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Recalculation of the 2014 Annual Report of the OASDI Trustees HA-20-7-15

 

By Anthony J. Sanders

sanderstony@live.com

 

Free Disability Insurance Reallocation Tax (DIRT) Act:

 

To immediately amend the DI tax rate from 1.80% to 2.30%, from 0.90% to 1.15% for employees and from 0.90% to 1.15% for employers under Sec. 201(b)(1)(S) of the Social Security Act 42USC(7)II§401 and amend the OASI tax rate from 10.60% to 10.10%, from 5.30% to 5.05% for employees under 26USC(C)(21)(A)§3101 (a) and from 5.30% to 5.05% for employers under 26USC(C)(21)(A)§3111 (a) to avoid depletion of the Disability Insurance (DI) Trust Fund in 2016 without increasing the overall 12.4% OASDI or 15.3% OASDI and Hospital Insurance (HI) tax-rate under 26USC(A)(2)§1401 beginning October 1, 2015.

 

To amend the DI tax rate again in 2018 to 2.20% from 2.30%, from 1.15% to 1.10% for employees and from 1.15% to 1.10% for employers under Sec. 201(b)(1)(S) of the Social Security Act 42USC(7)II§401 and amend the OASI tax rate from 10.10% to 10.20%, from 5.05% to 5.10% for employees under 26USC(C)(21)(A)§3101 (a) and from 5.05% to 5.10% for employers under 26USC(C)(21)(A)§3111 (a) without increasing the overall 12.4% OASDI or 15.3% OASDI and Hospital Insurance (HI) tax-rate under 26USC(A)(2)§1401 to maximize efficiency until a deficit appears in the OASI Trust Fund in 2019.

 

Without Income Limit Law (WILL) Act:

 

To abolish the maximum taxable limit on DI contributions on January 1, 2016 and OASI contributions January 1, 2017 and repeal Adjustment of the contribution and benefit base Section 230 of the Social Security Act 42USC(7)§430.

 

To require the Social Security Administration to pay for SSI Costs beginning January 1, 2017. 

 

To share profits in excess of social security program costs to the general fund of the U.S Treasury on a sliding scale beginning year end 2016 DI 50/50 with the  USPS, and OASI 10/90 to eliminate the federal budget deficit.  In 2020 OASI would share at negotiated rates an estimated 25/75, by 2025 OASDI would share 50/50 and by 2030 OASDI would save to pay for the peak in costs of Baby Boomer generation in 2035 that might raise the overall OASDI tax rate from 12.4%.

 

Audit: Two errors have been detected, in OASI Trust Fund Table IV.A.1, and at least one more is suspected before Table IV.A.3 OASDI.  First a uniform rate of interest must be declared.  Second, the high expenditure figures are misplaced in the low-cost projection.  The Actuaries must correct the 2014 Annual Report before they first redo the DI Trust Fund Table A.2 using Arabic numeral 0 and negative numbers.  Second, from a credible starting date, the Actuary must redo the OASI Trust Fund Table IV A.1 at an interest rate of their own declaration.  Third, they must recalculate the combined OASDI Trust Fund Table IV A.3.  Fourth, the SSA Actuaries must come to agreement with the 2.3% DI 10.1% rate of taxation until 2018 when it changes to 2.2% DI and 10.1%, under penalty of having to calculate, for the sake of comparison, half a dozen “pain in the OASDI tax rates” that take a week to finish, so sit straight on a soft cushion.  Fifth, publish the legislative proposal before it is inserted into a new first Chapter to the 2015 Annual Report of the Trustees, that presents Congress with both the Free DIRT Act, that will be in effect as an emergency countermeasure, whether or not Congress has the mind to edit the FICA tax on paystubs and/or pay the WILL Act and balance the federal budget before 2020.

 

DI Trust Fund Balance 2015-2022

 

Year

Total Revenue

Payroll Tax

Other Revenue

Net Interest

Total Spending

Net Increase Year End

Year End Balance

2015

121.2

117.3

1.9

2.0

151.0

-29.8

28.4

2016

125.8

123.8

2.0

0

155.8

-30.0

-1.6

2017

133.6

131.4

2.2

0

161.2

-27.6

-29.2

2018

141.9

139.4

2.5

0

167.1

-25.2

-54.4

2019

149.7

147.0

2.7

0

173.6

-23.9

-78.3

2020

157.6

154.7

2.9

0

180.6

-23

-101.3

2021

165.5

162.4

3.1

0

189.4

-23.9

-125.2

2022

173.5

170.1

3.4

0

198.5

-25

-150.2

Source: Annual Report of the OASDI Trustees 2014 Table IV.A.2.

 

To begin calculating the OASDI tax reallocation DI Table IV.A.2 must be filled out.  The Actuary leaves it to the reader to add other revenues, meaning the taxation of benefits, contributions from the General Fund and net interest, to come up with total revenue.  Because there are is no interest revenues, insignificant to nothing contributions from the General Fund are combined with the taxation of benefits to come up with Other Revenue.  There is no interest after 2015 because the Trust fund will be depleted under current law. Net Interest is estimated at 3% for DIRT and WILL projections.  Total spending is estimated using the Actuary’s intermediate projections for the current law.  Administrative and Railroad Benefits are affordable and do not raise any questions.  Net increase at year end is total revenues minus total spending.  The total net increase is added to previous number, or subtracted if that number happens to be negative.  At the end of 2015 the DI Trust Fund is estimated to have a balanced of $28.4 billion, however due to the ongoing deficit, the trust fund will be depleted sometime in 2016 and at the end of the year the balance will be -$1.6 billion, in 2017 it will -$29.2 billion and by 2020 it will reach -$101.3.  The OASI Trust Fund could pay the deficit as a reduction in assets at the end of the year and there would be no DI trust fund, only a payroll tax and some taxation of benefits for revenues and benefit payments, administration and Railroad benefits for expenses.  This is the easiest solution, it is sloppy accounting, but not criminally so, because no-one’s benefits would be unnecessarily cut. SSA Actuaries have previously always been able to perform the OASDI reallocation math or raise taxes if necessary.  Now we are ready to begin calculating the optimal OASDI tax rate; using the 2013 Report figures supporting the Free DIRT Act 2.3% DI and 10.1% OASI was found to be optimal until 2018 when the optimal rate becomes 2.2% DI and 10.2% OASI. 

 

DI Trust Fund: Current, Free DIRT and WILL 2015-2022

 

Year

Total Rev.

Payroll Tax

Other Rev.

Net Interest

Gross

Cost

Gross Increase

USPS

Fed 2020

Year End Balance

2015

121.2

117.3

1.9

2.0

151.0

-29.8

0

28.4

2016

125.8

123.8

2.0

0

155.8

-30.0

0

-1.6

DIR 2.3

161.2

158.2

2.0

1.0

155.8

5.4

0

33.8

WILL

208.7

205.7

2.0

1.0

161.0

47.7

21.4

54.7

2017

133.6

131.4

2.2

0

161.2

-27.6

0

-29.2

DIRT

171.3

167.9

2.2

1.2

161.2

10.1

0

43.9

WILL

222.4

218.3

2.2

1.9

167.3

55.1

21.9

87.9

2018

141.9

139.4

2.5

0

167.1

-25.2

0

-54.4

DIR 2.2

174.4

170.3

2.5

1.5

167.1

7.3

0

51.2

WILL

226.9

221.4

2.5

3.0

173.9

53

22.3

118.6

2019

149.7

147.0

2.7

0

173.6

-23.9

0

-78.3

DIRT

184

179.6

2.7

1.7

173.6

10.4

0

61.6

WILL

240.2

233.5

2.7

4.0

180.9

59.3

22.8

155.1

2020

157.6

154.7

2.9

0

180.6

-23

0

-101.3

DIRT

194.1

189.1

2.9

2.1

180.6

13.5

0

75.1

WILL

254.0

245.8

2.9

5.3

188.2

65.8

32.9

188.0

2021

165.5

162.4

3.1

0

189.4

-23.9

0

-125.2

DIRT

204.2

198.5

3.1

2.6

189.4

14.8

0

89.9

WILL

267.6

258.1

3.1

6.4

197.2

70.4

35.2

223.2

2022

173.5

170.1

3.4

0

198.5

-25

0

-150.2

DIRT

214.4

207.9

3.4

3.1

198.5

15.9

0

105.8

WILL

281.3

270.3

3.4

7.6

206.3

75.0

37.5

260.7

Source: 2014 Annual Report of the OASDI Trustees 2014 Table IV.A.2.

 

To calculate the free DIRT estimates for DI is necessary to multiply the taxable payroll with 2.3/1.8 = 1.278 until 2018 when it becomes 2.2/1.8 = 1.222 and add other revenues and net interest for the total revenues.  Total spending uses the intermediate projection.  The gross increase at end of year is total revenues minus total spending.  The Year End Balance is the net increase at end of year, (less the postal service in WILL), plus the previous Year’s End Balance.  The WILL is calculated by multiplying the free DIRT payroll tax revenues by 1.3.  Medicare is estimated to have a taxbase 1.33 times the size of SSA’s because Medicare doesn’t have a maximum taxable limit and has some other minor sources of taxbase that are not readily available to SSA.  Wherefore, the estimate of 1.3 times the free DIRT payroll tax is made and total revenues are recalculated. Not to lose all the people’s money to the federal deficit the high cost scenario is used in the WILL total spending projections to benefit the poor, while the intermediate revenue projections continue to be used as a baseline for revenues, to ensure a conservative estimate.  Interest is estimated at 3.4% of the previous year’s Year-end balance.  Revenues from the DI WILL are expected to be so high that the surplus revenues must be shared.  Therefore, after paying the high cost projection and sharing with the US Postal Service $20 billion (2014) + 2% annual growth until 2020, if revenues allow, when the General Fund would share the surplus 50/50 and pay for USPS.  In deciding on the optimal free DIRT tax rate one must adjust the rate in 2018 to prevent a deficit in the OASI account.  In the WILL OASI shall become responsible for paying for SSI in 2017.  SSI growth should be estimated highly, because laggard economies grow quickly, at around 5% annual growth from $70 billion in 2017.  The SSI is added to the high estimate that happens to be in the low-cost future in Table IV.A.1.  The OASI Trust Fund shall share 90% of surplus revenues with the federal government until 2020 when the rate shall be reviewed, it is estimated at 75% from 2020-2022.  The optimal OASDI tax rate will need to be respeculated and there will be a new 1% UN FICA tax on the agenda in 2020.  Before we can swiftly analyze the combined OASDI accounts in a concise table of total revenues and total expenditures, it is of course necessary to admire the effects of the free DIRT and WILL Acts on the largest asset in the world.  Interest is estimated at 3.4% of previous Year-end Balance.  OASI high cost projections and SSI costs are added in the WILL to create Gross Cost.  Total revenues are subtracted by gross costs to give gross increase at end of year.  There is a 90% federal share until 2020 when it will be renegotiated from this 75% share through 2022.  The Year-end Balance is sum of gross increase year end, less the federal share plus the previous year’s Year-end Balance.  The free DIRT Act reduces OASI revenues by multiplying current payroll taxes times 10.1/10.6 - = 0.953 and adding other revenues until 2018 when the current payroll tax is multiplied by 10.2/10.6 = 0.962. 

 

OASI Trust Fund; Current, Free Dirt and WILL 2015-2022

 

Year

Total Rev.

Pay-

roll Tax

Other Rev.

Net Int.

OASI Cost

SSI Cost

Gross Cost

Gross Increase

Federal Share

Year End Balance

2015

816.8

691.1

31

94.7

758.7

0

758.7

58.1

0

2,783.7

2016

858.8

729.2

33.9

95.7

807.5

0

807.5

51.3

0

2,835.0

DIRT

824.5

694.9

33.9

95.7

807.5

0

807.5

17

0

2,800.7

WILL

824.5

694.9

33.9

95.7

807.5

0

807.5

17

0

2,800.7

2017

907.4

773.5

37.5

96.4

861.1

0

861.1

46.3

0

2,881.3

DIRT

869.7

737.0

37.5

95.2

861.1

0

861.1

8.6

0

2,809.3

WILL

1,090.8

958.1

37.5

95.2

880.2

70

950.2

140.6

126.5

2,814.8

2018

959.6

820.7

40.9

98.0

920.5

0

920.5

39.1

0

2,920.4

DIRT

926.1

789.7

40.9

95.5

920.5

0

920.5

5.6

0

2,814.9

WILL

1,163.2

1,027

40.9

95.7

949.7

73.5

1,023

140.2

126.2

2,828.8

2019

1,009.8

865.8

44.7

99.3

985.1

0

985.1

24.7

0

2,945.1

DIRT

973.5

833.1

44.7

95.7

985.1

0

985.1

-11.6

0

2,803.3

WILL

1,223.9

1,083

44.7

96.2

1,024

77.2

1,101

122.9

110.6

2,841.1

2020

1,059.6

910.9

48.6

100.1

1,055

0

1,055

4.6

0

2,949.7

DIRT

1,020.4

876.5

48.6

95.3

1.055

0

1,055

-34.6

0

2,768.7

WILL

1,284.7

1,140

48.6

96.6

1,103

81.0

1,184

100.7

50.3

2,891.4

2021

1,109.4

956.5

52.6

100.3

1,123

0

1,123

-13.6

0

2,936.1

DIRT

1,067.1

920.4

52.6

94.1

1,123

0

1,123

-55.9

0

2,712.8

WILL

1,347.4

1,196.5

52.6

98.3

1,183

85.1

1,268

79.4

39.7

2,931.1

2022

1,158.5

1,001.8

56.9

99.8

1,197

0

1,197

-38.5

0

2,897.6

DIRT

1.113.1

964.0

56.9

92.2

1,197

0

1,197

-83.9

0

2,628.9

WILL

1,409.8

1,253.2

56.9

99.7

1,270

89.3

1,359

50.8

25.4

2,956.5

Source: Annual Report of the OASDI Trustees 2014 Table IV.A.1.

 

Two errors have been detected, in OASI Trust Fund Table IV.A.1, and at least one more is suspected.  First, the rate of interest had to be normalized at the arbitrary net interest rate of 3.4%, thus changing future total OASI revenues, gross increase and Year-end balance; so as not to be overly pessimistic about the Free DIRT Act, that seems to be more accurately projected than that of the 2014 Annual Report.  Second, the high expenditure figures are misplaced in the low-cost projection.  Because they are higher than the intermediate projections these low-cost projections are used to describe expanded SSA spending under the WILL Act.  This is the first time that any hacking has been detected in the Annual Report of the OASDI Trustees.  This is very trying on the mental health of the analyst swayed by high OASI and feudal DI estimates. Comprehension at the moment of the publication has so far been at absolute zero, a number that hasn’t even yet been invested by our non-Palestine Supreme Court compensating Actuary.  SSA Actuaries must first redo the DI Trust Fund Table A.2 using Arabic numeral 0 and negative numbers.  Second, from a credible starting date, the Actuary must redo the OASI Trust Fund Table IV A.1 at an interest rate of their own declaration.  Third, they must recalculate the combined OASDI Trust Fund Table IV A.3.  Fourth, the SSA Actuaries must come to agreement with the 2.3% DI 10.1% rate of taxation until 2018 when it changes to 2.2% DI and 10.1%, under penalty of having to calculate, for the sake of comparison, half a dozen “pain in the OASDI tax rates” that takes a week, so make sure to sit up straight on a soft cushion. Under the proposed OASI tax rate a deficit would not appear in the OASI account until 2019.  Saving the DI trust fund, at no cost to taxpayers, by reallocating the FICA, moves the first expected deficit in the OASI account from 2022 to 2019.  Although the 10.2 OASI 2.2 DI rate seems to be a better expression from 2018 there is no half a percent that can save both OASI and DI from a deficit in 2019. OASI is much better able to bear the costs of a deficit than the much smaller DI Trust Fund. 

 

OASDI Trust Funds; Current, Free DIRT and WILL 2015-2022

 

 

OASI

DI

OASDI

Year

Total Rev.

Gross Cost

Gross Increase

Total Rev.

Gross

Cost

Gross Increase

Total Rev.

Gross Cost

Gross Increase

2015

816.8

758.7

58.1

121.2

151.0

-29.8

938.0

909.7

28.3

2016

858.8

807.5

51.3

125.8

155.8

-30.0

984.6

963.3

21.3

DIRT

824.5

807.5

17

161.2

155.8

5.4

985.7

963.3

22.4

WILL

824.5

807.5

17

208.7

161.0

47.7

1,033.2

968.5

64.7

2017

907.4

861.1

46.3

133.6

161.2

-27.6

1,041

1,022

18.7

DIRT

869.7

861.1

8.6

171.3

161.2

10.1

1,041

1,022

18.7

WILL

1,090.8

950.2

140.6

222.4

167.3

55.1

1,313.2

1,117.5

195.7

2018

959.6

920.5

39.1

141.9

167.1

-25.2

1,101.5

1,087.6

13.9

DIRT

926.1

920.5

5.6

174.4

167.1

7.3

1,100.5

1,087.6

12.9

WILL

1,163.2

1,023

140.2

226.9

173.9

53

1,390.1

1,196.9

193.2

2019

1,009.8

985.1

24.7

149.7

173.6

-23.9

1,159.5

1,158.7

0.8

DIRT

973.5

985.1

-11.6

184

173.6

10.4

1,157.5

1,158.7

-1.2

WILL

1,223.9

1,101

122.9

240.2

180.9

59.3

1,464.1

1,281.9

182.2

2020

1,059.6

1,055

4.6

157.6

180.6

-23

1,217.2

1,235.6

-18.4

DIRT

1,020.4

1,055

-34.6

194.1

180.6

13.5

1,214.5

1,235.6

-31.1

WILL

1,284.7

1,184

100.7

254.0

188.2

65.8

1,538.7

1,372.2

166.5

2021

1,109.4

1,123

-13.6

165.5

189.4

-23.9

1,274.9

1,312.4

-37.5

DIRT

1,067.1

1,123

-55.9

204.2

189.4

14.8

1,271.3

1,312.4

-41.1

WILL

1,347.4

1,268

79.4

267.6

197.2

70.4

1,615

1,465.2

149.8

2022

1,158.5

1,197

-38.5

173.5

198.5

-25

1,332

1,395.5

-63.5

DIRT

1.113.1

1,197

-83.9

214.4

198.5

15.9

1,327.5

1,395.5

-68

WILL

1,409.8

1,359

50.8

281.3

206.3

75.0

1,691.1

1,565.3

125.8

 

Even adjusting for a uniform 3.4% rate of interest, OASI net interest defies logic to make the free DIRT Act look like dirt.  According to this math, keeping the DI trust fund solvent to sustain interest earnings causes OASDI a slight loss.  The free DIRT Act will cause an OASDI deficit in 2019 instead of 2020 by a margin of error less than $2 billion.  The OASDI tax reallocation equation will need to be re-addressed in 2020.  There must be more scientific ways to calculate optimal rates other than dire necessity of the disability beneficiary.  Because the OASI Trust Fund balance is so much larger than the DI Trust Fund balance, the tax rate must be biased to protect the DI Trust Fund against deficit.  Ultimately, everyone agrees that by 2020 we are going to need to raise the rate of OASDI taxation.  Why we haven’t already abolished the maximum taxable limit on OASDI contributions is probably that it is more than SSA demands.  SSA could expand OASDI and SSI benefits in support of ILO Holidays with Pay Convention 132 of 1970, Workers with Family Responsibilities Convention 156 of 1981 and Maternity Protection Convention 183 of 2000.At this time the projected OASDI surplus from a WILL is not enough to satisfy official demands regarding the federal deficit.  However, it is enough for a disability beneficiary to sustainably balance the federal budget, if only the Allowances and Other Defense Civil Programs rows were abolished from OMB Table 4.1; military spending was limited to less than $500 billion and Health and Human Services spending to less than $1 trillion, at least until 2020.  Agency spending growth, in all other departments, is limited to no more than 3% annually, aiming for 2% agency growth that provides 3% income growth.