The bipartisan Social Security rescue package before Congress will keep benefit checks flowing without interruption for many years if economic conditions are reasonably good and a new method of crediting trust-fund tax intake is used, according to new estimates by system actuaries.
The figures indicated that, if the economy is not so good, the rescue plan could fall short of the amount needed.
System Commissioner John A. Svahn said in a letter to the House Ways and Means and Senate Finance committees that, if economic conditions improve to the so-called "intermediate" level during the 1980s, the plan developed by a presidential commission will provide $165 billion over the next seven years.
That is substantially more than the system's anticipated shortfall of $117 billion under the "intermediate" economic assumptions.
Svahn said that, even without changing the method of crediting tax income, this would allow Social Security to maintain an adequate reserve in the old-age and disability funds. That reserve, he said, would start growing larger toward the end of the decade, although it would drop temporarily to 13 percent of a year's benefits in 1985 and leave "little margin for error" in case of a sudden economic dip.
A reserve of 12 to 13 percent is considered the minimum safe balance at the start of any year.
However, Svahn said a new method of crediting tax revenues to the trust funds, called "normalized tax transfers," is being put into effect. Estimated revenues expected from the Social Security tax throughout the month would all be credited to the trust fund by the Treasury on the first day of the month.
He said that this change would improve trust-fund balances and that, under the "intermediate" economic scenario, the combined assets of the old-age, disability and health funds through 1989--assuming enactment of the rescue plan--would "fall no lower than 20 percent, well above the necessary 13 percent to keep benefits timely."
However, Svahn reported that, if economic conditions during the 1980s follow what he called the "pessimistic scenario," combined balances in the old-age and disability funds, not including the impact of "normalized tax transfers," would dip to 11 percent in 1985, assuming adoption of the rescue plan.
He said they would go even lower for the next several years and not reach the required 13 percent again until 1991. He did not elaborate on the impact of "normalized tax transfers."
Under the "pessimistic" scenario, according to a chart with the letters, the rescue plan would provide $180 billion over the next seven years, while the estimated shortfall for the period would be $198 billion.
Figures for the "pessimistic" scenario are higher than for the "intermediate" because the former assumes higher inflation rates.