Economic forecasting: effect of errors on OASDI fund ratios.

A broad range of economic assumptions are used to project the future income and outgo of the Social Security system. The assumptions adopted by the Board of Trustees of the Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Fund were rather consistently on the optimistic side of the actual experience that emerged. This article examines the experience of several key economic indicators during the 1970's. Acknowledging that forecasting such quantities is an inexact science at best, the authors present a formula for making estimates of OASDI fund ratios, given the necessary assumptions. The formula is used to project fund ratios from 1981 to 1986. It shows where the fund would stand if forecasting errors were to continue at the magnitudes experienced in 1970-76.