beneficiary family            Federal                 Maximum
                                       minimum    Average      taxable
                                       wage \1\   wage \2\  earnings \3\
------------------------------------------------------------------------
Retired-worker families: \4\
  Average indexed monthly earnings..  $1,106.00  $2,288.00    $4,463.00
  Primary insurance amount..........     662.30   1,049.60     1,515.10
  Maximum family benefit............     995.60   1,916.20     2,651.50
  Monthly benefit amount:
    Retired worker claiming benefits
     at age 62:
      Worker alone..................     529.00     839.00     1,212.00
      Worker with spouse claiming
       benefits at--
        Age 65 or older.............     860.00   1,363.00     1,969.00
        Age 62......................     777.00   1,232.00     1,780.00
Survivor families: \5\
  Average indexed monthly earnings..     943.00   2,294.00     5,567.00
  Primary insurance amount..........     608.80   1,051.50     1,684.60
  Maximum family benefit............     913.30   1,918.80     2,948.30
  Monthly benefit amount:
    Survivors of worker deceased at
 age 40:
      One surviving child...........     456.00     788.00     1,263.00
      Widowed mother or father and       912.00   1,576.00     2,526.00
       one child....................
      Widowed mother or father and       912.00   1,917.00     2,946.00
       two children.................
Disabled worker families: \6\
  Average indexed monthly earnings..   1,027.00   2,290.00     5,182.00
  Primary insurance amount..........     636.40   1,050.30     1,625.60
  Maximum family benefit............     893.80   1,575.40     2,438.30
  Monthly benefit amount:
    Disabled worker age 50: \7\
      Worker alone..................     636.00   1,050.00     1,625.00
      Worker, spouse, and one child.     892.00   1,574.00    2,437.00
------------------------------------------------------------------------
\1\ Annual earnings are calculated by multiplying the Federal minimum
  wage by 2,080 hours. Increases in the minimum wage during the year are
  prorated.
\2\ Worker earned the national average wage in each year used in the
  computation of the benefit.
\3\ Worker earned the maximum amount of wages that can be credited to a
  worker's Social Security record in all years used in the computation
  of the benefit.
\4\ Assumes the worker began to work at age 22, retired at age 62 in
  1999 with maximum reduction, and had no prior period of disability.
\5\ Assumes the deceased worker began to work at age 22, died in 1999 at
  age 40, had no earnings in that year, and had no prior period of
  disability.
\6\ Assumes the worker began work at age 22, became disabled in 1999 at
  age 50, and had no prior disability.
\7\ The 1980 amendments to the Social Security Act provide for a
  different family maximum amount for disability cases. For disabled
  workers entitled after June 1980, the maximum is the smaller of: (1)
  85 percent of the worker's average indexed monthly earnings (AIME) (or
  100 percent of the PIA, if larger); or (2) 150 percent of the PIA.

 Source: Social Security Administration.


                    TABLE 1-17.--SOCIAL SECURITY REPLACEMENT RATES, SELECTED YEARS 1940-2040
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                                  Replacement rates \1\
                                                            Age at     -----------------------------------------
                                                        retirement \2\  Low earnings     Average       Maximum
                                                                             \3\      earnings \4\  earnings \5\
----------------------------------------------------------------------------------------------------------------
1940..................................................             65         39.4          26.2          16.5
1950..................................................             65         33.2          19.7          21.2
1960..................................................             65         49.1          33.3          29.8
1965..................................................             65         45.6          31.4          32.9
1970..................................................             65         48.5          34.3          29.2
1975..................................................             65         59.9          42.3          30.1
1976..................................................             65         60.1          43.7          32.1
1977..................................................             65         61.0          44.8          33.5
1978..................................................             65         63.4          46.7          34.7
1979..................................................             65         64.4          48.1          36.1
1980..................................................             65         68.1          51.1          32.5
1981..................................................             65         72.5          54.4          33.4
1982..................................................             65         65.8          48.7          28.6
1983..................................................             65         63.5          45.8          26.3
1984..................................................             65         62.6          42.8          23.7
1985..................................................             65         61.1          40.9          22.8
1986..................................................             65         60.3          41.1          23.1
1987..................................................             65         59.5          41.2          22.6
1988..................................................             65         58.4          40.9          23.0
1989..................................................             65         57.9          41.6          24.1
1990..................................................             65         58.2          43.2          24.5
2000..................................................             65         52.8          39.2          23.7
2010..................................................             66         56.6          42.2          27.1
2020..................................................       66 and 2         56.4          41.9          27.6
                                                               months
2030..................................................             67         56.2          41.9          27.5
2040 \6\..............................................             67         56.2          41.9         27.5
----------------------------------------------------------------------------------------------------------------
\1\ Total monthly benefits payable for year of entitlement at FRA expressed as percent of earnings in year prior
  to entitlement for workers with steady career earnings.
\2\ Full retirement age will rise from 65 starting with workers attaining age 62 in 2000 and will ultimately
  reach 67 for workers attaining age 62 in 2022 and later.
\3\ Earnings equal to 45 percent of the Social Security average-wage index.
\4\ Earnings equal to the Social Security average-wage index.
\5\ Earnings equal to the maximum wage taxable for Social Security purposes.
\6\ Assumes full benefits remain payable despite projection in 2000 Trustees' Report that the trust funds will
  be depleted in 2037.

Note.--Projections are based on the intermediate assumptions of the 2000 OASDI Trustees' Report.

 Source: Office of the Chief Actuary, Social Security Administration.

                          Benefit Adjustments

TABLE 1-18.--SOCIAL SECURITY BENEFIT INCREASES FROM THE BEGINNING OF THE
                      PROGRAM THROUGH JANUARY 2000
                              [In percent]
------------------------------------------------------------------------
                                                              Amount of
                     Date increase paid                        increase
------------------------------------------------------------------------
January 2000...............................................          2.4
January 1999...............................................          1.3
January 1998...............................................          2.1
January 1997...............................................          2.9
January 1996...............................................          2.6
January 1995...............................................          2.8
January 1994...............................................          2.6
January 1993...............................................          3.0
January 1992...............................................          3.7
January 1991...............................................          5.4
January 1990...............................................          4.7
January 1989...............................................          4.0
January 1988...............................................          4.2
January 1987...............................................          1.3
January 1986...............................................          3.1
January 1985...............................................          3.5
January 1984...............................................          3.5
July 1982..................................................          7.4
July 1981..................................................         11.2
July 1980..................................................         14.3
July 1979..................................................          9.9
July 1978..................................................          6.5
July 1977..................................................          5.9
July 1976..................................................          6.4
July 1975 \1\..............................................          8.0
April/July 1974 \2\........................................         11.0
October 1972...............................................         20.0
February 1971..............................................         10.0
February 1970..............................................         15.0
March 1968.................................................         13.0
February 1965..............................................          7.0
February 1959..............................................          7.0
October 1954...............................................         13.0
October 1952...............................................         12.5
October 1950 \3\...........................................        77.0
------------------------------------------------------------------------
\1\ Automatic cost-of-living adjustments (COLAs) began.
\2\ Increase came in two steps.
\3\ First increase paid in October 1950.

 Source: Social Security Administration.


TABLE 1-19.--HISTORICAL COMPARISON OF AVERAGE WAGE INCREASES TO BENEFIT INCREASES AND CHANGES IN THE CPI-W, 1965-
                                                       99
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                    Increase in wages   Increase in CPI \2\      Increase in
                                                           \1\         ---------------------     benefits \3\
                                                  ---------------------                     --------------------
                  Calendar year                             Cumulative    Over   Cumulative           Cumulative
                                                     Over    from each   prior    from each    Over    from each
                                                    prior     year to     year     year to    prior     year to
                                                     year      1999                 1999       year      1999
----------------------------------------------------------------------------------------------------------------
1965.............................................      1.8       550.4      1.6       414.9      7.0       523.9
1970.............................................      5.0       389.8      5.7       318.5     15.0       380.1
1971.............................................      5.0       366.3      4.4       301.1     10.0       336.5
1972.............................................      9.8       324.7      3.4       287.7     20.0       263.7
1973.............................................      6.3       299.7      6.2       265.2      0.0       263.7
1974.............................................      5.9       277.3     11.0       229.1     11.0       227.7
1975.............................................      7.5       251.0      9.1       201.7      8.0       203.4
1976.............................................      6.9       228.4      5.7       185.4      6.4       185.2
1977.............................................      6.0       209.8      6.5       168.0      5.9       169.3
1978.............................................      7.9       187.0      7.7       148.8      6.5       152.8
1979.............................................      8.7       163.9     11.4       123.3      9.9       130.1
1980.............................................      9.0       142.1     13.4        96.9     14.3       101.3
1981.............................................     10.1       120.0     10.3        78.6     11.2        81.0
1982.............................................      5.5       108.5      6.0        68.5      7.4        68.5
1983.............................................      4.9        98.8      3.0        63.6  \4\ 3.5        62.8
1984.............................................      5.9        87.8      3.5        58.0      3.5        57.3
1985.............................................      4.3        80.1      3.5        52.7      3.1        52.6
1986.............................................      3.0        74.9      1.6        50.3      1.3        50.6
1987.............................................      6.4        64.4      3.6        45.1      4.2        44.6
1988.............................................      4.9        56.7      4.0        39.5      4.0        39.0
1989.............................................      4.0        50.7      4.8        33.1      4.7        32.8
1990.............................................      4.6        44.1      5.2        26.5      5.4        26.0
1991.............................................      3.7        38.9      4.1        21.5      3.7        21.5
1992.............................................      5.2        32.1      2.9        18.1      3.0        17.9
1993.............................................      0.9        31.0      2.8        14.9      2.6        14.9
1994.............................................      2.7        27.6      2.5        12.1      2.8        11.8
1995.............................................      4.0        22.6      2.9         9.0      2.6         9.0
1996.............................................      4.9        16.9      2.9         5.9      2.9         5.9
1997.............................................      5.8        10.5      2.3         3.6      2.1         3.7
1998.............................................      5.2         5.0      1.3         2.2      1.3         2.4
1999.............................................  \5\ 5.0          NA      2.2          NA  \6\ 2.4         NA
----------------------------------------------------------------------------------------------------------------
\1\ Average annual wages used to index earnings records.
\2\ Increase in annual average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
\3\ Legislated benefit increases through 1975 and increases based on the Consumer Price Index (CPI) thereafter.
  After 1975, the CPI and benefit increases are different because they reflect the change in prices measured
  over different periods of time.
\4\ As a result of the Social Security Amendments of 1983, COLAs are provided on a calendar year basis, with the
  benefit increase payable in January rather than July. The July 1983 COLA was delayed to January 1984. This
  delay and a change in the computation period led to 6 months of 1983 (first quarter-third quarter) not being
  accounted for in any COLA increase--a period in which the CPI increased 2.4 percent.
\5\ Preliminary.
\6\ Effective December 1999, payable in January 2000.

 NA--Not applicable.

 Source: Office of the Chief Actuary, Social Security Administration.


 TABLE 1-20.--INCREASES IN FULL RETIREMENT AGE AND DELAYED RETIREMENT CREDITS, WITH RESULTING BENEFIT, AS A PERCENT OF PRIMARY INSURANCE AMOUNT, PAYABLE
                                                   AT SELECTED AGES, FOR PERSONS BORN IN 1924 OR LATER
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Credit for each      Benefit, as a percent of PIA, beginning at age--
                                                                               year of delayed ---------------------------------------------------------
          Year of birth            Age 62 attained in--   Full retirement age     retirement
                                                                                  after full        62         65         66          67          70
                                                                                retirement age
--------------------------------------------------------------------------------------------------------------------------------------------------------
1924.............................  1986................  65..................                3         80        100         103         106         115
1925-26..........................  1987-88.............  65..................           3\1/2\         80        100    103\1/2\         107    117\1/2\
1927-28..........................  1989-90.............  65..................                4         80        100         104         108         120
1929-30..........................  1991-92.............  65..................           4\1/2\         80        100    104\1/2\         109    122\1/2\
1931-32..........................  1993-94.............  65..................                5         80        100         105         110         125
1933-34..........................  1995-96.............  65..................           5\1/2\         80        100    105\1/2\         111    127\1/2\
1935-36..........................  1997-98.............  65..................                6         80        100         106         112         130
1937.............................  1999................  65..................           6\1/2\         80        100    106\1/2\         113    132\1/2\
1938.............................  2000................  65 and 2 months.....           6\1/2\    79\1/6\    98\8/9\   105\5/12\  111\11/12\   131\5/12\
1939.............................  2001................  65 and 4 months.....                7    78\1/3\    97\7/9\    104\2/3\    111\2/3\    132\2/3\
1940.............................  2002................  65 and 6 months.....                7    77\1/2\    96\2/3\    103\1/2\    110\1/2\    131\1/2\
1941.............................  2003................  65 and 8 months.....           7\1/2\    76\2/3\    95\5/9\    102\1/2\         110    132\1/2\
1942.............................  2004................  65 and 10 months....           7\1/2\    75\5/6\    94\4/9\    101\1/4\    108\3/4\    131\1/4\
1943-54..........................  2005-16.............  66..................                8         75    93\1/3\         100         108         132
1955.............................  2017................  66 and 2 months.....                8    74\1/6\    92\2/9\     98\8/9\    106\2/3\    130\2/3\
1956.............................  2018................  66 and 4 months.....                8    73\1/3\    91\1/9\     97\7/9\    105\1/3\    129\1/3\
1957.............................  2019................  66 and 6 months.....                8    72\1/2\         90     96\2/3\         104         128
1958.............................  2020................  66 and 8 months.....                8    71\2/3\    88\8/9\     95\5/9\    102\2/3\    126\2/3\
1959.............................  2021................  66 and 10 months....                8    70\5/6\    87\7/9\     94\4/9\    101\1/3\    125\1/3\
1960 or later....................  2022 or later.......  67..................                8         70    86\2/3\     93\1/3\         100        124
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Ballantyne, H.C. (1984).


              TABLE 1-21.--WINDFALL BENEFIT FORMULA FACTORS
------------------------------------------------------------------------
                                                                 First
                                                               factor in
              Years of Social Security coverage                 formula
                                                               (percent)
------------------------------------------------------------------------
20 or fewer..................................................      40
21...........................................................      45
22...........................................................      50
23...........................................................      55
24...........................................................      60
25...........................................................      65
26...........................................................      70
27...........................................................      75
28...........................................................      80
29...........................................................      85
30 or more...................................................     90
------------------------------------------------------------------------
Source: Social Security Administration.

          Effect of Current Earnings and Taxation of Benefits

  TABLE 1-22.--ANNUAL EARNINGS EXEMPT FROM THE EARNINGS LIMIT, CALENDAR
                             YEARS 1975-2009
------------------------------------------------------------------------
                                                                FRA and
                       Year                         Under FRA   over \1\
------------------------------------------------------------------------
1975..............................................     $2,520     $2,520
1976..............................................      2,760      2,760
1977..............................................      3,000      3,000
1978..............................................      3,240      4,000
1979..............................................      3,480      4,500
1980..............................................      3,720      5,000
1981..............................................      4,080      5,500
1982..............................................      4,440      6,000
1983..............................................      4,920      6,600
1984..............................................      5,160      6,960
1985..............................................      5,400      7,320
1986..............................................      5,760      7,800
1987..............................................      6,000      8,160
1988..............................................      6,120      8,400
1989..............................................      6,480      8,880
1990..............................................      6,840      9,360
1991..............................................      7,080      9,720
1992..............................................      7,440     10,200
1993..............................................      7,680     10,560
1994..............................................      8,040     11,160
1995..............................................      8,160     11,280
1996..............................................      8,280     12,500
1997..............................................      8,640     13,500
1998..............................................      9,120     14,500
1999..............................................      9,600     15,500
2000..............................................     10,080     17,000
2001..............................................  \2\ 10,68     25,000
                                                            0
2002..............................................  \2\ 11,16     30,000
                                                            0
2003..............................................  \2\ 11,64  \2\ 31,32
                                                            0          0
2004..............................................  \2\ 12,12  \2\ 32,64
                                                            0          0
2005..............................................  \2\ 12,60  \2\ 33,96
                                                            0          0
2006..............................................  \2\ 13,08  \2\ 35,28
                                                            0          0
2007..............................................  \2\ 13,68  \2\ 36,84
                                                            0          0
2008..............................................  \2\ 14,16  \2\ 38,28
                                                            0          0
2009..............................................  \2\ 14,76  \2\ 39,96
                                                            0         0
------------------------------------------------------------------------
\1\ In 1955-82, retirement earnings test did not apply at ages 72 and
  older; beginning in 1983, it does not apply at ages 70 and older.
  Beginning in 2000, the retirement earnings limit no longer applies to
  persons at the FRA. However, during the year in which a person reaches
  the FRA, the annual exempt amounts shown apply for months preceding
  the attainment of the FRA. Amounts for 1978-82 specified by Public Law
  95-216; for 1996-2002, Public Law 104-121. After 2003, the annual
  exempt amount is indexed to average wage growth.
\2\ Based on economic assumptions in the 2000 Annual Report of the Board
  of Trustees of the Federal Old-Age and Survivors Insurance (OASI) and
  Disability Insurance Trust Funds.

 Note.--FRA = Full retirement age (currently 65, rising to 67 for
  workers born in 1960 or later).

Source: Office of the Chief Actuary, Social Security Administration.


    TABLE 1-23.--NUMBER OF RETIRED WORKERS WITH EARNINGS IN 1997 \1\
------------------------------------------------------------------------
               Total earnings                  Ages 62-64    Ages 65-69
------------------------------------------------------------------------
$1-4,999....................................       289,600       915,400
5,000-9,999.................................       206,700       507,200
10,000-14,999...............................        43,100       338,800
15,000-19,999...............................        17,100       107,800
20,000-24,999...............................         6,700        63,900
25,000-29,999...............................         5,400        45,400
30,000-34,999...............................         3,200        34,400
35,000-39,999...............................         2,300        25,800
40,000-44,999...............................         1,300        19,800
45,000-49,999...............................           700        17,000
50,000-54,999...............................           900        14,200
55,000-59,999...............................           400        11,100
60,000-64,999...............................           900         9,700
65,000-69,999...............................           400         7,300
70,000-74,999...............................           500         6,900
75,000-79,999...............................           200         6,300
80,000-84,999...............................         (\2\)         5,100
85,000-89,999...............................         (\2\)         3,800
90,000-94,999...............................         (\2\)         3,400
95,000-99,999...............................         (\2\)         2,800
100,000 +...................................         1,400        35,900
                                             ---------------------------
      Total.................................       581,200    2,182,000
------------------------------------------------------------------------
\1\ Includes retired workers entitled to Social Security benefits as of
  December 31, 1996.
\2\ Fewer than 300 workers.

Source: Office of Research, Evaluation and Statistics, Social Security
  Administration; 1997 1 Percent Continuous Work History Sample.


  TABLE 1-24.--MONTHLY SUBSTANTIAL GAINFUL ACTIVITY (SGA) AMOUNTS SINCE
                                  1968
------------------------------------------------------------------------
                                             SGA amounts    SGA amounts
                   Year                      for nonblind    for blind
                                            beneficiaries  beneficiaries
------------------------------------------------------------------------
1968-73...................................        $140           $140
1974-75...................................         200            200
1976......................................         230            230
1977......................................         240            240
1978......................................         260            334
1979......................................         280            375
1980......................................         300            417
1981......................................         300            459
1982......................................         300            500
1983......................................         300            550
1984......................................         300            580
1985......................................         300            610
1986......................................         300            650
1987......................................         300            680
1988......................................         300            700
1989......................................         300            740
1990......................................         500            780
1991......................................         500            810
1992......................................         500            850
1993......................................         500            880
1994......................................         500            930
1995......................................         500            940
1996......................................         500            960
1997......................................         500          1,000
1998......................................         500          1,050
1999......................................     \1\ 500          1,100
2000......................................     \2\ 700          1,170
------------------------------------------------------------------------
\1\ Through June 30, 1999.
\2\ July 1, 1999 and later.

Note.--SGA amounts for nonblind beneficiaries are set by regulation by
  the Commissioner of Social Security. SGA amounts for blind
  beneficiaries are indexed to increases in the average wage level.
  Before 1978, SGA levels for blind beneficiaries were the same as those
  for nonblind beneficiaries.

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


                          TABLE 1-25.--EFFECT OF TAXING SOCIAL SECURITY BENEFITS BY INCOME CLASS, PROJECTED CALENDAR YEAR 2000
                                                 [Numbers of persons in thousands; dollars in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         Persons age 65 and older                        All recipients                 Aggregate
                                  ------------------------------------------------------------------------------------- amount of  Aggregate  Taxes as a
  Level of individual or couple                 Number        Percent     Number of Social     Number        Percent      Social   amount of  percent of
            income \1\              Number    affected by   affected by       Security       affected by   affected by   Security   taxes on   benefits
                                             taxation \2\  taxation \2\  beneficiaries \3\  taxation \3\  taxation \3\   benefits   benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000................     5,358           0            0             7,410                0           0       $46,394          0         0
$10,000-$15,000..................     3,849           0            0             5,064                0           0        46,029          0         0
$15,000-$20,000..................     3,425           0            0             4,244                0           0        39,692          0         0
$20,000-$25,000..................     2,853           0            0             3,408                0           0        34,163          0         0
$25,000-$30,000..................     2,581          66            3             2,964              105           4        28,876        $12         0
$30,000-$40,000..................     4,180       1,263           30             4,747            1,490          31        47,016        506         1
$40,000-$50,000..................     3,158       2,664           84             3,702            3,189          86        36,520      1,761         5
$50,000-$100,000.................     5,149       4,660           91             5,749            5,605          97        63,721      8,833        14
Over $100,000....................     2,212       1,900           86             2,133            2,128         100        25,526      6,187        24
                                  ----------------------------------------------------------------------------------------------------------------------
    All..........................    32,765      10,553           32            39,421           12,517          32       367,937     17,299         5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Cash income (based on income of tax filing unit) plus capital gains realizations.
\2\ Some elderly individuals do not receive Social Security benefits and thus are not affected by taxation of benefits.
\3\ Includes beneficiaries under and over age 65.

 Note.--Aggregate benefits and revenues are understated by about 10 percent because of benefits paid abroad, deaths of recipients before March
  interview, and exclusion of institutionalized beneficiaries. The number of beneficiaries is also understated.

 Source: Congressional Budget Office simulations based on data from the Current Population Survey.


 TABLE 1-26.--TAXATION OF OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE (OASDI) BENEFITS BY TRUST FUNDS CREDITED
                    AND AS A PERCENT OF TOTAL OASDI BENEFIT PAYMENTS, FISCAL YEARS 1984-2005
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                               Taxes credited to trust       Taxes credited to
                                                              funds from the taxation of  trust funds as percent
                                                    Total           OASDI benefits           of OASDI benefits
                   Fiscal year                      OASDI   ----------------------------------------------------
                                                   benefits            Hospital
                                                              OASDI   insurance   Total    OASDI    HI     Total
                                                                         (HI)
----------------------------------------------------------------------------------------------------------------
1984............................................   $173,603   $2,275        NA    $2,275     1.3      NA     1.3
1985............................................    183,959    3,368        NA     3,368     1.8      NA     1.8
1986............................................    193,869    3,558        NA     3,558     1.8      NA     1.8
1987............................................    202,430    3,307        NA     3,307     1.6      NA     1.6
1988............................................    213,907    3,390        NA     3,390     1.6      NA     1.6
1989............................................    227,150    3,772        NA     3,772     1.7      NA     1.7
1990............................................    243,275    3,081        NA     3,081     1.3      NA     1.3
1991............................................    263,104    5,921        NA     5,921     2.3      NA     2.3
1992............................................    281,650    6,237        NA     6,237     2.2      NA     2.2
1993............................................    298,176    6,161        NA     6,161     2.1      NA     2.1
1994............................................    313,129    5,656    $1,625     7,281     1.8     0.5     2.3
1995............................................    328,841    5,449     3,883     9,332     1.7     1.2     2.8
1996............................................    343,235    6,155     4,039    10,194     1.8     1.2     3.0
1997............................................    358,281    6,862     3,541    10,403     1.9     1.0     2.9
1998............................................    371,875    9,121     5,036    14,157     2.5     1.4     3.8
1999............................................    382,843   10,803     6,498    17,301     2.8     1.7     4.5
2000 \1\........................................    398,439   12,042     7,150    19,192     3.0     1.8     4.8
2001 \1\........................................    419,263   11,010     6,836    17,846     2.6     1.6     4.3
2002 \1\........................................    442,209   11,590     7,397    18,987     2.6     1.7     4.3
2003 \1\........................................    466,596   12,202     8,001    20,203     2.6     1.7     4.3
2004 \1\........................................    493,328   13,029     8,594    21,623     2.6     1.7     4.4
2005 \1\........................................    522,809   14,031     9,158    23,189     2.7     1.8    4.4
----------------------------------------------------------------------------------------------------------------
\1\ Projected; based on intermediate assumptions in the 2000 Annual Report of the Board of Trustees of the
  Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

 NA--Not applicable.

 Note.--Tax amounts are the amounts collected through the Federal income tax system (including adjustments for
  actual experience in prior years) plus, for OASDI only, taxes withheld from the OASDI benefits of certain
  nonresident aliens.

 Source: Office of the Chief Actuary, Social Security Administration.


  TABLE 1-27.--WORKSHEET FOR DETERMINING THE TAXABLE PORTION OF SOCIAL
                            SECURITY BENEFITS



1. Enter yearly Social Security benefits                ________________
2. Multiply line 1 by 0.50                              ________________
3. Enter adjusted gross income plus tax-free            ________________
 interest
4. Add line 2 and line 3                                ________________
5. Enter: $25,000 if single or head of                  ________________
 household; $32,000 if married filing jointly;
 $0 if married filing separately
6. Subtract line 5 from line 4                          ________________
(If result on line 6 is zero or a negative
 number, stop; no benefits are taxable.)
7. Divide line 6 by 2                                   ________________
8. Enter smaller of amounts on line 2 or line 7         ________________
9. Enter amount on line 4                               ________________
10. Enter: $34,000 if single or head of                 ________________
 household; $44,000 if married filing jointly;
 $0 if married filing separately
11. Subtract line 10 from line 9                        ________________
(If result on line 11 is zero or a negative
 number, stop; amount on line 8 is amount of
 benefits taxable.)
12. Multiply line 11 by 0.85                            ________________
13. Enter smallest of: amount on line 8; $4,500         ________________
 if single or head of household; $6,000 if
 married filing jointly; $0 if married filing
 separately
14. Add amounts on line 12 and line 13                  ________________
15. Multiply line 1 by 0.85                             ________________
16. Enter smaller of amounts on line 14 or line         ________________
 15
(The amount on line 16 is the total amount of
 benefits taxable.)

Source: Congressional Research Service.

                            Trust Fund Data

 TABLE 1-28.--PROJECTED SOCIAL SECURITY TRUST FUNDS' INCOME, OUTGO, AND END-OF-YEAR BALANCES, SELECTED CALENDAR
                                                  YEARS 2000-35
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                        End-of-
                      Calendar year                           Tax      Interest    Total      Outgo       year
                                                             income     income     income               balance
----------------------------------------------------------------------------------------------------------------
2000.....................................................       $501        $65       $566       $410     $1,052
2005.....................................................        635        120        755        539      2,022
2010.....................................................        810        194      1,004        737      3,263
2015.....................................................      1,035        281      1,315      1,045      4,640
2020.....................................................      1,310        352      1,662      1,492      5,739
2025.....................................................      1,650        376      2,026      2,065      6,008
2030.....................................................      2,078        316      2,394      2,762      4,866
2035.....................................................      2,620        136      2,757      3,572     1,729
----------------------------------------------------------------------------------------------------------------
Source: Board of Trustees (2000; intermediate assumptions).



   TABLE 1-29.--ESTIMATED OPERATIONS OF THE COMBINED OASI AND DISABILITY INSURANCE (DI) TRUST FUNDS, SELECTED
                                             CALENDAR YEARS 2000-35
                                     [In billions of constant 2000 dollars]
----------------------------------------------------------------------------------------------------------------
                                                             Income                                     Balance
                      Calendar year                        excluding   Interest    Total      Outgo    at end of
                                                            interest    income     income                 year
----------------------------------------------------------------------------------------------------------------
2000.....................................................     $500.7      $64.9     $565.7     $410.3   $1,051.5
2001.....................................................      512.7       73.4      586.2      419.6    1.187.4
2002.....................................................      521.1       81.5      602.5      429.5    1,326.0
2003.....................................................      528.6       88.6      617.1      439.6    1,464.1
2004.....................................................      536.2       95.7      631.9      450.6    1,600.5
2005.....................................................      545.3      103.2      648.5      462.4    1,736.1
2006.....................................................      552.8      110.8      663.6      475.0    1,869.1
2007.....................................................      562.4      118.5      680.9      488.6    2,001.8
2008.....................................................      571.0      126.3      697.3      503.2    2,131.8
2009.....................................................      580.9      133.9      714.8      519.7    2,259.0
2010.....................................................      591.5      141.6      733.1      538.1    2,381.8
2015.....................................................      642.0      174.1      816.1      648.6    2,879.8
2020.....................................................      691.1      185.8      876.9      786.9    3,027.7
2025.....................................................      740.0      168.7      908.7      926.6    2,694.8
2030.....................................................      792.4      120.6      912.9    1,053.4    1,855.6
2035.....................................................      849.5       44.2      893.7    1,157.9      560.4
----------------------------------------------------------------------------------------------------------------
Note.--Figures are not shown for years after which the combined OASI and DI Trust Funds are estimated to be
  exhausted (year 2037 under intermediate assumptions). Adjustment from current to constant dollars is by the
  CPI.

 Source: Board of Trustees (2000; intermediate assumptions).


                    TABLE 1-30.--PROJECTED BUDGET SURPLUSES (WITH AND WITHOUT SOCIAL SECURITY) AND FEDERAL DEBT, FISCAL YEARS 2000-10
                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                  Total
                                                     2000    2001    2002    2003    2004    2005    2006    2007    2008     2009       2010    2001-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Federal budget surpluses with and without Social Security
                                                   -----------------------------------------------------------------------------------------------------
Assuming discretionary spending grows at the rate
 of inflation after 2000:
    With Social Security..........................    $232    $268    $312    $345    $369    $402    $469    $523    $565      $625       $685   $4,561
    Without Social Security.......................      84     102     126     143     154     169     222     260     288       332        377    2,173
                                                                                     Federal debt/or net asset position
                                                   -----------------------------------------------------------------------------------------------------
Assuming discretionary spending grows at the rate
 of inflation after 2000:
    Debt held by the public.......................   3,409   3,158   2,854   2,522   2,165   1,774   1,315  \1\ 80  \1\ 24  \1\ -376  \1\ -1,05
                                                                                                                 0       2                    4
    Debt held by the Social Security Trust Funds..   1,005   1,171   1,358   1,560   1,775   2,007   2,254   2,517   2,795     3,087      3,394
    Debt held by other government accounts........   1,202   1,287   1,384   1,481   1,573   1,662   1,762   1,858   1,954     2,050      2,145
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Represents the net publicly-held debt of the government after subtracting excess cash held in depository accounts from debt still outstanding at end
  of fiscal year. Assumes portion of debt is not redeemable with the budget surplus of that year.

Note.--The figures shown above represent only one of three alternative sets of projections made by CBO. It reflects a scenario under which Federal
  discretionary spending would rise with inflation after fiscal year 2000. Two other Congressional Budget Office scenarios show larger unified and on-
  budget surpluses by assuming either: (1) that discretionary spending would be frozen after the year 2000 at the level provided in that year; or (2)
  that discretionary spending would be held to levels prescribed by budget limits enacted in 1997 (in effect through fiscal year 2002) after which it
  would be allowed to rise with inflation. The differences are significant, with larger projected unified budget surpluses and Social Security surpluses
  that represent considerably smaller shares of the totals (albeit the actual dollar amounts of the Social Security surpluses stay the same as shown
  above).

Source: Congressional Budget Office, ``The Budget and Economic Outlook: An Update,'' July 2000.


                                     TABLE 1-31.--HISTORICAL AND PROJECTED OPERATIONS OF THE COMBINED OASI AND DI TRUST FUNDS DURING FISCAL YEARS 1998-2010
                                                                                    [In billions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     1998       1999        2000       2001       2002       2003       2004       2005       2006       2007       2008       2009       2010
                                                    actual  preliminary  projected  projected  projected  projected  projected  projected  projected  projected  projected  projected  projected
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Combined OASDI Trust Funds:
Income:
  Revenues.......................................   $415.8     $444.5      $479.6     $501.5     $524.9     $547.2     $569.9     $597.3     $622.7     $649.5     $676.5     $706.5     $737.8
  Intragovernmental:
    Taxes on benefits............................      9.1       10.8        11.5       10.8       11.5       12.2       13.0       13.8       14.7       15.7       16.7       17.9       19.2
    Federal employer share.......................      7.1        7.4         7.7        8.3        8.9        9.5       10.1       10.9       11.6       12.2       13.0       13.8       14.7
    Interest.....................................     46.6       52.1        60.0       69.5       80.1       90.8      101.6      112.9      125.1      138.1      152.1      166.9      182.5
    Other........................................      0.0        0.0         0.1        0.1        0.1        0.1        0.1        0.1        0.1        0.1        0.1        0.1        0.1
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
      Subtotal, intragovernmental................     62.8       70.3        79.3       88.7      100.6      112.6      124.8      137.6      151.4      166.1      181.9      198.7      216.4
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
        Total income.............................    478.6      514.8       558.9      590.2      625.4      659.8      694.7      735.0      774.0      815.5      858.4      905.2      954.3
                                                  ==============================================================================================================================================
Outgo:
  Benefits.......................................    372.0      382.9       397.7      415.5      435.6      456.2      478.4      502.5      527.9      554.6      583.7      616.9      653.0
  Discretionary administration...................      3.1        3.0         3.2        3.3        3.3        3.4        3.5        3.7        3.8        3.9        4.0        4.1        4.2
  Treasury administration........................      0.3        0.4         0.3        0.3        0.3        0.3        0.3        0.3        0.3        0.3        0.3        0.3        0.3
  Railroad transfer..............................      3.8        3.8         3.8        3.6        3.7        3.8        3.8        3.8        3.7        3.9        3.9        4.0        4.1
  Quinquennial...................................        0          0           0        1.2          0          0          0          0          0          0          0          0          0
                                                  ----------------------------------------------------------------------------------------------------------------------------------------------
        Total outgo..............................    379.2      390.1       405.0      423.9      443.0      463.8      486.0      510.3      535.7      562.7      591.9      625.3      661.7
                                                  ==============================================================================================================================================
Surplus..........................................     99.4      124.6       153.9      166.4      182.5      196.0      208.6      224.7      238.4      252.9      266.5      279.9      292.6
Memo:
  OASI surplus...................................     85.9      109.1       132.6      143.1      158.4      172.0      185.1      201.4      216.0      231.7      246.7      261.1      275.0
  DI surplus.....................................     13.5       15.7        21.3       23.3       24.1       24.0       23.5       23.3       22.4       21.2       19.7       18.8       17.6
Balance..........................................    730.3      855.0     1,008.9    1,175.3    1,357.8    1,553.8    1,762.4    1,987.1    2,225.5    2,478.3    2,744.8    3,024.7    3,317.3
Memo:
  OASI balance...................................    653.3      762.4       895.0    1,038.1    1,196.5    1,368.5    1,553.6    1,755.0    1,970.9    2,202.6    2,449.4    2,710.5    2,985.4
  DI balance.....................................     77.0       92.6       113.9      137.2      161.3      185.3      208.8      232.1      254.5      275.7      295.4      314.3      331.9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Unpublished data from the Congressional Budget Office, March 2000.


  TABLE 1-32.--ESTIMATED TRUST FUND BALANCES AS A PERCENTAGE OF ANNUAL
              EXPENDITURES, SELECTED CALENDAR YEARS 2000-35
------------------------------------------------------------------------
       Beginning of calendar year           OASI        DI      Combined
------------------------------------------------------------------------
2000...................................        226        172        218
2001...................................        251        196        243
2002...................................        277        216        268
2003...................................        304        231        293
2004...................................        329        240        315
2005...................................        353        243        335
2006...................................        376        243        354
2007...................................        397        238        370
2008...................................        417        231        385
2009...................................        434        223        397
2010...................................        447        213        406
2015...................................        472        152        418
2020...................................        428         71        373
2025...................................        348          0        293
2030...................................        244          0        189
2035...................................        126          0         71
------------------------------------------------------------------------
Note.--Under intermediate assumptions, the OASDI fund is estimated to
  become exhausted in 2039, the DI fund in 2023, and the combined funds
  in 2037. The balances for the combined funds for years after a
  component fund has been exhausted are shown for illustrative purposes
  only, since no legal authority exists for interfund borrowing between
  OASI and DI.

 Source: Board of Trustees (2000; intermediate assumptions).


  TABLE 1-33.--MAXIMUM TRUST FUND RATIOS AND YEAR OF EXHAUSTION FOR THE
             OASDI TRUST FUNDS UNDER ALTERNATIVE ASSUMPTIONS
------------------------------------------------------------------------
                Assumption                    OASI       DI     Combined
------------------------------------------------------------------------
Alternative I (optimistic):
    Maximum trust fund ratio (percent)....       597      1293       574
    Year attained.........................      2017      2074      2018
    Year of exhaustion....................        NA        NA        NA
Alternative II (intermediate):
    Maximum trust fund ratio (percent)....       473       243       421
    Year attained.........................      2014      2005      2013
    Year of exhaustion....................      2039      2023      2037
Alternative III (pessimistic):
    Maximum trust fund ratio (percent)....       357       188       301
    Year attained.........................      2011      2002      2009
    Year of exhaustion....................      2029      2012     2026
------------------------------------------------------------------------
NA--Not applicable.

Source: Board of Trustees (2000).


                 TABLE 1-34.--ESTIMATED INCOME RATES AND COST RATES, AS A PERCENTAGE OF TAXABLE PAYROLL, SELECTED CALENDAR YEARS 2000-75
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             OASI                                 DI                               Combined
                                             -----------------------------------------------------------------------------------------------------------
                Calendar year                   Income                              Income                              Income
                                                 rate      Cost rate    Balance      rate      Cost rate    Balance      rate      Cost rate    Balance
--------------------------------------------------------------------------------------------------------------------------------------------------------
2000........................................       10.83        8.91        1.92        1.81        1.42        0.39       12.65       10.34        2.31
2001........................................       10.85        8.89        1.96        1.82        1.46        0.35       12.67       10.36        2.31
2002........................................       10.85        8.91        1.94        1.82        1.51        0.30       12.67       10.42        2.25
2003........................................       10.85        8.94        1.91        1.82        1.57        0.24       12.67       10.51        2.16
2004........................................       10.86        8.98        1.88        1.82        1.64        0.18       12.68       10.62        2.06
2005........................................       10.87        9.02        1.84        1.82        1.71        0.11       12.68       10.74        1.95
2006........................................       10.87        9.09        1.79        1.82        1.79        0.04       12.69       10.87        1.82
2007........................................       10.88        9.16        1.72        1.82        1.86       -0.04       12.70       11.02        1.69
2008........................................       10.89        9.25        1.64        1.82        1.93       -0.10       12.71       11.17        1.54
2009........................................       10.90        9.37        1.53        1.82        1.98       -0.16       12.73       11.35        1.37
2010........................................       10.91        9.53        1.38        1.82        2.02       -0.20       12.74       11.55        1.18
2015........................................       10.98       10.74        0.25        1.83        2.17       -0.34       12.81       12.91       -0.10
2020........................................       11.08       12.40       -1.32        1.83        2.26       -0.43       12.91       14.66       -1.75
2025........................................       11.17       13.86       -2.69        1.83        2.38       -0.54       13.00       16.24       -3.24
2030........................................       11.25       14.94       -3.69        1.84        2.41       -0.57       13.08       17.35       -4.26
2035........................................       11.30       15.48       -4.18        1.84        2.38       -0.54       13.14       17.86       -4.72
2040........................................       11.32       15.46       -4.14        1.84        2.41       -0.57       13.16       17.87       -4.71
2045........................................       11.34       15.35       -4.01        1.84        2.51       -0.66       13.18       17.85       -4.67
2050........................................       11.36       15.40       -4.04        1.85        2.56       -0.72       13.21       17.96       -4.76
2055........................................       11.39       15.67       -4.28        1.85        2.60       -0.75       13.24       18.27       -5.03
2060........................................       11.42       16.04       -4.62        1.85        2.58       -0.74       13.27       18.63       -5.36
2065........................................       11.45       16.36       -4.91        1.85        2.59       -0.74       13.30       18.95       -5.65
2070........................................       11.47       16.63       -5.16        1.85        2.60       -0.75       13.32       19.24       -5.92
2075........................................       11.49       16.89       -5.40        1.85        2.63       -0.78       13.34       19.53      -6.18
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Board of Trustees (2000; intermediate assumptions).


    TABLE 1-35.--ESTIMATED OASDI INCOME AND COST RATES AND ACTUARIAL
 BALANCES AS A PERCENTAGE OF TAXABLE PAYROLL OVER 25-, 50-, AND 75-YEAR
                               PERIODS \1\
------------------------------------------------------------------------
                                         Ultimate percentage increase in
                                                    wages \2\
            Valuation period            --------------------------------
                                          3.8-3.3    4.3-3.3    4.8-3.3
------------------------------------------------------------------------
Summarized income rate:
    25-year: 2000-24...................      13.95      13.88      13.82
    50-year: 2000-49...................      13.66      13.58      13.49
    75-year: 2000-74...................      13.60      13.51      13.42
Summarized cost rate:
    25-year: 2000-24...................      13.22      12.84      12.47
    50-year: 2000-49...................      15.19      14.63      14.08
    75-year: 2000-74...................      15.99      15.40      14.81
Balance:
    25-year: 2000-24...................      +0.73      +1.04      +1.35
    50-year: 2000-49...................      -1.53      -1.06      -0.58
    75-year: 2000-74...................      -2.39      -1.89     -1.38
------------------------------------------------------------------------
\1\ Based on intermediate estimates with various real-wage assumptions.
\2\ 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 (CPI). The difference between the two values is
  the real-wage differential.

 Source: Board of Trustees (2000).


  TABLE 1-36.--ESTIMATED COST OF OASDI AND HI PROGRAMS AS A PERCENT OF
      GROSS DOMESTIC PRODUCT (GDP), SELECTED CALENDAR YEARS 2000-75
------------------------------------------------------------------------
                                                                 OASDI
             Calendar year                 OASDI        HI      and  HI
------------------------------------------------------------------------
Annual cost rates:
    2000...............................       4.19       1.39       5.58
    2005...............................       4.30       1.43       5.73
    2010...............................       4.57       1.53       6.10
    2015...............................       5.06       1.63       6.69
    2020...............................       5.70       1.78       7.48
    2025...............................       6.26       2.00       8.26
    2030...............................       6.62       2.23       8.85
    2035...............................       6.75       2.42       9.17
    2040...............................       6.69       2.54       9.22
    2045...............................       6.62       2.60       9.22
    2050...............................       6.59       2.63       9.22
    2055...............................       6.64       2.65       9.25
    2060...............................       6.70       2.69       9.39
    2065...............................       6.75       2.76       9.51
    2070...............................       6.79       2.84       9.63
    2075...............................       6.83       2.92       9.75
Summarized cost rates:
    2000-24............................       5.08       1.65       6.73
    2000-49............................       5.68       1.96       7.64
    2000-74............................       5.88       2.13      8.01
------------------------------------------------------------------------
Note.--Summarized rates are calculated on the present value basis
  including the value of the trust funds in the first year and the cost
  of reaching and maintaining a target trust fund level of 1 year's
  expenditures by the last year.

 Source: Board of Trustees (2000; intermediate assumptions).


 TABLE 1-37.--POPULATION, WORK FORCE, AND OASDI BENEFICIARY DATA AND DEPENDENCY RATIOS, SELECTED YEARS 1960-2040
----------------------------------------------------------------------------------------------------------------
                         Work force measure                            1960     1980     2000     2020     2040
----------------------------------------------------------------------------------------------------------------
Total population (in millions).....................................      190      235      285      331      364
Covered workers (in millions)......................................       73      114      154      172      182
OASDI beneficiaries (in millions)..................................       14       35       45       69       88
Worker/beneficiary ratio...........................................      5.1      3.2      3.4      2.5      2.1
Aged dependency ratio \1\..........................................    0.173    0.195    0.211    0.274    0.370
Total dependency ratio \2\.........................................    0.904    0.749    0.697    0.710   0.802
----------------------------------------------------------------------------------------------------------------
\1\ Ratio of the number of persons aged 65 and older to the number of persons aged 20-64.
\2\ Ratio of the number of persons aged 65 and older plus the number of persons aged under 20, to the number of
  persons aged 20-64.

 Source: Board of Trustees (2000; intermediate assumptions).


          TABLE 1-38.--FERTILITY, DEATH RATE AND LIFE EXPECTANCY ASSUMPTIONS, SELECTED YEARS 1940-2075
----------------------------------------------------------------------------------------------------------------
                                                                  Age-sex-     Life expectancy   Life expectancy
                                                       Total      adjusted      \3\ at birth      \3\ at age 65
                                                     fertility   death rate
                   Calendar year                      rate \1\    \2\ (per   -----------------------------------
                                                        (per      100,000)
                                                       woman)                   Male    Female    Male    Female
----------------------------------------------------------------------------------------------------------------
1940...............................................      2.23        1,672.6     61.4     65.7     11.9     13.4
1945...............................................      2.42        1,488.6     62.9     68.4     12.6     14.4
1950...............................................      3.03        1,339.9     65.6     71.1     12.8     15.1
1955...............................................      3.50        1,243.0     66.7     72.8     13.1     15.6
1960...............................................      3.61        1,237.9     66.7     73.2     12.9     15.9
1965...............................................      2.88        1,210.8     66.8     73.8     12.9     16.3
1970...............................................      2.43        1,138.4     67.1     74.9     13.1     17.1
1975...............................................      1.77        1,020.9     68.7     76.6     13.7     18.0
1980...............................................      1.85          961.1     69.9     77.5     14.0     18.4
1985...............................................      1.84          912.3     71.1     78.2     14.4     18.6
1990...............................................      2.07          865.8     71.8     78.9     15.0     19.0
1991...............................................      2.07          854.8     71.9     79.0     15.1     19.1
1992...............................................      2.06          843.7     72.2     79.2     15.2     19.2
1993...............................................      2.04          863.5     72.0     78.9     15.1     19.0
1994...............................................      2.04          852.5     72.2     79.0     15.3     19.0
1995...............................................      2.02          850.1     72.4     79.0     15.3     19.0
1996...............................................      2.03          837.1     72.8     79.1     15.4     19.0
1997...............................................      2.04          822.6     73.3     79.3     15.5     19.1
1998...............................................      2.06          796.1     73.9     79.4     16.0     19.1
1999...............................................      2.06          803.0     73.7     79.5     15.8     19.1
2000...............................................      2.05          796.3     73.9     79.6     15.9     19.2
2005...............................................      2.03          767.0     74.7     80.0     16.1     19.3
2010...............................................      2.01          744.2     75.4     80.4     16.4     19.4
2015...............................................      1.99          720.1     75.9     80.7     16.6     19.6
2020...............................................      1.97          692.7     76.4     81.1     16.9     19.8
2025...............................................      1.95          665.9     76.9     81.6     17.2     20.1
2030...............................................      1.95          640.6     77.4     82.0     17.5     20.4
2035...............................................      1.95          617.0     77.9     82.4     17.8     20.7
2040...............................................      1.95          594.8     78.3     82.7     18.1     21.0
2045...............................................      1.95          574.0     78.7     83.1     18.3     21.2
2050...............................................      1.95          554.5     79.1     83.5     18.6     21.5
2055...............................................      1.95          536.1     79.5     83.8     18.9     21.8
2060...............................................      1.95          518.7     79.9     84.1     19.1     22.0
2065...............................................      1.95          502.3     80.3     84.5     19.4     22.3
2070...............................................      1.95          486.9     80.7     84.8     19.6     22.5
2075...............................................      1.95          472.2     81.0     85.1     19.9    22.7
----------------------------------------------------------------------------------------------------------------
\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 childbearing period.
\2\ The age-sex-adjusted death rate is the crude rate that would occur in the enumerated total population as of
  April 1, 1990, if that population were to experience the death rates by age and sex observed in, or assumed
  for, the selected year.
\3\ The period life expectancy for any year is the average number of years of life remaining for a group of
  persons if that group were to experience the death rates by age observed in, or assumed for, the selected
  year.

 Source: Board of Trustees (2000; intermediate assumptions).


                                          TABLE 1-39.--SELECTED ECONOMIC ASSUMPTIONS, SELECTED YEARS 1960-2075
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Average annual percentage change
                                                                               in--                                   Average      Average      Average
                                                                ----------------------------------     Real-wage       annual      annual       annual
                         Calendar year                                       Average               differential \3\   interest  unemployment  percentage
                                                                   Real    annual wage   Consumer      (percent)      rate \4\    rate \5\     increase
                                                                 GDP \1\   in covered     Price                      (percent)    (percent)    in labor
                                                                           employment   Index \2\                                              force \6\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1960-64........................................................      4.2           3.4       1.3            2.1           3.7          5.7          1.3
1965-69........................................................      4.7           5.3       3.4            2.0           5.2          3.8          2.0
1970-74........................................................      2.8           6.3       6.1            0.2           6.7          5.4          2.6
1975...........................................................     -0.3           6.7       9.1           -2.4           7.4          8.5          2.0
1976...........................................................      5.2           8.5       5.7            2.8           7.1          7.7          2.5
1977...........................................................      4.5           6.8       6.5            0.3           7.1          7.1          2.9
1978...........................................................      5.7          11.6       7.7            3.9           8.2          6.1          3.3
1979...........................................................      3.4           9.8      11.4           -1.6           9.1          5.8          2.7
1980...........................................................      0.0           6.7      13.4           -6.7          11.0          7.2          1.9
1981...........................................................      2.5          10.8      10.3            0.6          13.3          7.6          1.6
1982...........................................................     -1.9           6.3       6.0            0.3          12.8          9.7          1.4
1983...........................................................      4.2           4.2       3.0            1.2          11.0          9.6          1.2
1984...........................................................      7.3           6.0       3.5            2.5          12.4          7.5          1.8
1985...........................................................      3.9           6.0       3.5            2.6          10.8          7.2          1.7
1986...........................................................      3.4           4.6       1.6            3.0           8.0          7.0          2.1
1987...........................................................      3.5           4.6       3.6            1.0           8.4          6.2          1.7
1988...........................................................      4.2           5.3       3.9            1.4           8.8          5.5          1.5
1989...........................................................      3.5           3.9       4.9           -0.9           8.7          5.3          1.8
1990...........................................................      1.7           5.1       5.2           -0.1           8.6          5.6          0.6
1991...........................................................     -0.2           3.0       4.1           -1.1           8.0          6.8          0.4
1992...........................................................      3.3           4.9       2.9            2.0           7.1          7.5          1.4
1993...........................................................      2.4           1.9       2.8           -0.9           6.1          6.9          0.8
1994...........................................................      4.0           3.4       2.5            1.0           7.1          6.1          1.4
1995...........................................................      2.7           4.0       2.9            1.1           6.9          5.6          1.0
1996...........................................................      3.7           4.5       2.9            1.6           6.6          5.4          1.2
1997...........................................................      4.5           5.7       2.3            3.4           6.6          4.9          1.8
1998...........................................................      4.3           5.6       1.3            4.3           5.6          4.5          1.0
1999...........................................................      4.0           5.2       2.2            3.0           5.9          4.2          1.2
2000...........................................................      3.5           4.6       3.1            1.5           6.7          4.1          1.3
2001...........................................................      2.7           4.4       3.0            1.4           6.7          4.2          1.2
2002...........................................................      2.3           4.2       3.0            1.2           6.2          4.4          1.0
2003...........................................................      2.0           4.1       3.1            1.0           6.0          4.7          0.8
2004...........................................................      2.0           4.1       3.2            0.9           6.1          4.9          0.8
2005...........................................................      2.0           4.2       3.3            1.0           6.2          5.1          0.8
2006...........................................................      2.0           4.2       3.3            0.9           6.3          5.2          0.8
2007...........................................................      2.0           4.3       3.3            1.0           6.3          5.3          0.8
2008...........................................................      2.0           4.2       3.3            0.9           6.3          5.4          0.8
2009...........................................................      2.1           4.3       3.3            1.0           6.3          5.5          0.7
2010...........................................................      2.1           4.3       3.3            1.0           6.3          5.5          0.7
2020...........................................................      1.7           4.3       3.3            1.0           6.3          5.5          0.3
2030...........................................................      1.7           4.3       3.3            1.0           6.3          5.5          0.3
2040...........................................................      1.7           4.3       3.3            1.0           6.3          5.5          0.3
2050...........................................................      1.6           4.3       3.3            1.0           6.3          5.5          0.2
2060...........................................................      1.6           4.3       3.3            1.0           6.3          5.5          0.2
2070...........................................................      1.6           4.3       3.3            1.0           6.3          5.5          0.2
2075...........................................................      1.5           4.3       3.3            1.0           6.3          5.5         0.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The real gross domestic product is the value of total output of goods and services, expressed in 1996 dollars.
\2\ The Consumer Price Index (CPI) 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 the average annual wage in covered employment,
  and the average annual CPI.
\4\ The average annual interest rate is the average of the nominal interest rates, which, in practice, are compounded semiannually, for special public-
  debt obligations issuable to the trust funds in each of the 12 months of the year..
\5\ Unadjusted civilian unemployment rates are shown through 2009. Thereafter, the rates are adjusted to the age-sex distribution of the civilian labor
  force in 1999.
\6\ The U.S. civilian labor force concept is used here.

 Source: Board of Trustees (2000; intermediate assumptions).


TABLE 1-40.--NET ADMINISTRATIVE EXPENSES AND ADMINISTRATIVE EXPENSES AS A PERCENTAGE OF BENEFIT PAYMENTS, FISCAL
                                                  YEARS 1995-99
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                   Administrative expenses as a
                                                                                  percentage of benefit payments
                                                                                            paid from:
                                                                                --------------------------------
                                                                      Total        Old-Age
                          Fiscal year                            administrative     and
                                                                    expenses     Survivors
                                                                                 Insurance   DI Trust   Combined
                                                                                   (OASI)      Fund      funds
                                                                                   Trust
                                                                                    Fund
----------------------------------------------------------------------------------------------------------------
1995...........................................................         $2.87          0.6        2.7        0.9
1996...........................................................          2.86          0.6        2.5        0.8
1997...........................................................          3.21          0.6        2.7        0.9
1998...........................................................          3.60          0.6        3.3        1.0
1999...........................................................          3.36          0.6        3.0       0.9
----------------------------------------------------------------------------------------------------------------
Source: Office of the Chief Actuary, Social Security Administration.

                        Disability Program Data

             TABLE 1-41.--NUMBER OF DISABILITY INSURANCE (DI) BENEFICIARIES, SELECTED YEARS 1960-99
----------------------------------------------------------------------------------------------------------------
                                                              Disabled
                           Year                                workers       Spouses      Children      Total
----------------------------------------------------------------------------------------------------------------
1960.....................................................         455,371       76,599      155,481      687,451
1965.....................................................         988,074      193,362      557,615    1,739,051
1970.....................................................       1,492,948      283,447      888,600    2,664,995
1975.....................................................       2,488,774      452,922    1,410,504    4,352,200
1980.....................................................       2,861,253      462,204    1,358,715    4,682,172
1985.....................................................       2,656,500      305,528      945,141    3,907,169
1990.....................................................       3,011,294      265,890      988,797    4,265,981
1991.....................................................       3,194,938      266,219    1,051,883    4,513,040
1992.....................................................       3,467,783      270,674    1,151,239    4,889,696
1993.....................................................       3,725,966      272,759    1,254,841    5,253,566
1994.....................................................       3,962,954      271,054    1,349,511    5,583,519
1995.....................................................       4,185,263      263,539    1,408,854    5,857,656
1996.....................................................       4,385,623      223,854    1,462,557    6,072,034
1997.....................................................       4,508,134      206,959    1,437,946    6,153,039
1998.....................................................       4,698,319      189,843    1,446,408    6,334,570
1999.....................................................       4,879,455      176,299    1,467,976   6,523,730
----------------------------------------------------------------------------------------------------------------
Source: Office of Research, Evaluation and Statistics, Social Security Administration.


 TABLE 1-42.--PERCENT DISTRIBUTION BY AGE, SEX AND EDUCATION OF TITLE II DISABLED WORKER BENEFICIARIES GRANTED BENEFITS IN SELECTED CALENDAR YEARS 1970-99, COMPARED WITH ADULT U.S. POPULATION
                                                                                             IN 1990
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Year granted benefits
                     Characteristics                      -----------------------------------------------------------------------------------------------------------------------   Adult U.S.
                                                            1970   1975   1979   1982   1985   1988   1989   1990   1991   1992   1993   1994   1995   1996   1997   1998   1999  population \1\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Age:
  Under 35...............................................    9.0   11.0   13.6   14.4   16.8   15.2   16.2   15.7   15.7   16.8   16.2   14.7   13.3   12.3   11.4   11.0   12.3         45.6
  35-44..................................................   11.0   10.0   11.5   12.3   15.0   16.5   17.9   18.7   19.6   20.4   20.9   20.7   20.4   20.4   19.7   19.5   20.4         24.4
  45-54..................................................   26.0   26.0   27.2   26.5   25.7   23.3   24.7   24.7   25.1   25.6   26.8   27.7   28.3   29.7   30.3   31.1   32.6         16.3
  55-59..................................................   24.0   23.0   27.0   27.2   23.9   20.6   20.4   19.9   19.5   18.5   18.6   19.2   19.9   20.0   21.0   21.1   21.4          6.8
  60 and older...........................................   30.0   30.0   20.6   19.6   18.7   24.4   20.9   21.0   20.1   18.7   17.6   17.8   18.0   17.4   17.6   17.3   13.2          6.9
  Median age (years).....................................   56.0   55.6   53.4   53.1   51.7   53.3   52.1   51.9   51.4   50.5   50.3   50.8   51.3   51.3   51.7   51.8   50.9         32.9
Sex:
  Male...................................................     74     68     69     70     67     66     64     64     64     63     62     60   58.4   56.7   55.5   54.3   54.3         49.5
  Female.................................................     26     32     31     30     33     34     36     36     36     37     38     40   41.4   43.2   44.5   45.3   45.7         50.5
Education (years of school completed):
  No schooling \2\.......................................      2      1      1      1      2      1      1      1      1      1      1      1     NA      1      1      1      1            1
  Elementary school (1-8)................................     44     37     29     26     23     18     17     16     16     12     11     12     NA     10      9      9      8            9
  Some high school.......................................     46     52     55     56     59     59     60     62     62     50     45     55     NA     58     54     57     54           45
    9-11.................................................     23     24     23     22     22     20     19     19     19     15     14     16     NA     16     14     15     14           11
    12...................................................     23     28     32     34     37     39     41     43     43     35     31     39     NA     42     40     42     40           34
  Some college...........................................      9     10     12     14     14     15     17     17     17     14     12     16     NA      3      4      3      4           45
  Unknown................................................      0      0      3      3      2      7      5      5      5     23     31     16     NA     28     32     30     33           0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Derived from 1990 census. Figures for age based on population aged 18-64. Figures for education based on persons aged 25 and older.
\2\ Also includes special schools for handicapped.

 NA--Not available.

 Source: Office of Disability, Social Security Administration.


 TABLE 1-43.--PERCENT DISTRIBUTION BY DISABLING CONDITION OF TITLE II DISABLED WORKER BENEFICIARIES GRANTED BENEFITS IN SELECTED CALENDAR YEARS, 1970-99
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Disabling condition                 1970  1975  1979  1982  1985  1988  1989  1990  1991  1992  1993  1994  1995  1996  1997  1998  1999
--------------------------------------------------------------------------------------------------------------------------------------------------------
Infective and parasitic diseases \1\..............     3     1     1     1     1     0     1     6     6     7     7     6     6     5     3     3     2
Neoplasms.........................................    10    10    14    17    15    16    18    17    16    13    15    16    16    17    17    17    17
Allergic, endocrine system, metabolic and              4     3     3     4     5     3     3     3     4     5     5     5     5     5     6     6     6
 nutritional diseases.............................
Mental, psychoneurotic and personality disorders..    11    11    11    11    18    22    22    23    24    25    26    24    22    22    21    21    22
Diseases of the nervous system and sense organs...     6     7     8     9     8     8     9     9     8     8     7     8     8     8     8     8     9
Circulatory system................................    31    32    28    25    19    18    17    16    15    14    15    14    14    14    14    13    13
Respiratory system................................     7     7     6     7     5     5     5     5     5     4     5     5     5     5     5     5     5
Digestive system..................................     3     3     2     2     2     2     2     2     2     2     2     2     2     2     2     2     2
Musculoskeletal...................................    15    17    17    16    13    14    11    12    13    13    12    12    12    12    12    14    15
Accidents, poisonings and violence................     8     6     6     6     4     5     4     4     4     4     3     3     3     4     4     4     4
Other/unknown.....................................     2     3     3     2    11     7     9     5     5     5     5     6     6     6     6     7     6
                                                   -----------------------------------------------------------------------------------------------------
    Total percent \2\.............................   100   100   100   100   100   100   100   100   100   100   100   100   100   100   100   100   100
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Beginning in 1990, AIDS/HIV cases are included in this category.    \2\ May not add to 100 percent due to rounding.

 Source: Office of Disability, Social Security Administration.


 TABLE 1-44.--DISABLED WORKERS' APPLICATIONS, AWARDS, AWARDS AS A PERCENT OF APPLICATIONS, AND AWARDS PER 1,000
                              INSURED WORKERS FOR SELECTED CALENDAR YEARS, 1960-99
                             [Number of applications and total awards in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                                    Awards as a     Awards per
                                                     Number of     Total awards     percent of     1,000 insured
                                                   applications                    applications     workers \1\
----------------------------------------------------------------------------------------------------------------
1960............................................           418.6           207.8            49.6             4.5
1965............................................           532.9           253.5            47.9             4.7
1970............................................           868.2           350.4            40.3             4.8
1971............................................           924.4           415.9            45.0             5.6
1972............................................           947.8           455.4            48.1             6.0
1973............................................         1,066.9           491.6            46.1             6.3
1974............................................         1,330.2           536.0            40.3             6.7
1975............................................         1,285.3           592.0            46.1             7.1
1976............................................         1,232.2           551.5            44.8             6.5
1977............................................         1,235.2           568.9            46.1             6.5
1978............................................         1,184.7           464.4            39.2             5.2
1979............................................         1,187.8           416.7            35.1             4.4
1980............................................         1,262.3           396.6            31.4             4.0
1981............................................         1,161.3           345.3            30.3             3.4
1982............................................         1,020.0           298.5            29.1             2.9
1983............................................         1,017.7           311.5            30.6             3.0
1984............................................         1,035.7           357.1            34.9             3.4
1985............................................         1,066.2           377.4            35.4             3.5
1986............................................         1,118.4           416.9            37.3             3.8
1987............................................         1,108.9           415.8            37.5             3.7
1988............................................         1,017.9           409.5            40.2             3.6
1989............................................           984.9           425.6            43.2             3.7
1990............................................         1,067.7           468.0            43.8             4.0
1994............................................         1,208.7           536.4            44.4             4.5
1992............................................         1,335.1           636.6            47.8             5.2
1993............................................         1,425.8           635.2            44.6             5.2
1994............................................         1,443.8           631.9            43.8             5.1
1995............................................         1,338.1           645.8            48.3             5.1
1996............................................         1,279.2           624.3            48.8             4.9
1997............................................         1,180.2           587.4            49.8             4.5
1998............................................         1,169.3           608.1            52.0             4.6
1999............................................         1,200.1           620.5            51.7            4.8
----------------------------------------------------------------------------------------------------------------
\1\ Gross incidence rate.

Source: Office of the Chief Actuary, Social Security Administration.


 TABLE 1-45.--ADMINISTRATIVE LAW JUDGE DI \1\ DECISION RATES, INITIAL DENIALS AND TERMINATIONS, \2\ FISCAL YEARS
                                                     1980-99
----------------------------------------------------------------------------------------------------------------
                                                                                                        Percent
                Fiscal year                  Dismissed \3\  Unfavorable \4\  Favorable \5\    Total    favorable
----------------------------------------------------------------------------------------------------------------
Initial denials:
    1980...................................        7,093          31,703          56,733       95,529       59.4
    1981...................................       15,141          59,930          98,129      173,200       56.7
    1982...................................       15,403          67,481          91,865      174,749       52.6
    1983...................................       14,334          65,626          79,427      159,387       49.8
    1984...................................       15,075          63,381          88,301      166,757       53.0
    1985...................................       14,806          61,161          92,118      168,085       54.8
    1986...................................       28,792          44,223          78,737      151,752       51.9
    1987...................................       15,271          58,412          98,180      171,863       57.1
    1988...................................       18,213          58,788         111,748      188,749       59.2
    1989...................................       19,695          54,284         122,070      196,049       62.3
    1990...................................       19,297          45,264         127,707      192,268       66.4
    1991...................................       19,880          44,594         144,945      209,419       69.2
    1992...................................       19,665          48,407         166,661      234,733       71.0
    1993...................................       20,190          47,579         171,508      239,277       71.7
    1994...................................       23,576          49,110         189,373      262,059       72.3
    1995...................................       44,234          65,415         220,558      330,207       66.8
    1996...................................       33,367          89,817         237,131      360,315       65.8
    1997...................................       53,205          89,689         199,040      341,934       58.2
    1998...................................       53,395          90,591         190,182      334,168       56.9
    1999...................................       43,228          78,553         181,938      303,719       59.9
Terminations:
    1980...................................        1,431           4,197           9,909       15,537       63.8
    1981...................................        2,623           6,945          16,685       26,253       63.6
    1982...................................        4,670          17,502          37,306       59,478       62.7
    1983...................................        9,247          37,284          73,821      120,352       61.3
    1984...................................       25,681          22,590          56,327      104,598       53.9
    1985...................................        4,176           2,415           3,126        9,717       32.2
    1986...................................        1,095           2,129           2,014        5,238       38.4
    1987...................................          812           1,954           2,014        4,780       42.1
    1988...................................        1,031           2,807           3,426        7,264       47.2
    1989...................................        1,220           3,482           4,882        9,584       50.9
    1990...................................        1,166           2,940           4,695        8,801       53.3
    1991...................................        1,007           2,140           3,935        7,082       55.6
    1992...................................          812           1,642           2,812        5,266       53.4
    1993...................................          720           1,281           2,079        4,080       51.0
    1994...................................          656           1,082           1,540        3,278       47.0
    1995...................................          821           1,173           1,807        3,801       47.5
    1996...................................        1,172           2,275           2,488        5,935       41.9
    1997...................................        1,693           3,242           3,377        8,312       40.6
    1998...................................        2,157           4,586           4,251       10,994      38.7
----------------------------------------------------------------------------------------------------------------
\1\ Includes title II and concurrent title II/title XVI disability cases and concurrent title II/title XVI aged
  cases.
\2\ Includes all termination cases regardless of the basis of termination.
\3\ Dismissal of claimant's request for a hearing.
\4\ Determination that claimant is not disabled or is no longer disabled.
\5\ Determination that claimant is disabled or continues to be disabled.

 Source: Office of Hearings and Appeals, Social Security Administration.


                          TABLE 1-46.--TITLE II CONTINUING DISABILITY REVIEW CESSATIONS AND CONTINUATIONS, FISCAL YEARS 1977-99
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Cessations           Continuations                     Total cases
                                                                 ---------------------------------------------------------------------------------------
                           Fiscal year                                                                            Cessations      Total
                                                                   Number   Percent \1\   Number   Percent \2\       and         disabled      Percent
                                                                                                                continuations  persons \3\  reviewed \4\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1977............................................................    41,475      38.7       65,745      61.3         107,220      3,322,230         3.2
1978............................................................    38,847      46.4       44,804      53.6          83,651      3,447,767         2.4
1979............................................................    45,216      48.1       48,868      51.9          94,084      3,457,837         2.7
1980............................................................    44,273      46.8       50,227      53.2          94,550      3,454,010         2.7
1981............................................................    80,956      47.9       87,966      52.1         168,922      3,413,602         4.9
1982............................................................   179,857      44.8      221,325      55.2         401,182      3,263,354        12.3
1983............................................................   182,074      41.7      254,424      58.3         436,498      3,226,888        13.5
1984 \5\........................................................    31,927      24.6       97,752      75.4         129,679      3,249,367         4.0
1985 \5\........................................................       475      14.6        2,785      85.4           3,260      3,332,870         0.1
1986............................................................     2,554       5.6       42,805      94.4          45,359      3,261,768         1.4
1987............................................................    20,343      12.4      143,712      87.6         164,055      3,433,524         4.8
1988............................................................    33,565      11.5      257,377      88.5         290,942      3,492,762         8.3
1989............................................................    24,102       9.2      237,722      90.8         261,824      3,559,840         7.4
1990 \6\........................................................    15,154      10.5      129,026      89.5         144,180      3,678,509         3.9
1991 \7\........................................................     5,697      12.5       39,749      87.5          45,446      3,866,645         1.2
1992............................................................     6,923      15.0       39,291      85.0          46,214      4,165,133         1.1
1993 \8\........................................................     4,886       9.9       44,316      90.1          49,202      4,457,500         1.1
1994 \8\........................................................    13,940      14.1       85,189      85.9          99,129      4,729,948         2.1
1995 \8\........................................................    31,694      16.1      164,281      83.9         196,575      4,980,462         4.0
1996 \8\........................................................    35,452      10.0      311,041      90.0         346,493      5,216,126         6.6
1997 \8\........................................................    48,562      11.3      383,130      88.8         431,692      5,354,315         8.1
1998 \8\........................................................    52,698       5.4      927,486      94.6         980,184      5,557,486        17.6
1999 \8\........................................................    40,465       4.7      824,716      95.3         865,181      5,751,600        15.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Percent of cessations = number of cessations  (number of cessations + number of continuances)  100.
\2\ Percent of continuances = number of continuances  (number of cessations + number of continuances)  100.
\3\ Number of disabled persons in current payment status (currently receiving benefits) at end of fiscal year.
\4\ Percent of total disabled persons reviewed = (number of cessations + number of continuances)  total disabled persons  100.
\5\ The decline in the number of reviews in 1984 and 1985 was due to the national moratorium on reviews pending enactment and implementation of new
  legislation that revised criteria for continuing disability reviews (CDRs) (legislation enacted in fiscal year 1984; regulations promulgated late
  fiscal year 1985).
\6\ The decline in CDR processing in 1990 was due to the unanticipated demands of processing approximately 40,000 class action court cases.
\7\ The continued decline in CDR processing was due to the increase in the initial claims workloads.
\8\ Includes non-State CDR mailer continuations.

 Source: Office of Disability, Social Security Administration.


    TABLE 1-47.--DISABILITY CASES PENDING AND WAITING TIMES, 1988-99
      [Cases pending and weeks of work on hand at State Disability
                         Determination Services]
------------------------------------------------------------------------
                                          Total cases
             Fiscal year               pending at end of   Weeks of work
                                           year \1\         on hand \2\
------------------------------------------------------------------------
1988................................             407,000              NA
1989................................             479,000            10.0
1990................................             538,000            11.7
1991................................             693,000            12.1
1992................................             725,000            10.7
1993................................             717,000            10.4
1994................................             721,000            10.3
1995................................             590,000             7.9
1996................................             702,000             9.8
1997................................             704,000             8.6
1998................................             760,000            10.4
1999................................             770,000           11.1
------------------------------------------------------------------------
\1\ Includes initial claims, reconsiderations, hearing office requests,
  CDRs and disability hearings.
\2\ Based on dispositions.

NA--Not available.

Source: Office of Disability, Social Security Administration, May 2000.

    APPENDIX: RELATIONSHIP OF TAXES TO BENEFITS FOR SOCIAL SECURITY 
  RETIREES--HOW LONG IT TAKES TO RECOVER THE VALUE OF TAXES PAID PLUS 
                                INTEREST

    The issue of the relative value of Social Security 
benefits, compared to the value of the payroll taxes paid to 
earn those benefits, is often brought up in discussions of the 
nature of the program. This comparison is complex and involves 
many judgments, and is not easily answered with general 
aggregate numbers. In addition to all the technical factors 
that must be addressed, the nature of the Social Security law 
complicates such computations. Not only do analysts disagree on 
the proper techniques to use in making calculations, there are 
often fundamental disagreements involving subjective factors: 
what work patterns to use; what part of the Social Security tax 
to count; whether to include the employer's share of the tax; 
and what rate of interest to use.
    This analysis seeks to avoid judgmental conclusions by 
providing a range of illustrations that vary these subjective 
factors. It does not evaluate the ``moneysworth'' of Social 
Security (answering whether recipients get a good deal from 
their investment), nor does it provide an ``actuarial 
analysis'' of how whole age cohorts fare. Rather, it simply 
presents illustrations of the amount of time it takes, and is 
projected to take, to recover the value of taxes paid plus 
interest (table 1-51). The illustrations represent a range of 
possible payback times, depending on variations in the 
assumptions used. In this way, no conclusions are made--but the 
illustrations allow readers to make their own judgments.
    Many things complicate any determination of the 
relationship of benefits to taxes for future retirees. For 
example, although Social Security tax rates and benefit 
formulas are set by law, they are not immutable. Since Congress 
has modified taxes and benefits many times since the beginning 
of the program, it is clearly inconsistent with the program's 
history to calculate taxes and benefits into the future on the 
assumption that these key elements will not change. There is 
little doubt they eventually will be altered, as it is 
projected that demographic phenomena will cause the program's 
projected outgo to outstrip its resources significantly 37 
years from now. Higher taxes or benefit cuts would be 
necessary, at that point or as soon as 2015, if the self-
supporting character of the program is to be continued. These 
changes obviously would affect the relationship of taxes to 
benefits. However, the nature of future changes is unknown, 
whereas current law is a given. Therefore, in order to assess 
the relationship of future taxes and benefits, this analysis 
uses calculations that are useful in presenting possible 
outcomes of policies currently incorporated in the law.
    Calculations of the relationship of benefits to taxes for 
future retirees involve many key factors. The rate of Social 
Security taxation is set by law. The portion of the tax that 
provides cash benefits (Old-Age, Survivors, and Disability 
Insurance, or OASDI) to employees is 6.2 percent levied on both 
employees and employers. The old-age and survivors insurance 
portion of the tax from which retirement benefits are paid, is 
5.3 percent, again, on both employees and employers. The tax 
rate applies to earnings up to a maximum amount. The ``maximum 
taxable earnings'' is $76,200 in 2000 but will rise in the 
future at the same rate as average wages in the economy. 
Therefore, the amount of Social Security taxes an employee will 
pay under current law is a direct function of her earnings. If 
one knows the amounts of an individual employee's earnings, and 
what the maximum taxable earnings are each year, the amount of 
tax paid is easily calculated.
    Future initial benefit amounts are also in part a function 
of one's earnings. Benefits are computed at first eligibility 
(age 62 for retirement) by a method that indexes both earnings 
over the worker's career and the benefit formula to changes in 
average wages in the economy. After age 62, benefits rise in 
tandem with the cost of living. As these factors are unknown, 
future benefit amounts cannot be predicted with certainty.
    Further complicating the issue is the nature of the 
program. As a ``social insurance'' program, Social Security has 
both social and insurance goals. The social-goal features 
provide a design that deliberately gives a better return on 
taxes to some workers than to others. For example, the basic 
formula for calculating Social Security benefits is tilted to 
replace a higher proportion of earnings for low-paid workers. 
Also, a complex array of dependents' benefits is available at 
no additional cost for workers with families.
    As with insurance, the exact relationship of Social 
Security benefits received to total taxes paid cannot be 
predicted for each and every worker. Thus, workers who die 
before or shortly after retirement and leave no survivors may 
collect only a few dollars in benefits or perhaps none at all. 
Other workers may collect Social Security benefits for many 
years after retirement and receive benefits substantially 
greater than the value of their Social Security taxes. Workers 
who become disabled or die at an early age might have paid 
relatively little in Social Security taxes, but they or their 
families may receive benefits for many years, recovering the 
value of the worker's taxes many times.
    There really is no ``typical'' Social Security beneficiary 
with a ``typical'' work history. An ``average'' benefit can be 
the result of many different work histories and thus be based 
on different amounts of taxes paid. For example, because the 
benefit formula does not require that all earnings be used in 
the benefit computation, workers with gaps in their earnings 
history may receive the same benefits as other workers, but pay 
less in total taxes.
    Nevertheless, models can produce projections of future 
benefits, based on assumptions about wage and price growth, for 
workers with designated work histories and characteristics. 
This analysis makes such projections using several assumptions 
about illustrative workers. It assumes that each worker retires 
at age 65 in January of the designated year after having worked 
full time in employment covered by Social Security beginning at 
age 21. Similarly, all the illustrations reflect three lifetime 
earnings patterns--workers who always earned (1) the Federal 
minimum wage; (2) a wage equal to Social Security's ``average 
wage series''; or (3) a wage equal to the maximum amount 
creditable under Social Security.
    These work histories and characteristics are necessarily 
arbitrary. Many variations could be constructed that would 
alter the payback times. However, by comparing similar examples 
of workers in what may be considered illustrative situations 
one may make a number of observations without having to resolve 
all the judgmental questions concerning what constitutes a 
typical worker or having to provide a voluminous array of 
illustrations.
    Calculations are based on the intermediate assumptions of 
the 2000 Social Security Trustees' Report to forecast wage and 
price growth. Under these assumptions, wages grow for most of 
the projected period by 4.3 percent a year, prices by 3.3 
percent.
    Although using common assumptions and focusing on certain 
examples allows comparisons across generations, there are other 
factors that can be varied depending on one's view of the 
Social Security system. Among these is whether to count the 
employer's share of the payroll tax. Most economists agree that 
employees pay for the employer's share of the tax in the form 
of forgone wages or fringe benefits. However, some maintain 
that employers are actually paying for income maintenance 
protection that they would have to pay for anyway in one form 
or another in the absence of the Social Security Program, and 
that they absorb part of it and pass the rest along to the 
general public in the form of higher prices. This analysis does 
not attempt to resolve this debate, but rather presents 
examples using both assumptions.
    Another variable subject to the reader's judgment is the 
proportion of the Social Security tax to apply to retirement 
benefits. The payroll tax consists of three elements--old-age 
and survivors insurance (OASI), disability insurance (DI), and 
hospital insurance (HI). Because the DI and HI Programs have 
earmarked taxes, their own trust funds, and designated tax 
rates specified in the law, they are clearly and easily 
excludable from computations of taxes that pay for retirement 
benefits. OASI taxes pay for survivor as well as retirement 
benefits, and it would be inconsistent to include taxes that 
pay for survivor benefits on the tax side, but not include the 
value of survivor benefits on the benefit side, in computing 
payback times. However, there is no separate allocation of 
taxes in the law for survivor or old-age benefits. It is 
possible to derive hypothetical year-by-year tax allocations 
for old-age benefits by assuming that such taxes would be in 
the same proportion to OASI tax rates as old-age benefits are 
to OASI benefits for each year. The Social Security 
Administration's actuaries have year-by-year projections of 
these benefits and this analysis uses them to compute taxes 
attributable solely to old-age benefits.
    A problem with this approach is that the survivor portion 
of the tax cannot so easily be assigned to a benefit. While the 
DI and HI taxes protect against risks that really do not 
involve an element of choice--every worker could become too 
disabled to work or suffer illness in old age--there is an 
element of choice in whether a worker has dependents. 
Nevertheless, the worker still must pay the full OASI tax. An 
unmarried childless worker can maintain that it is inaccurate 
to say that only the old-age portion of the OASI tax should be 
used to compute the payback times of his retirement benefit 
when the worker is forced to pay a tax (the survivor portion of 
the OASI tax) for which he currently can derive no benefit. 
Also, it can be asserted that this approach understates the 
value of the accumulated taxes because it does not take account 
of the subsidy provided by workers who die before reaching 
retirement. However, such a subsidy is theoretical, whereas the 
illustrations refer to individuals who in fact have survived to 
retirement age and use the tax they actually would have paid. 
Because Social Security taxes are adjusted periodically to take 
account of current and projected program experience, it can 
reasonably be assumed that any subsidy effect is reflected in 
the rate of the OASI tax. Again, this analysis does not resolve 
the argument of whether to count the survivor portion of the 
OASI tax. It simply shows both ways of computing the 
relationship of benefits to taxes.
    Of course, any calculation of such a relationship is 
heavily dependent on the interest rate assumptions used. The 
value of taxes over time is equivalent to their worth if 
invested. However, the amount of interest is not easily 
determinable. Were the value of taxes paid invested wisely its 
total real worth theoretically could be many times its nominal 
value. On the other hand, it is possible that the principal 
could be wiped out by poor investment choices. To obtain a 
middle ground, consisting of a reasonable and safe investment 
history, one could assume that the value of taxes paid was 
always placed in U.S. Government obligations. Excess Social 
Security taxes have always been invested in U.S. Government 
securities, so, to provide illustrations, we use the effective 
interest rates earned by the Social Security Trust Funds over 
the years and those projected for the future. Under the 
alternative II assumptions, average annual interest rates are 
projected ultimately to be 6.4 percent, a ``real'' interest 
rate of 3.0 percent (i.e., 3.0 percent above inflation). The 
interest is assumed to be tax free.
    The cumulative value of taxes plus interest at the 3 
different earnings levels  for  workers  retiring  in  2000  
are  shown  in  tables 1-48, 1-49, and 1-50.

    TABLE 1-48.--SOCIAL SECURITY TAXES PAID BY A WAGE EARNER WHO HAS ALWAYS EARNED THE MINIMUM WAGE, 1956-99
----------------------------------------------------------------------------------------------------------------
                                                                 Tax rates (in         Taxes paid      Effective
                                                                   percent)     ----------------------  interest
                   Calendar year                     Earnings ------------------                        rate \2\
                                                                        Old age     OASI     Old age      (in
                                                                 OASI     \1\                           percent)
----------------------------------------------------------------------------------------------------------------
1956...............................................     1,993    2.000    1.526      39.86      30.42     2.401
1957...............................................     2,080    2.000    1.548      41.60      32.21     2.492
1958...............................................     2,080    2.000    1.555      41.60      32.34     2.516
1959...............................................     2,080    2.250    1.739      46.80      36.17     2.578
1960...............................................     2,080    2.750    2.111      57.20      43.91     2.598

1961...............................................     2,184    2.750    2.094      60.06      45.73     2.755
1962...............................................     2,392    2.875    2.187      68.77      52.32     2.825
1963...............................................     2,461    3.375    2.563      83.06      63.07     2.923
1964...............................................     2,600    3.375    2.553      87.75      66.37     3.084
1965...............................................     2,600    3.375    2.529      87.75      65.76     3.184

1966...............................................     2,600    3.500    2.568      91.00      66.78     3.483
1967...............................................     2,886    3.550    2.604     102.45      75.14     3.753
1968...............................................     3,293    3.325    2.415     109.49      79.52     3.950
1969...............................................     3,328    3.725    2.710     123.97      90.20     4.437
1970...............................................     3,328    3.650    2.661     121.47      88.55     5.074

1971...............................................     3,328    4.050    2.961     134.78      98.54     5.286
1972...............................................     3,328    4.050    2.973     134.78      98.94     5.406
1973...............................................     3,328    4.300    3.101     143.10     103.19     5.754
1974...............................................     3,883    4.375    3.168     169.88     123.03     6.218
1975...............................................     4,368    4.375    3.184     191.10     139.06     6.593

1976...............................................     4,784    4.375    3.201     209.30     153.12     6.731
1977...............................................     4,784    4.375    3.213     209.30     153.70     6.958
1978...............................................     5,512    4.275    3.153     235.64     173.80     7.199
1979...............................................     6,032    4.330    3.206     261.19     193.36     7.524
1980...............................................     6,448    4.520    3.355     291.45     216.33     8.568

1981...............................................     6,968    4.700    3.514     327.50     244.87     9.947
1982...............................................     6,968    4.575    3.460     318.79     241.07    11.178
1983...............................................     6,968    4.775    3.645     332.72     253.96    10.768
1984...............................................     6,968  \3\ 4.9  \3\ 3.7     343.24     263.12    11.601
                                                                    26       76
1985...............................................     6,968    5.200    3.993     362.34     278.25    11.213

1986...............................................     6,968    5.200    3.997     362.34     278.52    11.091
1987...............................................     6,968    5.200    4.002     362.34     278.83    10.063
1988...............................................     6,968    5.530    4.257     385.33     296.64     9.773
1989...............................................     6,968    5.530    4.264     385.33     297.08     9.573
1990...............................................     7,670    5.600    4.320     429.52     331.37     9.324

1991...............................................     8,606    5.600    4.321     481.94     371.91     9.090
1992...............................................     8,840    5.600    4.320     495.04     381.92     8.745
1993...............................................     8,840    5.600    4.315     495.04     381.47     8.322
1994...............................................     8,840    5.260    4.050     464.98     357.99     8.040
1995...............................................     8,840    5.260    4.046     464.98     357.70     7.859

1996...............................................     9,100    5.260    4.045     478.66     368.08     7.615
1997...............................................    10,157    5.350    4.120     543.40     418.47     7.500
1998...............................................    10,712    5.350    4.136     573.09     443.05     7.228
1999...............................................    10,712    5.350    4.139     573.09     443.38     6.948
                                                    ------------------------------------------------------------
Total taxes paid 1956-99:
  Accumulated without interest.....................        NA       NA       NA  11,323.05   8,609.25        NA
  Accumulated with interest........................        NA       NA       NA  47,715.81  35,818.27        NA
----------------------------------------------------------------------------------------------------------------
\1\ Old-age tax rates were derived by applying the ratio of old-age benefits/total OASI benefits to the OASI tax
  rates.
\2\ Interest rates for 1956-99 are from the SSA Office of the Chief Actuary, and reflect the interest rate
  earned by the Social Security Trust Funds.
\3\ In 1984, employees received a tax credit of 0.3 percent against OASDI taxes. The OASI and old-age tax rates
  reflect a proportional allocation of the tax credit.

 NA--Not applicable.

Note.--Initial benefit amount upon retirement in January 2000 at age 65: $631 worker only; $946 worker and
  spouse (both age 65).

 Source: Kollmann (2000).


           TABLE 1-49.--SOCIAL SECURITY TAXES PAID BY A WAGE EARNER WITH AVERAGE EARNINGS, 1956-99 \1\
----------------------------------------------------------------------------------------------------------------
                                                                Tax rates (in         Taxes paid       Effective
                                                                  percent)     -----------------------  interest
                  Calendar year                     Earnings ------------------                         rate \3\
                                                                       Old age     OASI      Old age      (in
                                                                OASI     \2\                            percent)
----------------------------------------------------------------------------------------------------------------
1956.............................................   3,532.36    2.000    1.526       70.65      53.91     2.401
1957.............................................   3,641.72    2.000    1.548       72.83      56.39     2.492
1958.............................................   3,673.80    2.000    1.555       73.48      57.13     2.516
1959.............................................   3,855.80    2.250    1.739       86.76      67.05     2.578
1960.............................................   4,007.12    2.750    2.111      110.20      84.59     2.598
1961.............................................   4,086.76    2.750    2.094      112.39      85.57     2.755
1962.............................................   4,291.40    2.875    2.187      123.38      93.87     2.825
1963.............................................   4,396.64    3.375    2.563      148.39     112.67     2.923
1964.............................................   4,576.32    3.375    2.553      154.45     116.83     3.084
1965.............................................   4,658.72    3.375    2.529      157.23     117.82     3.184
1966.............................................   4,938.36    3.500    2.568      172.84     126.84     3.483
1967.............................................   5,213.44    3.550    2.604      185.08     135.74     3.753
1968.............................................   5,571.76    3.325    2.415      185.26     134.55     3.950
1969.............................................   5,893.76    3.725    2.710      219.54     159.75     4.437
1970.............................................   6,186.24    3.650    2.661      225.80     164.61     5.074
1971.............................................   6,497.08    4.050    2.961      263.13     192.37     5.286
1972.............................................   7,133.80    4.050    2.973      288.92     212.09     5.406
1973.............................................   7,580.16    4.300    3.101      325.95     235.04     5.754
1974.............................................   8,030.76    4.375    3.168      351.35     254.45     6.218
1975.............................................   8,630.92    4.375    3.184      377.60     274.77     6.593
1976.............................................   9,226.48    4.375    3.201      403.66     295.30     6.731
1977.............................................   9,779.44    4.375    3.213      427.85     314.19     6.958
1978.............................................  10,556.03    4.275    3.153      451.27     332.84     7.199
1979.............................................  11,479.46    4.330    3.206      497.06     367.99     7.524
1980.............................................  12,513.46    4.520    3.355      565.61     419.83     8.568
1981.............................................  13,773.10    4.700    3.514      647.34     484.01     9.947
1982.............................................  14,531.34    4.575    3.460      664.81     502.73    11.178
1983.............................................  15,239.24    4.775    3.645      727.67     555.42    10.768
1984.............................................  16,135.07  \4\ 4.9  \4\ 3.7      794.86     609.29    11.601
                                                                   26       76
1985.............................................  16,822.51    5.200    3.993      874.77     671.77    11.213
1986.............................................  17,321.82    5.200    3.997      900.73     692.38    11.091
1987.............................................  18,426.51    5.200    4.002      958.18     737.35    10.063
1988.............................................  19,334.04    5.530    4.257    1,069.17     823.09     9.773
1989.............................................  20,099.55    5.530    4.264    1,111.51     856.95     9.573
1990.............................................  21,027.98    5.600    4.320    1,177.57     908.48     9.324
1991.............................................  21,811.60    5.600    4.321    1,221.45     942.58     9.090
1992.............................................  22,935.42    5.600    4.320    1,284.38     990.89     8.745
1993.............................................  23,132.67    5.600    4.315    1,295.43     998.23     8.322
1994.............................................  23,753.53    5.260    4.050    1,249.44     961.95     8.040
1995.............................................  24,705.66    5.260    4.045    1,299.52     999.67     7.859
1996.............................................  25,913.90    5.260    4.045    1,363.07   1,098.19     7.615
1997.............................................  27,426.00    5.350    4.120    1,467.29   1,129.96     7.500
1998.............................................  28,861.44    5.350    4.136    1,544.09   1,193.72     7.228
1999.............................................  30,298.80    5.350    4.139    1,620.99   1,254.10     6.948
                                                  --------------------------------------------------------------
Total taxes paid 1956-99:
  Accumulated without interest...................         NA       NA       NA   27,322.92  20,826.94        NA
  Accumulated with interest......................         NA       NA       NA  101,642.27  76,470.34        NA
----------------------------------------------------------------------------------------------------------------
\1\ This table uses the average wage series for indexing earnings, for the period 1956-98, developed by SSA in
  computing benefit amounts. The average wage for 1999 is based on Alternative II assumptions in the 2000 report
  of the Social Security Board of Trustees.
\2\ Old-age tax rates were derived by applying the ratio of old-age benefits/total OASI benefits to the OASI tax
  rates.
\3\ Interest rates for 1956-99 are from the SSA Office of the Chief Actuary and reflect the interest rate earned
  by the Social Security Trust Funds.
\4\ In 1984, employees received a tax credit of 0.3 percent against OASDI taxes. The OASI and old-age tax rates
  reflect a proportional allocation of the tax credit.

NA--Not applicable.

Note.--Initial benefit amount upon retirement in January 2000 at age 65: $987 worker only; $1,480 worker and
  spouse (both age 65).

 Source: Kollmann (2000).


         TABLE 1-50.--SOCIAL SECURITY TAXES PAID BY A WAGE EARNER WITH MAXIMUM TAXABLE EARNINGS, 1956-99
----------------------------------------------------------------------------------------------------------------
                                                               Tax rates (in          Taxes paid       Effective
                                                                 percent)     ------------------------  interest
                  Calendar year                    Earnings ------------------                          rate \2\
                                                                      Old age     OASI       Old age      (in
                                                               OASI     \1\                             percent)
----------------------------------------------------------------------------------------------------------------
1956.............................................     4,200    2.000    1.526       84.00       64.10     2.401
1957.............................................     4,200    2.000    1.548       84.00       65.03     2.492
1958.............................................     4,200    2.000    1.555       84.00       65.31     2.516
1959.............................................     4,800    2.250    1.739      108.00       83.47     2.578
1960.............................................     4,800    2.750    2.111      132.00      101.33     2.598

1961.............................................     4,800    2.750    2.094      132.00      100.51     2.755
1962.............................................     4,800    2.875    2.187      138.00      105.00     2.825
1963.............................................     4,800    3.375    2.563      162.00      123.01     2.923
1964.............................................     4,800    3.375    2.553      162.00      122.54     3.084
1965.............................................     4,800    3.375    2.529      162.00      121.40     3.184

1966.............................................     6,600    3.500    2.568      231.00      169.52     3.483
1967.............................................     6,600    3.550    2.604      234.30      171.84     3.753
1968.............................................     7,800    3.325    2.415      259.35      188.35     3.950
1969.............................................     7,800    3.725    2.710      290.55      211.42     4.437
1970.............................................     7,800    3.650    2.661      284.70      207.55     5.074

1971.............................................     7,800    4.050    2.961      315.90      230.95     5.286
1972.............................................     9,000    4.050    0.973      364.50      267.57     5.406
1973.............................................    10,800    4.300    3.101      464.40      334.87     5.754
1974.............................................    13,200    0.375    3.168      577.50      418.24     6.218
1975.............................................    14,100    4.375    3.184      616.88      448.87     6.593

1976.............................................    15,300    4.375    3.201      669.38      489.69     6.731
1977.............................................    16,500    4.375    3.213      721.88      530.11     6.958
1978.............................................    17,700    4.275    3.153      756.67      558.09     7.199
1979.............................................    22,900    4.330    3.206      991.57      734.09     7.524
1980.............................................    25,900    4.520    3.355    1,170.68      868.96     8.568

1981.............................................    29,700    4.700    3.514    1,395.90    1,043.70     9.947
1982.............................................    32,400    4.575    3.460    1,482.30    1,120.92    11.178
1983.............................................    35,700    4.775    3.645    1,704.68    1,301.16    10.768
1984.............................................  \3\ 37,8  \3\ 4.9  \3\ 3.7    1,862.03    1,427.40    11.601
                                                         00       26       76
1985.............................................    39,600    5.200    3.993    2,059.20    1,581.35    11.213

1986.............................................    42,000    5.200    3.997    2,184.00    1,678.81    11.091
1987.............................................    43,800    5.200    4.002    2,277.60    1,752.70    10.063
1988.............................................    45,000    5.530    4.257    2,488.50    1,915.74     9.773
1989.............................................    48,000    5.530    4.264    2,654.40    2,046.50     9.573
1990.............................................    51,300    5.600    4.320    2,872.80    2,216.34     9.324

1991.............................................    53,400    5.600    4.321    2,990.40    2,307.66     9.090
1992.............................................    55,500    5.600    4.320    3,108.00    2,397.79     8.745
1993.............................................    57,600    5.600    4.315    3,225.60    2,485.57     8.322
1994.............................................    60,600    5.260    4.050    3,187.56    2,454.12     8.040
1995.............................................    61,200    5.260    4.046    3,219.16    2,476.35     7.859

1996.............................................    62,700    5.260    4.045    3,298.02    2,536.14     7.615
1997.............................................    65,400    5.350    4.120    3,498.90    2,694.50     7.500
1998.............................................    68,400    5.350    4.136    3,659.40    2,829.05     7.228
1999.............................................    72,600    5.350    4.139    3,884.10    3,005.00     6.948
                                                  --------------------------------------------------------------
Total taxes paid 1956-99:
  Accumulated without interest...................        NA       NA       NA   60,249.87   46,052.58        NA
  Accumulated with interest......................        NA       NA       NA  188,376.70  142,273.73        NA
----------------------------------------------------------------------------------------------------------------
\1\ Old-age tax rates were derived by applying the ratio of old-age benefits/total OASI benefits to the OASI tax
  rates.
\2\ Interest rates for 1956-99 are from the SSA Office of the Chief Actuary and reflect the interest rate earned
  by the Social Security Trust Funds.
\3\ In 1984, employees received a tax credit of 0.3 percent against OASDI taxes. The OASI and old-age tax rates
  reflect a proportional allocation of the tax credit.

 NA--Not applicable.

Note.--Initial benefit amount upon retirement in January 2000 at age 65: $1,433 worker only; $2,149 worker and
  spouse (both age 65).

 Source: Kollmann (2000).

    Table 1-51 shows past and projected payback times for 
workers retiring in various years from 1940 to 2030. Benefits 
are for the worker alone. However, the value of the benefit 
could be higher if the worker had dependents who were eligible 
for benefits. For example, if these workers had spouses who 
also were the full retirement age (FRA) and were not entitled 
to a Social Security benefit on their own account, the value of 
the monthly benefit would increase by 50 percent. This would 
shorten the payback times considerably.
    While these illustrations do not address the 
``moneysworth'' question, they do show the relationship of 
payback times of past, current, and future beneficiaries. It is 
apparent that past retirees recovered the value of their taxes 
very quickly. Payback times have lengthened for workers 
retiring today, but they are still significantly shorter than 
those projected for future retirees. This decline in value is 
ameliorated somewhat (especially for low-income workers) by the 
projection that future retirees are expected to live longer, 
and thus collect benefits longer. Table 1-52 shows the life 
expectancies for people turning age 65 in the illustrated 
years.
    Defenders of Social Security tend to discount the 
phenomenon of lengthening payback times, arguing that the 
program serves social ends that transcend calculations of which 
individuals, or generations, obtain some sort of balance-sheet 
profit or loss. They point out that pay-as-you-go retirement 
systems such as Social Security by their nature often provide 
large returns on the contributions of the initial generations. 
In the early years of such programs, the


 TABLE 1-51.--NUMBER OF YEARS TO RECOVER TAXES PLUS INTEREST FOR VARIOUS
        WORKERS RETIRING AT AGE 65, \1\ SELECTED YEARS 1940-2030
------------------------------------------------------------------------
                                          Minimum    Average    Maximum
           Year of retirement              earner     earner     earner
------------------------------------------------------------------------
Illustration 1: Years to recover
 employee's OASI taxes
1940...................................      (\2\)        0.1        0.2
1960...................................        0.5        0.8        1.0
1980...................................        1.5        2.0        2.1
2000...................................        7.2       10.3       11.9
2010...................................        8.9       12.9       18.4
2020...................................        9.4       14.1       22.8
2030...................................        8.5       13.9       24.2
Illustration 2: Years to recover
 combined employee-employer OASI taxes
1940...................................      (\2\)        0.2        0.4
1960...................................        1.0        1.6        2.0
1980...................................        3.0        3.9        4.4
2000...................................       16.6       25.5       38.2
2010...................................       21.1       34.2       61.6
2020...................................       22.5       38.7      131.3
2030...................................       20.0       38.0      (\3\)
Illustration 3: Years to recover
 retirement portion of employee's OASI
 taxes
1940...................................      (\2\)        0.1        0.2
1960...................................        0.4        0.6        0.7
1980...................................        1.1        1.4        1.6
2000...................................        5.3        7.4        9.9
2010...................................        6.5        9.3       12.9
2020...................................        7.0       10.3       16.1
2030...................................        6.6       10.5       17.5
Illustration 4: Years to recover
 retirement portion of combined
 employee-employer OASI taxes
1940...................................      (\2\)        0.2        0.4
1960...................................        0.7        1.1        1.4
1980...................................        2.2        2.8        3.1
2000...................................       11.6       17.1       24.2
2010...................................       14.5       22.1       34.2
2020...................................       15.7       25.2       47.7
2030...................................       14.7       25.9      56.1
------------------------------------------------------------------------
\1\ Under the alternative II assumptions and taking into account benefit
  increases and continued accrual of interest after retirement but not
  the taxation of benefits. The retiree is assumed to attain age 65 and
  retire in January of the designated year. The current law increase in
  the retirement age is reflected.
\2\ Less than 0.1 years.
\3\ Infinite.

 Source: Kollmann (2000).



    TABLE 1-52.--LIFE EXPECTANCY AT AGE 65, SELECTED YEARS 1940-2030
------------------------------------------------------------------------
                                                   Life expectancy (in
                                                         years)
                     Year                      -------------------------
                                                    Male        Female
------------------------------------------------------------------------
1940..........................................         11.9         13.4
1960..........................................         12.9         15.9
1980..........................................         14.0         18.4
2000..........................................         15.9         19.2
2010..........................................         16.4         19.4
2020..........................................         16.9         19.8
2030..........................................         17.5        20.4
------------------------------------------------------------------------
Note.--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.
  Actual average lifetimes will probably be a little longer than the
  projected expectancies because of lower mortality rates assumed in
  future years.

 Source: Board of Trustees (2000).

ratio of workers to recipients is very high, allowing tax or 
contribution rates to be low. As the program matures, rates 
rise to reflect the increase in the number of beneficiaries. 
This feature is not unique to Social Security. Establishing 
benefit levels for early recipients in excess of what 
contributions would dictate is also found in private pension 
systems.
    Furthermore, proponents of Social Security note that 
providing ``adequate'' benefits to initial Social Security 
recipients that were essentially ``unearned'' in relation to 
their contributions to the system was deliberate social policy. 
Providing a minimum level of protection to the first workers to 
participate in the system was considered more important, in a 
period of economic depression, than concerns about excessive 
rates of return on taxes paid. Besides, the social benefits of 
giving a measure of economic independence for the elderly, and 
later for surviving spouses, and the disabled, are believed by 
many to be immense. Thus, some argue younger workers are in 
large part relieved from the financial burden of supporting 
their parents, and the elderly are afforded an opportunity to 
live independently and with dignity.
    Critics of Social Security point to these social welfare 
features as a basic flaw in the program. They argue that by 
combining the goals of social adequacy, which is welfare-
related, with individual equity, which loosely ties benefits to 
taxes paid, the program has become a mishmash that accomplishes 
neither goal well and creates inequities. One inequity they 
cite is that future beneficiaries will receive retirement 
benefits inferior to those that the equivalence of their taxes 
could purchase in the private sector. They also say when 
interest is included, many workers (for example, those earning 
at least average wages; see table 1-51) will not recoup what 
they and their employer paid in taxes. Often buttressing these 
arguments are calculations that show what individuals could 
receive if their Social Security taxes were invested privately.
    This latter argument is dependent on the interest rate 
assumed on private investment. Arriving at the ``proper'' 
interest rate is problematic. Those who project high investment 
returns often refer to the historical performance of the stock 
market, showing that a portfolio of broad-based stocks would 
have earned on average substantial rates of return over the 
years, and that this performance can be expected to continue in 
the future. Also, high real interest rates may not seem so 
unlikely given the relationship of nominal interest rates and 
inflation over the past decade.
    On the other hand, private investments have an element of 
risk that critics believe should be unacceptable in providing a 
national system of retirement income, and that if a safe-as-
possible mix of investment vehicles were used instead, 
projected rates of return would be smaller. They also contend 
that recent high real interest rates are a historical anomaly 
that will not be sustained in the future. The key point for the 
reader is to be aware of the influence exerted by the projected 
rate of return in these sorts of calculations, and the large 
degree to which the argument about the value of Social Security 
hinges around it.

                               REFERENCES

Advisory Council on Social Security. (1997, January). Report on 
        the 1994-96 Advisory Council on Social Security. 
        Washington, DC: Author.
Ballantyne, H.C. (1984). Present policies and methods regarding 
        the long-term adjustment of benefits. Social Security 
        Bulletin, 47(10), 9-12.
Bipartisan Commission on Entitlement and Tax Reform. (1995, 
        January). Final report to the President. Washington, 
        DC: Author.
Board of Trustees, Federal Old-Age and Survivors Insurance and 
        Disability Insurance Trust Funds. (2000, March 30). The 
        2000 annual report of the Board of Trustees of the 
        Federal Old-Age and Survivors Insurance and Disability 
        Insurance Trust Funds. Washington, DC: U.S. Government 
        Printing Office.
Committee on Economic Security. (1935, January). Report of the 
        Committee on Economic Security. Washington, DC: Author. 
        (The report is available on the Social Security 
        Administration's Website at: http://www.ssa.gov/
history/reports/ces.html).
Kollmann, G. (2000). Social Security: The relationship of taxes 
        and benefits for past, present, and future retirees 
        (95-149 EPW). Washington, DC: Congressional Research 
        Service.
Social Security Administration. (1999). Annual Statistical 
        Supplement to the Social Security Bulletin, 1999. 
        Washington, DC: Author.