Social Security Primer

Summary: Social Security provides monthly cash benefits to retired or disabled workers and their family members, and to the family members of deceased workers. Among the beneficiary population, 83% are retired or disabled workers; family members of retired, disabled, or deceased workers make up the remainder. In March 2019, approximately 63.3 million beneficiaries received a total of $85.3 billion in benefit payments for the month; the average monthly benefit was $1,347.

Summary: Workers become eligible for Social Security benefits for themselves and their family members by working in Social Security-covered employment. An estimated 93% of workers in paid employment or self-employment are covered, and their earnings are subject to the Social Security payroll tax. Employers and employees each pay 6.2% of covered earnings, up to an annual limit on taxable earnings ($132,900 in 2019).

Summary: Among other requirements, a worker generally needs 40 earnings credits (10 years of covered employment) to be eligible for a Social Security retired-worker benefit. Fewer earnings credits are needed to qualify for a disabled-worker benefit; the number needed varies depending on the age of the worker when he or she became disabled. A worker's initial monthly benefit is based on his or her career-average earnings in covered employment. Social Security retired-worker benefits are first payable at the age of 62, subject to a permanent reduction for early retirement. Full (unreduced) retirement benefits are first payable at the full retirement age (FRA), which is increasing gradually from 65 to 67 under a law enacted by Congress in 1983. The FRA will reach 67 for persons born in 1960 or later (i.e., persons who become eligible for retirement benefits at the age of 62 in 2022 or later).

Summary: In addition to payroll taxes, Social Security is financed by federal income taxes that some beneficiaries pay on a portion of their benefits and by interest income that is earned on the Treasury securities held by the Social Security trust funds. In 2018, the Social Security trust funds had receipts totaling $1,003 billion, expenditures totaling $1,000 billion, and accumulated assets (U.S. Treasury securities) totaling $2.9 trillion. The Social Security Board of Trustees (the trustees) notes, "Over the program's 84-year history, it has collected roughly $21.9 trillion and paid out $19.0 trillion, leaving asset reserves of $2.9 trillion at the end of 2018 in its two trust funds." Projections by the trustees show that, based on the program's current financing and benefit structure, benefits scheduled under current law can be paid in full and on time until 2035 (under the intermediate set of assumptions). Projections also show that Social Security expenditures are estimated to exceed income by at least 20% over the next 75 years. Restoring long-range trust fund solvency and other policy objectives (such as increasing benefits for certain beneficiaries) have made Social Security reform an issue of ongoing congressional interest.

Summary: This report provides an overview of Social Security financing and benefits under current law. Specifically, the report covers the origins and a brief history of the program; Social Security financing and the status of the trust funds; how Social Security benefits are computed; the types of Social Security benefits available to workers and their family members; the basic eligibility requirements for each type of benefit; the scheduled increase in the Social Security retirement age; and the federal income taxation of Social Security benefits.

Social Security is a self-financing program that provides monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. As of March 2019, there were approximately 63.3 million Social Security beneficiaries. Of those, 47.2 million (74.6%) were retired workers and family members, 10.1 million (16.0%) were disabled workers and family members, and 6.0 million (9.4%) were survivors of deceased workers.

Social Security is financed primarily by payroll taxes paid by covered workers and their employers. An estimated 176 million workers are covered by Social Security. Employers and employees each pay 6.2% of covered earnings, up to an annual limit; self-employed individuals pay 12.4% of net self-employment income, up to an annual limit. The annual limit on taxable earnings is $132,900 in 2019. Social Security is also credited with tax revenues from the federal income taxes paid by some beneficiaries on a portion of their benefits. In addition, Social Security receives interest income from Social Security trust fund investments. Social Security income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. This report refers to the separate OASI and DI trust funds on a combined basis as the Social Security trust funds. In 2018, the combined Social Security trust funds (OASDI) had total receipts of $1,003 billion, total expenditures of $1,000 billion, and accumulated holdings (assets) of more than $2.9 trillion.

Origins and Brief History of Social Security

Title II of the original Social Security Act of 1935 established a national plan designed to provide economic security for the nation's workers. The system of Old-Age Insurance it created provided benefits to individuals who were aged 65 or older and who had "earned" retirement benefits through work in jobs covered by the system. Benefits were to be financed by a payroll tax paid by employees and their employers on wages up to a base amount ($3,000 per year at the time). Monthly benefits were to be based on cumulative wages in covered jobs. The law related the amount of the benefit to the amount of a worker's wages covered by the program, but the formula was progressive. That is, the formula was weighted to replace a larger share of the earnings of low-wage workers compared with those of higher-wage workers. Before the Old-Age Insurance program was in full operation, the Social Security Amendments of 1939 shifted the emphasis of Social Security from protection of the individual worker to protection of the family by extending monthly cash benefits to the dependents and survivors of workers. The program now provided OASI.

During the decades that followed, changes to the Social Security program were mainly ones of expansion. Coverage of workers became nearly universal (the largest groups remaining outside the system are state and local government employees who have not chosen to join the system and federal employees who were hired before 1984). In 1956, Congress established the Disability Insurance (DI) program. Over the years, there were increases in the payroll tax rate, which increased from 2.0% of pay (1.0% each for employees and employers) in the 1937-1949 period to its current level of 12.4%. In addition, there were increases in the amount of wages subject to the payroll tax (the taxable wage base), which increased from $3,000 in the 1937-1950 period to $132,900 in 2019. The types of individuals eligible for benefits were expanded over the years, and benefit levels were increased periodically. In 1972, legislation provided for automatic cost-of-living adjustments, starting in 1975, indexed to the change in consumer prices as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) published by the Department of Labor's Bureau of Labor Statistics.

Beginning in the late 1970s, legislative action regarding Social Security became more concentrated on solving persistent financing problems. Legislation enacted in 1977 raised taxes and curtailed future benefit growth in an effort to shore up the system's finances. Still, in 1982, the OASI trust fund needed to borrow assets from the DI trust fund and the Medicare Hospital Insurance (HI) trust fund (borrowed amounts were fully repaid by 1986). In 1983, Congress passed additional major legislation that was projected to restore solvency to the Social Security system on average over the 75-year projection period at that time.

Current projections by the Social Security Board of Trustees show that the Social Security system has a long-range funding shortfall, and that the system will operate with annual cash-flow deficits each year through the end of the 75-year projection period (2093). These projections, and other factors, have focused attention on potential Social Security program changes.

The Social Security program is financed primarily by revenues from Federal Insurance Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA) taxes. FICA taxes are paid by both employers and employees, however, it is employers who remit the taxes to the U.S. Treasury. Employers remit FICA taxes on a regular basis throughout the year (e.g., weekly, monthly, quarterly, or annually), depending on the employer's level of total employment taxes (Social Security, Medicare, and federal individual income tax withholding).

The FICA tax rate of 7.65% each for employers and employees has two components: 6.20% for Social Security and 1.45% for Medicare HI. Under current law, employers and employees each pay 6.2% of covered wages, up to the taxable wage base, in Social Security payroll taxes. The SECA tax rate is 15.3% for self-employed individuals, with 12.4% for Social Security and 2.9% for Medicare HI. Self-employed individuals pay 12.4% of net self-employment income, up to the taxable wage base, in Social Security payroll taxes. One-half of the SECA taxes are allowed as a deduction for federal income tax purposes. SECA taxes are normally paid once a year as part of filing an annual individual income tax return.

In addition to Social Security payroll taxes, the Social Security program has two other sources of income. First, certain Social Security beneficiaries must include a portion of Social Security benefits in taxable income for the federal income tax, and the Social Security program receives part of those federal tax revenues. Second, the Social Security program receives interest from the U.S. Treasury on its investments in special U.S. government obligations.

As the Managing Trustee of the Social Security trust funds, the Secretary of the Treasury is required by law to invest Social Security revenues in interest-bearing federal government securities held by the trust funds. The revenues exchanged for the federal government securities are deposited into the general fund of the U.S. Treasury and are indistinguishable from revenues in the general fund that come from other sources. Because the assets held by the trust funds are federal government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the general fund of the U.S. Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption of federal government securities held by the trust funds.

Since 1984, Social Security benefits have been subject to the federal income tax. As part of the Social Security Amendments of 1983 ( P.L. 98-21 ), Congress made up to 50% of a person's Social Security benefits subject to the federal income tax if he or she has provisional income above a specified threshold ($25,000 for an individual tax filer; $32,000 for a married couple filing jointly). Provisional income is defined as total income from all sources recognized for tax purposes plus certain otherwise tax-exempt income, including half of Social Security benefits. Revenues from this "first tier" of taxation are credited to the Social Security trust funds. In 2018, the trust funds received $35.0 billion (3.5% of total trust fund income) from this provision.

Next, as part of the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ), Congress made up to 85% of a person's Social Security benefits subject to the federal income tax if he or she has provisional income above a second higher threshold ($34,000 for an individual tax filer; $44,000 for a married couple filing jointly). Revenues from this "second tier" of taxation are credited to the Medicare HI trust fund. In 2018, the HI trust fund received $24.2 billion (7.9% of total trust fund income) from this provision.

Under current law, the income thresholds are fixed (i.e., they are not adjusted for inflation or wage growth). Over time an increasing number of beneficiaries will be subject to the federal income tax on benefits. The Congressional Budget Office (CBO) estimates that about half of current Social Security beneficiaries are affected by the taxation of benefits.

Status of the Social Security Trust Funds

Projections by the Social Security Board of Trustees (the trustees) show that Social Security expenditures will exceed tax revenues each year through the end of the 75-year valuation period (2093). That is, Social Security will operate with annual cash-flow deficits . With interest income taken into account, Social Security maintained a total surplus (tax revenues plus interest income exceeded expenditures) from 2010 through 2018. Total revenues in 2019 are projected to exceed total costs by $1 billion; the last instance of costs exceeding revenues was in 1982. The trustees project that the trust funds will have a positive balance (asset reserves) until 2035, allowing Social Security benefits scheduled under current law to be paid in full and on time until then.

Over the long run, the trustees project that the 75-year actuarial deficit for the trust funds is equal to 2.78% of taxable payroll. Stated a different way, the trustees project that Social Security expenditures will exceed income by at least 20% over the next 75 years. For illustration purposes, the trustees point out that the following cha nges would be needed for the trust funds to remain solvent throughout the 75-year projection period: (1) an immediate 2.70-percentage-point increase in the payroll tax rate (from 12.40% to 15.10%); or (2) an immediate 17% reduction in benefits for all current and future beneficiaries; or (3) some combination of these approaches. Social Security's projected long-range funding shortfall is attributed primarily to demographic factors (such as lower fertility rates and increasing life expectancy) as well as program design features (such as a wage-indexed benefit formula and annual COLAs).

At the end of 2018, the trust funds were credited with asset reserves of more than $2.9 trillion. With the projection that the program's total costs will begin to exceed total revenue in 2020, the trustees project the trust funds to peak at the end of 2019. Beginning in 2020, the trustees project that the trust fund balance will begin to decline, until the asset reserves are depleted in 2035. The trust fund ratio can be used to put the size of the trust fund balance into perspective. This ratio represents trust fund assets at the beginning of a year as a percentage of cost for the year. In 2019, for example, the projected trust fund ratio is 273%. (Assets held by the trust funds at the beginning of 2019 are projected to be 2.73 times greater than the cost of the program in 2019.) The trustees project that the trust fund ratio will decline to 130% in 2028 and reach zero at the point of trust fund reserve depletion in 2035.

After depletion of trust fund reserves, the program would continue to operate with incoming Social Security receipts; those receipts are projected to be sufficient to pay 80% of benefits scheduled under current law in 2035, declining to 75% of scheduled benefits in 2093. Under current law, Social Security does not have authority to borrow from the general fund of the Treasury. Therefore, the program cannot draw upon general revenues to make up the difference between incoming receipts and benefit payments when the program no longer has asset reserves to draw upon. The Social Security Act does not specify what would happen to the payment of benefits scheduled under current law in the event of Social Security trust fund depletion. Two possible scenarios are (1) the payment of full monthly benefits on a delayed basis or (2) the payment of partial (reduced) monthly benefits on time.

Social Security Cash-Flow Surpluses and Deficits

From 1984 to 2009, Social Security generated surplus tax revenues (i.e., the program operated with annual cash-flow surpluses). Surplus tax revenues and interest income credited to the trust funds in the form of federal government securities contributed to a growing trust fund balance. Beginning in 2010, however, the program began operating with annual cash-flow deficits, and the trustees project that Social Security tax revenues will remain below program expenditures each year throughout the 75-year projection period (2019-2093).

When Social Security operates with a cash-flow deficit, the trust funds redeem more federal securities than the amount of current Social Security tax revenues, relying in part on trust fund asset reserves to pay benefits and administrative expenses. Because the federal securities held by the trust funds are redeemed with general revenues, this results in increased spending for Social Security from the general fund. When there are no surplus governmental receipts, the federal government must raise the necessary funds by increasing taxes or other income; reducing other spending; borrowing from the public; or some combination of these measures.

With respect to the program's reliance on general revenues, it is important to note that Social Security does not have authority to borrow from the general fund of the Treasury under current law. Rather, the program relies on revenues collected for Social Security purposes in previous years that were used by the federal government at the time for other (non-Social Security) spending needs and interest income earned on trust fund investments. The program draws on those previously collected Social Security tax revenues and interest income (trust fund asset reserves) when current Social Security tax revenues fall below current program expenditures.

Social Security reform is an issue of ongoing interest to lawmakers. For some advocates of reform, the focus is on restoring long-range solvency to the trust funds. For others, the focus is on constraining the projected growth in spending for entitlement programs—including Social Security, Medicare, and Medicaid—in the context of broader efforts to reduce growing federal budget deficits. The Social Security reform debate reflects other policy objectives as well, such as improving the adequacy and equity of benefits, and different philosophical views about the role of the Social Security program and the federal government in providing retirement income. Over the years, the debate has reflected two fundamentally different approaches to reform. The traditional approach would maintain the current structure of the program (i.e., a defined benefit system funded on a pay-as-you-go basis) by making relatively modest changes, such as an increase in the retirement age or an increase in the taxable wage base. In general, the goal of this approach is to preserve the social insurance nature of the program. In contrast, the personal savings and investment approach would redesign the 1930s-era program to create a prefunded system in which benefits would be based partially or entirely on personal savings and investments. More recently, the Social Security debate has reflected a shift in focus among some lawmakers away from efforts to scale back the program toward proposals that would expand Social Security benefits to address concerns about the adequacy of benefits and, more broadly, retirement income security.

Social Security provides monthly cash benefits to retired or disabled workers and to the family members of retired, disabled, or deceased workers. Benefits are designed to replace part of a worker's earnings. As such, a worker's benefit is based on his or her career-average earnings in covered employment (i.e., earnings up to the annual taxable limit) and a progressive benefit formula that is intended to provide adequate benefit levels for workers with low career-average earnings. This section explains how the worker's primary insurance amount (PIA) is computed. The worker's PIA is his or her monthly benefit amount payable at the full retirement age (FRA); it also determines the amount of monthly benefits payable to family members based on the worker's record. This section also covers the basic eligibility requirements for different types of Social Security benefits.

Social Security retirement benefits are first payable to retired workers at the age of 62, subject to a permanent reduction for "early retirement." The age at which full (unreduced) retirement benefits are first payable is the FRA. For most of the program's history, the FRA was 65. As part of the Social Security Amendments of 1983 ( P.L. 98-21 ), Congress raised the FRA from 65 to 67. The 1983 law established a gradual phase-in from 65 to 67 over a 22-year period (2000 to 2022).

Specifically, workers born in 1938 or later are affected by the increase in the FRA (i.e., workers who become eligible for retirement benefits at age 62 in 2000 or later). The increase in the FRA will be fully phased in for workers born in 1960 or later (i.e., workers who become eligible for retirement benefits at age 62 in 2022 or later). Table 1 shows the scheduled increase in the FRA being phased in under current law.

Computation of a Social Security Retired-Worker Benefit

Among other requirements, a worker generally needs 40 earnings credits (10 years of Social Security-covered employment) to be eligible for a Social Security retired-worker benefit. A worker's initial monthly benefit is based on his or her highest 35 years of earnings in covered employment, which are indexed to historical wage growth. The highest 35 years of indexed earnings are summed, and the total is divided by 420 months (35 years x 12 months). The resulting amount is the worker's average indexed monthly earnings (AIME). If a worker has fewer than 35 years of earnings in covered employment, years with no earnings are entered as zeroes in the computation, resulting in a lower AIME and therefore a lower monthly benefit.

The worker's PIA is determined by applying a formula to the AIME as shown in Table 2 . First, the AIME is sectioned into three brackets (or segments) of earnings, which are divided by dollar amounts known as bend points. In 2019, the bend points are $926 and $5,583. Three different replacement factors—90%, 32%, and 15%—are applied to the three brackets of AIME. The three products derived from multiplying each replacement factor and bracket of AIME are added together. For workers who become eligible for retirement benefits (i.e., those who attain age 62), become disabled, or die in 2019, the PIA is determined as shown in the example in Table 2 .

Generally, a worker's PIA increases each year from the year of eligibility (at age 62) to the year of benefit receipt based on the Social Security COLA. In addition, Social Security benefits already in payment generally increase each year based on the COLA.

Adjustments to Benefits Claimed Before or After the FRA

A worker's initial monthly benefit is equal to his or her PIA if he or she begins receiving benefits at the FRA. A worker's initial monthly benefit will be less than his or her PIA if he or she begins receiving benefits before the FRA, and it will be greater than his or her PIA if he or she begins receiving benefits after the FRA.

A retired-worker benefit is payable as early as the age of 62, however, the benefit will be permanently reduced to reflect the longer expected period of benefit receipt. Retired-worker benefits are reduced by five-ninths of 1% (or 0.0056) of the worker's PIA for each month of entitlement before the FRA up to 36 months, for a reduction of about 6.7% per year. For each month of benefit entitlement before the FRA in excess of 36 months, retirement benefits are reduced by five-twelfths of 1% (or 0.0042), for a reduction of 5% per year.

Workers who delay filing for benefits until after the FRA receive a delayed retirement credit (DRC). The DRC applies to the period that begins with the month the worker attains the FRA and ends with the month before he or she attains the age of 70. The DRC is 8% per year for workers born in 1943 or later (i.e., workers who attain the age of 62 in 2005 or later).

The actuarial adjustment to benefits based on claiming age is intended to provide the worker with roughly the same total lifetime benefits, regardless of the age at which he or she begins receiving benefits (based on average life expectancy). Therefore, if a worker claims benefits before the FRA, his or her monthly benefit is reduced to take into account the longer expected period of benefit receipt. For a worker whose FRA is 66, the decision to claim benefits at the age of 62 results in a 25% reduction in his or her PIA. For a worker whose FRA is 67, the decision to claim benefits at the age of 62 results in a 30% reduction in his or her PIA. Similarly, if a worker claims benefits after the FRA, his or her monthly benefit is increased to take into account the shorter expected period of benefit receipt.

Other Adjustments to Benefits (Including GPO and WEP)

Other benefit adjustments may apply, such as those related to simultaneous entitlement to more than one type of Social Security benefit. Under the dual entitlement rule, for example, a Social Security spousal benefit is reduced if the person also receives a Social Security benefit based on his or her own work in covered employment (i.e., a retired-worker or disabled-worker benefit). Similarly, under the government pension offset (GPO), a Social Security spousal benefit is reduced if the person also receives a pension based on his or her own work in non covered employment.

Under the windfall elimination provision (WEP), a modified benefit formula is used to compute a worker's Social Security benefit when he or she also receives a pension from non covered employment. The modified formula results in a lower initial monthly benefit compared to the regular benefit formula. Under the retirement earnings test (RET), a person's Social Security benefit is subject to withholding when he or she is below the FRA and has wage or salary income above an annual dollar threshold (i.e., above an annual exempt amount). Under the Social Security maximum family benefit rules, benefits payable to each family member (with the exception of the worker) are subject to reduction when total benefits payable to the family based on the worker's record exceed a specified limit.

For Social Security disability benefits, "disability" is defined as the inability to engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment that is expected to last for at least 12 months or result in death. Generally, the worker must be unable to do any kind of substantial work that exists in the national economy, taking into account age, education, and work experience. As noted previously, a worker generally needs 40 earnings credits to qualify for a Social Security retired-worker benefit. A worker under the age of 62 can qualify for a Social Security disabled-worker benefit with fewer earnings credits. The number of earnings credits needed varies, depending on the age of the worker when he or she became disabled; however, a minimum of six earnings credits is needed. Similarly, while the worker's highest 35 years of earnings are used to compute a retired-worker benefit, fewer years of earnings may be used to compute a disabled-worker benefit. Because a disabled worker's benefit is not reduced for entitlement before the FRA, a disabled worker's benefit is equal to his or her PIA.

Benefits for the Worker's Family Members

Although the majority of Social Security beneficiaries are retired or disabled workers, nearly 10.7 million beneficiaries (16.9% of the total) are the dependents and survivors of retired, disabled, or deceased workers.

Social Security benefits are payable to the spouse, divorced spouse, or child of a retired or disabled worker. Benefits are also payable to the widow(er), divorced widow(er), child, or parent of a deceased worker. In addition, mother's or father's benefits are payable to a young widow(er) who is caring for a deceased worker's child; the child must be under the age of 16 or disabled, and the child must be entitled to benefits. Benefits payable to family members are equal to a specified percentage of the worker's PIA, subject to a maximum family benefit. For example, the spouse of a retired worker may receive up to 50% of the retired worker's PIA, and the widow(er) of a deceased worker may receive up to 100% of the deceased worker's PIA. Benefits payable to family members may be subject to adjustments based on the person's age at entitlement, receipt of a Social Security benefit based on his or her own work record, and other factors.

Table 3 provides a summary of Social Security benefits payable to the family members of a retired, disabled, or deceased worker. It includes the basic eligibility requirements and basic benefit amounts before any applicable adjustments (such as for the maximum family benefit).

The total amount of Social Security benefits payable to a family based on a retired, disabled, or deceased worker's record is capped by the maximum family benefit. The family maximum cannot be exceeded, regardless of the number of beneficiaries entitled to benefits on the worker's record. If the sum of all benefits payable on the worker's record exceeds the family maximum, the benefit payable to each dependent or survivor is reduced in equal proportion to bring the total amount of benefits payable to the family within the limit. In the case of a retired or deceased worker , the maximum family benefit is determined by a formula and varies from 150% to 188% of the worker's PIA. For the family of a worker who attains the age of 62 in 2019, or dies in 2019 before attaining the age of 62, the total amount of benefits payable to the family is limited to

150% of the first $1,184 of the worker's PIA, plus 272% of the worker's PIA over $1,184 and through $1,708, plus 134% of the worker's PIA over $1,708 and through $2,228, plus 175% of the worker's PIA over $2,228.

The dollar amounts in the maximum family benefit formula ($1,184 / $1,708 / $2,228 in 2019) are indexed to average wage growth, as in the regular benefit formula. In the case of a disabled worker , the maximum family benefit is equal to 85% of the worker's AIME; however, the family maximum cannot be less than 100% or more than 150% of the worker's PIA.

In March 2019, there were approximately 63.3 million Social Security beneficiaries. As shown in Table 4 , retired-worker and disabled-worker beneficiaries accounted for 83.1% of the beneficiary population. The largest single category of beneficiaries was retired workers (69.7%), with an average monthly benefit of $1,467. The second-largest category was disabled workers (13.4%), with an average monthly benefit of $1,235. Family members of retired, disabled, or deceased workers accounted for the remainder of the beneficiary population (16.9%). Table 4 provides a breakdown of the Social Security beneficiary population in March 2019.


Salaries of Members of Congress: Recent Actions and Historical Tables

Summary: Congress is required by Article I, Section 6, of the Constitution to determine its own pay. In the past, Congress periodically enacted specific legislation to alter its pay; the last time this occurred affected pay in 1991. More recently, pay has been determined pursuant to laws establishing formulas for automatic adjustments.

Summary: The Ethics Reform Act of 1989 established the current automatic annual adjustment formula, which is based on changes in private sector wages as measured by the Employment Cost Index (ECI). The adjustment is automatic unless denied statutorily, although the percentage may not exceed the percentage base pay increase for General Schedule (GS) employees. Member pay has since been frozen in two ways: (1) directly, through legislation that freezes salaries for Members but not for other federal employees, and (2) indirectly, through broader pay freeze legislation that covers Members and other specified categories of federal employees.

Summary: Members of Congress last received a pay adjustment in January 2009. At that time, their salary was increased 2.8%, to $174,000. A provision in P.L. 111-8 prohibited any pay adjustment for 2010. Under the pay adjustment formula, Members were originally scheduled to receive an adjustment in January 2010 of 2.1%, although this would have been revised downward automatically to 1.5% to match the GS base pay adjustment. Members next were scheduled to receive a 0.9% pay adjustment in 2011. The pay adjustment was prohibited by P.L. 111-165. Additionally, P.L. 111-322 prevented any adjustment in GS base pay before December 31, 2012. Since the percentage adjustment in Member pay may not exceed the percentage adjustment in the base pay of GS employees, Member pay was also frozen during this period. If not limited by GS pay, Member pay could have been adjusted by 1.3% in 2012. The ECI formula established a maximum potential pay adjustment in January 2013 of 1.1%. P.L. 112-175 extended the freeze on GS pay rates for the duration of this continuing resolution, which also extended the Member freeze since the percentage adjustment in Member pay may not exceed the percentage adjustment in GS base pay. Subsequently, Member pay for 2013 was further frozen in P.L. 112-240. The maximum potential 2014 pay adjustment of 1.2%, or $2,100, was denied by P.L. 113-46. The maximum potential January 2015 Member pay adjustment was 1.6%, or $2,800. President Obama proposed a 1.0% increase in the base pay of GS employees, which would automatically have limited any Member pay adjustment to 1.0%. P.L. 113-235 contained a provision prohibiting any Member pay adjustment. The maximum potential January 2016 pay adjustment of 1.7%, or $3,000, would have been limited to 1.0%, or $1,700, due to the GS base pay increase. Member pay for 2016 was frozen by P.L. 114-113. The maximum potential January 2017 pay adjustment of 1.6%, or $2,800, would have been limited to 1.0%, or $1,700, due to the GS base pay increase. Member pay for 2017 was frozen by P.L. 114-254. The maximum potential January 2018 pay adjustment of 1.8%, or $3,100, was automatically limited to 1.4%, or $2,400, before being frozen by P.L. 115-141. The maximum potential January 2019 pay adjustment of 2.3%, or $4,000, was automatically limited to 1.4%, or $2,400, before being frozen at the 2009 level by P.L. 115-244. The maximum potential January 2020 pay adjustment is 2.6%, or $4,500.

Summary: If Members of Congress had received every adjustment prescribed by the ECI formula since 1992, and the 2 U.S.C. §4501 limitation regarding the percentage base pay increase for GS employees remained unchanged, the 2019 salary would be $210,900. When adjusted for inflation, Member salaries have decreased 15% since the last pay adjustment in 2009.

Summary: Both the automatic annual adjustments and funding for Members' salaries are provided pursuant to other laws (2 U.S.C. §4501)—not the annual appropriations bills—and a provision prohibiting a scheduled adjustment could be included in any bill, or introduced as a separate bill.

Member Pay: Constitutional Background, Source of Appropriations, and Current Rates

Article I, Section 6, of the U.S. Constitution, states that the compensation of Members of Congress shall be "ascertained by law, and paid out of the Treasury of the United States." Additionally, the Twenty-Seventh Amendment to the Constitution states, "No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened." This amendment was submitted to the states on September 25, 1789, along with 11 other proposed amendments, 10 of which were ratified and became the Bill of Rights. It was not ratified until May 7, 1992.

Since FY1983, Member salaries have been funded in a permanent appropriations account.

The most recent pay adjustment for Members of Congress was in January 2009. Since then, the compensation for most Senators, Representatives, Delegates, and the Resident Commissioner from Puerto Rico has been $174,000. The only exceptions include the Speaker of the House ($223,500) and the President pro tempore of the Senate and the majority and minority leaders in the House and Senate ($193,400).

This report provides historical tables on the rate of pay for Members of Congress since 1789; details on enacted legislation with language prohibiting the automatic annual pay adjustment since the most recent adjustment; the adjustments projected by the Ethics Reform Act as compared with actual adjustments in Member pay; and Member pay in constant and current dollars since 1992.

Additional CRS products also address pay and benefits for Members of Congress:

For information on actions taken each year since the establishment of the Ethics Reform Act adjustment procedure, see CRS Report 97-615, Salaries of Members of Congress: Congressional Votes, 1990-2018 , by Ida A. Brudnick. Members of Congress only receive salaries during the terms for which they are elected. Following their service, former Members of Congress may be eligible for retirement benefits, which are discussed in CRS Report RL30631, Retirement Benefits for Members of Congress , by Katelin P. Isaacs. For information on health insurance options available to Members, see CRS Report R43194, Health Benefits for Members of Congress and Designated Congressional Staff: In Brief , by Ada S. Cornell. For an overview of compensation, benefits, allowances, and selected limitations, see CRS Report RL30064, Congressional Salaries and Allowances: In Brief , by Ida A. Brudnick.

There are three basic ways to adjust Member pay.

Specific legislation was enacted to adjust Member pay prior to 1968. It has been used periodically since, most recently affecting pay for 1991.

The second method by which Member pay can be increased is pursuant to recommendations from the President, based on those made by a quadrennial salary commission. In 1967, Congress established the Commission on Executive, Legislative, and Judicial Salaries to recommend salary increases for top-level federal officials (P.L. 90-206). Three times (in 1969, 1977, and 1987) Congress received pay increases made under this procedure; on three occasions it did not. Effective with passage of the Ethics Reform Act of 1989 ( P.L. 101-194 ), the commission ceased to exist. Its authority was assumed by the Citizens' Commission on Public Service and Compensation. Although the first commission under the 1989 act was to have convened in 1993, it did not meet.

The third method by which the salary of Members can be changed is by annual adjustments. Prior to 1990, the pay of Members, and other top-level federal officials, was tied to the annual comparability increases provided to General Schedule (GS) federal employees. This procedure was established in 1975 ( P.L. 94-82 ). Such increases were recommended by the President, subject to congressional acceptance, disapproval, or modification. Congress accepted 5 such increases for itself—in 1975, 1979 (partial), 1984, 1985, and 1987—and declined 10 (1976, 1977, 1978, 1980, 1981, 1982, 1983, 1986, 1988, and 1989).

The Ethics Reform Act of 1989 changed the method by which the annual adjustment is determined for Members and other senior officials. This procedure employs a formula based on changes in private sector wages and salaries as measured by the Employment Cost Index (ECI). The annual adjustment automatically goes into effect unless

1. Congress statutorily prohibits the adjustment; 2. Congress statutorily revises the adjustment; or 3. The annual base pay adjustment of GS employees is established at a rate less than the scheduled adjustment for Members, in which case Members would be paid the lower rate.

Under this revised method, annual adjustments were

Although discussion of the Member pay adjustment sometimes occurs during consideration of annual appropriations bills, these bills do not contain funds for the annual salaries or pay adjustment for Members. Nor do they contain language authorizing an increase. The use of appropriations bills as vehicles for provisions prohibiting the automatic annual pay adjustments for Members developed by custom. A provision prohibiting an adjustment to Member pay could be offered to any bill, or be introduced as a separate bill.

The maximum potential January 2020 Member pay adjustment of 2.6%, or $4,500, was known when the Bureau of Labor Statistics (BLS) released data for the change in the Employment Cost Index (ECI) during the 12-month period from December 2017 to December 2018 on January 31, 2019.

Each year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the General Schedule (GS) base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase.

January 2019 Member Pay Adjustment Denied

The maximum potential January 2019 Member pay adjustment of 2.3%, or $4,000, was known when the BLS released data for the change in the ECI during the 12-month period from December 2016 to December 2017 on January 31, 2018.

Each year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The 2019 GS base pay adjustment was 1.4%, automatically limiting any Member pay adjustment to $2,400.

The House-passed ( H.R. 5894 ) and Senate-reported versions ( S. 3071 ) of the FY2019 legislative branch appropriations bill both contained provisions to prevent this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. Division B of P.L. 115-244 , enacted September 21, 2018, included the pay freeze provision.

January 2018 Member Pay Adjustment Denied

The maximum potential January 2018 member pay adjustment of 1.8%, or $3,100, was known when the BLS released data for the change in the ECI during the 12-month period from December 2015 to December 2016 on January 31, 2017.

Each year, the adjustment takes effect automatically unless it is either denied or modified statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The 2018 GS base pay adjustment was 1.4%, automatically limiting any Member pay adjustment to $2,400.

The House-passed ( H.R. 3162 ) and Senate-reported versions ( S. 1648 ) of the FY2018 legislative branch appropriations bill both contained provisions to prevent this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision.

Neither bill was enacted prior to the start of FY2018, and legislative branch activities were initially funded through a series of continuing appropriations resolutions (CRs) ( P.L. 115-56 , through December 8, 2017; P.L. 115-90 , through December 22, 2017; P.L. 115-96 , through January 19, 2018; P.L. 115-120 , through February 8, 2018; P.L. 115-123 , through March 23, 2018). P.L. 115-56 contained a provision, extended in the subsequent CRs, continuing "section 175 of P.L. 114-223 , as amended by division A of P.L. 114-254 ." This provision prohibited a Member pay adjustment in FY2017. Section 7 of the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ) prohibited the adjustment for the remainder of the year.

January 2017 Member Pay Adjustment Denied

The maximum potential January 2017 Member pay adjustment of 1.6%, or $2,800, was known when the BLS released data for the change in the ECI during the 12-month period from December 2014 to December 2015 on January 30, 2016.

Both the House-passed ( H.R. 5325 ) and Senate-reported ( S. 2955 ) versions of the FY2017 legislative branch appropriations bill—which would provide approximately $4.4 billion in funding for the activities of the House of Representatives, Senate, and legislative branch support agencies —contained a provision that would prohibit this adjustment. The Member pay provision was included in the bills as introduced and no separate votes were held on this provision. No further action was taken on H.R. 5325 or S. 2955 , but the pay prohibition language was included in the Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ).

Absent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase to match the increase in base salaries for GS employees.

January 2016 Member Pay Adjustment Denied

The maximum potential January 2016 Member pay adjustment of 1.7%, or $3,000, was known when the BLS released data for the change in the ECI during the 12-month period from December 2013 to December 2014 on January 30, 2015.

The House-passed and Senate-reported versions of the FY2016 legislative branch appropriations bill ( H.R. 2250 ) both contained a provision prohibiting this adjustment.

The pay adjustment prohibition was subsequently included in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ).

January 2015 Member Pay Adjustment Denied

The maximum potential January 2015 pay adjustment of 1.6%, or $2,800, was known when the BLS released data for the change in the ECI during the 12-month period from December 2012 to December 2013 on January 31, 2014.

Each year, the adjustment takes effect automatically unless it is either denied statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase.

The FY2015 legislative branch appropriations bill ( H.R. 4487 ), as reported by the Committee on Appropriations and passed by the House on May 1, 2014, contained a provision prohibiting this adjustment. This provision was continued in the House-passed and Senate-reported versions of this bill, with no separate vote on the Member pay provision. No further action on this bill was taken, but the provision was subsequently included in Section 8 of Division Q of the FY2015 Consolidated and Further Continuing Appropriations Act, which was enacted on December 16, 2014.

On August 29, 2014, President Obama issued an "alternative pay plan for federal civilian employees," which called for a 1.0% increase in base salaries for General Schedule employees. Absent the statutory prohibition on a Member pay adjustment, Members of Congress would have automatically been limited to a 1.0% ($1,700) salary increase.

January 2014 Member Pay Adjustment Denied

The maximum potential 2014 pay adjustment of 1.2%, or $2,100, was known when the BLS released data for the change in the ECI during the 12-month period from December 2011 to December 2012 on January 31, 2013. The Continuing Appropriations Act, 2014 ( P.L. 113-46 , enacted October 17, 2013), however, prohibited the scheduled 2014 pay adjustment for Members of Congress.

Each year, the adjustment takes effect automatically unless it is either

denied statutorily by Congress, or limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase. The scheduled January 2014 across-the-board increase in the base pay of GS employees under the annual adjustment formula was 1.3%. A scheduled GS annual pay increase may be altered only if the President issues an alternative plan or if a different increase, or freeze, is enacted. The President issued an alternate pay plan for civilian federal employees on August 30, 2013. This plan called for a January 2014 across-the-board pay increase of 1.0% for federal civilian employees, the same percentage as proposed in the President's FY2014 budget. Legislation was not enacted to prohibit or alter the GS adjustment, and Executive Order 13655, issued on December 23, 2013, implemented a 1.0% increase for GS employees. Had the Member pay adjustment not been prohibited by law, the GS base pay adjustment would have automatically limited a salary adjustment for Members of Congress to 1.0% ($1,700).

January 2013 Member Pay Adjustment Delayed and Then Denied

The maximum potential 2013 pay adjustment of 1.1%, or $1,900, was known when the BLS released data for the change in the ECI during the 12-month period from December 2010 to December 2011 on January 31, 2012. The adjustment takes effect automatically unless (1) denied statutorily by Congress or (2) limited by the GS base pay adjustment, since the percentage increase in Member pay is limited by law to the GS base pay percentage increase.

The President's budget, submitted on February 13, 2012, proposed an average (i.e., base and locality) 0.5% adjustment for GS employees.

President Obama later stated in a letter to congressional leadership on August 21, 2012, that the current federal pay freeze should extend until FY2013 budget negotiations are finalized. Section 114 of H.J.Res. 117 , the Continuing Appropriations Resolution, 2013, which was introduced on September 10, 2012, extended the freeze enacted by P.L. 111-322 through the duration of this continuing resolution. H.J.Res. 117 was passed by the House on September 13 and the Senate on September 22. It was signed by the President on September 28, 2012 ( P.L. 112-175 ). A delay in the implementation of pay adjustments for GS employees automatically delays any scheduled Member pay adjustment.

Executive Order Issued and Subsequent Pay Freeze Enacted

On December 27, 2012, President Obama issued Executive Order 13635, which listed the rates of pay for various categories of officers and employees that would be effective after the expiration of the freeze extended by P.L. 112-175 . The executive order included a 0.5% increase for GS base pay, which automatically lowered the maximum potential Member pay adjustment from 1.1% to 0.5%.

As in prior years, schedule 6 of the 2012 executive order listed the pay rate for Members of Congress for the upcoming year. This executive order indicated that an annual adjustment would take effect after the expiration of the freeze included in P.L. 112-175 . As stated above, the annual adjustments take effect automatically if legislation is not enacted preventing them. The executive order, however, by establishing the GS pay adjustment at a lower rate than the scheduled Member pay adjustment, automatically lowered the Member pay adjustment rate since by law Member pay adjustments cannot be higher than GS pay adjustments.

Subsequently, a provision in H.R. 8 , the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013 ( P.L. 112-240 ), froze Member pay at the 2009 level for 2013. The language was included in S.Amdt. 3448 , a substitute amendment agreed to by unanimous consent. The bill, as amended, passed the Senate (89-8, vote #251) and the House (257-167, roll call #659) on January 1, 2013. This freeze was subsequently reflected in Executive Order 13641, which was signed April 5, 2013.

This represented the second time, the first being in 2006, that Member pay was statutorily frozen for only a portion of the following year at the time of the issuance of the executive order. In both instances, the executive order listed new pay rates and indicated an effective date following the expiration of the statutory freeze. Pay adjustments in both years were further frozen pursuant to subsequent laws.

January 2011 and January 2012 Member Pay Adjustments Denied

As stated above, projected Member pay adjustments are calculated based on changes in the ECI. The projected 2011 adjustment of 0.9% was known when the BLS released data for the ECI change during the 12-month period from December 2008 to December 2009 on January 29, 2010. This adjustment would have equaled a $1,600 increase, resulting in a salary of $175,600.

The 2011 pay adjustment was prohibited by the enactment of H.R. 5146 ( P.L. 111-165 ) on May 14, 2010. H.R. 5146 was introduced in the House on April 27 and was agreed to the same day (Roll no. 226). It was agreed to in the Senate the following day by unanimous consent. Other legislation was also introduced to prevent the scheduled 2011 pay adjustment.

Additionally, P.L. 111-322 , which was enacted on December 22, 2010, prevents any adjustment in GS base pay before December 31, 2012. Since the percentage adjustment in Member pay may not exceed the percentage adjustment in the base pay of GS employees, Member pay is also frozen during this period. If not limited by GS pay, Members could have received a salary adjustment of 1.3% in January 2012 under the ECI formula. Pay for Members of Congress remained $174,000.

January 2010 Member Pay Adjustment Denied

Under the formula established in the Ethics Reform Act, Members were originally scheduled to receive a pay adjustment in January 2010 of 2.1%. This adjustment was denied by Congress through a provision included in the FY2009 Omnibus Appropriations Act. Section 103 of Division J of the act states, "Notwithstanding any provision of section 601(a)(2) of the Legislative Reorganization Act of 1946 (2 U.S.C. 31(2)), the percentage adjustment scheduled to take effect under any such provision in calendar year 2010 shall not take effect."

Had this provision not been enacted, the 2.1% projected adjustment would have been automatically reduced to 1.5% to match the 2010 GS base pay adjustment.

Member Pay: Other Proposals and Actions by Congress

As in previous Congresses, legislation was introduced in the 116 th Congress to

repeal the automatic pay adjustment provision (for example, H.R. 751 and H.R. 1466 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution, passage of appropriations, or reaching the debt limit (for example, S. 39 , S. 44 , S. 949 , H.R. 86 , H.R. 102 , H.R. 129 , H.R. 236 , H.R. 298 , H.R. 834 , H.R. 1172 , H.R. 1178 , H.R. 1466 , H.R. 1612 , H.J.Res. 10 , and H.J.Res. 51 ); and prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, S. 74 , S. 949 , H.R. 26 , H.R. 211 , H.R. 845 , and H.R. 1612 ).

Legislation was introduced in the 115 th Congress to

prohibit adjustments in pay (for example, H.R. 342 ); repeal the automatic pay adjustment provision (for example, H.R. 668 and H.R. 5946 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution or reaching the debt limit (for example, H.R. 429 , H.R. 536 , H.R. 646 , H.R. 1779 , H.R. 1951 , H.R. 2153 , H.R. 2665 , H.R. 3675 , H.R. 4512 , and H.R. 5946 , and S. 14 ); reduce the pay of Members of Congress (for example, H.R. 1786 and H.R. 5539 ); and prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, H.R. 1789 , H.R. 1794 , H.R. 2214 , H.R. 4852 , H.R. 4870 , and S. 2327 ).

Legislation was introduced in the 114 th Congress to

prohibit adjustments in pay (for example, H.R. 109 and H.R. 302 ); repeal the automatic pay adjustment provision (for example, H.R. 179 , H.R. 513 , H.R. 688 , H.R. 1585 , and S. 17 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including the passage of a budget resolution or existence of a deficit (for example, H.Con.Res. 27 , S.Con.Res. 11 , H.R. 92 , H.R. 110 , H.R. 174 , H.R. 187 , H.R. 3757 , H.R. 4814 , H.R. 4476 , and S. 39 ); reduce the pay of Members of Congress (for example, H.R. 179 and H.R. 688 ); and prohibit or reduce pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, S. 2074 , H.R. 3562 , H.R. 2023 , and H.R. 1032 ).

Linking Salaries to Passage of a Concurrent Resolution on the Budget

The House budget resolution for FY2016, H.Con.Res. 27 , included a policy statement that Congress should agree to a concurrent budget resolution each year by April 15, and if not, congressional salaries should be held in escrow (Section 819). The statement proposed that salaries would be released from the escrow account either when a chamber agrees to a concurrent resolution on the budget or the last day of the Congress, whichever is earlier. The House agreed to this resolution on March 25, 2015, and no further action was taken. The Senate agreed to its resolution on the FY2016 budget, S.Con.Res. 11 , on March 27, 2015, without this language. The conference report for S.Con.Res. 11 —agreed to in the House on April 30 and in the Senate on May 5, 2015—contains a "Policy Statement on 'No Budget, No Pay'" (Section 6216), which refers to actions by the House.

Legislation was introduced in the 113 th Congress to

prohibit adjustments in pay (for example, H.R. 54 , H.R. 243 , H.R. 636 , S. 18 , S. 30 ); repeal the automatic pay adjustment provision (for example, H.R. 134 , H.R. 150 , H.R. 196 , S. 65 , and H.R. 398 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to congressional actions or economic indicators, including passage of a budget resolution or reaching the debt limit (for example, H.R. 108 , H.R. 167 , H.R. 284 , H.R. 308 , H.R. 310 , H.R. 325 , H.R. 372 , H.R. 397 , H.R. 396 , H.R. 522 , H.R. 593 , H.R. 1884 , H.R. 2335 , H.R. 3234 , S. 18 , S. 30 , and S. 263 ); reduce the pay of Members of Congress (for example, H.R. 37 , H.R. 150 , H.R. 391 , H.R. 396 , H.R. 398 , and H.R. 1467 ); prohibit pay for Members of Congress during a lapse in appropriations resulting in a government shutdown (for example, H.R. 3160 , H.R. 3215 , H.R. 3224 , H.R. 3234 , and H.R. 3236 ); and apply any sequester to Member pay (for example, S. 436 , H.R. 1181 , H.R. 1478 , and H.R. 2677 ).

H.R. 325 , which (1) included language holding congressional salaries in escrow if a concurrent resolution on the budget was not agreed to by April 15, 2013, and (2) provided for a temporary extension of the debt ceiling through May 18, 2013, was introduced on January 21, 2013. Salaries would have been held in escrow for Members in a chamber if that chamber had not agreed to a concurrent resolution by that date. Salaries would have been released from the escrow account either when that chamber agreed to a concurrent resolution on the budget or the last day of the 113 th Congress, whichever was earlier. H.R. 325 was agreed to in the House on January 23, 2013, and the Senate on January 31, 2013. It was enacted on February 4, 2013 ( P.L. 113-3 ). Both the House and Senate agreed to a budget resolution prior to that date, however, and salaries were not held in escrow.

H.R. 807 , the Full Faith and Credit Act, was introduced in the House on February 25, 2013. The bill would have prioritized certain payments in the event the debt reaches the statutory limit. An amendment, H.Amdt. 61 , was offered on May 9, 2013, that would clarify that these obligations would not include compensation for Members of Congress. It was agreed to the same day. The bill passed the House on May 13, 2013. No further action was taken in the 113 th Congress.

The House-passed version of H.J.Res. 59 , the Continuing Appropriations Resolution, 2014, also contained a provision addressing actions by the Secretary of the Treasury in the event that the debt limit is reached and not raised. The provision (Section 138) would, in part, prohibit borrowing to provide pay for Members of Congress in the event that the debt reaches the statutory limit prior to December 15, 2014. The bill passed the House on September 20, 2013. It was enacted on December 26, 2013, without this section.

Legislation was introduced in the 112 th Congress to

repeal the automatic pay adjustment provision (for example, S. 133 , S. 148 , H.R. 187 , H.R. 235 , H.R. 246 , H.R. 343 , H.R. 431 , H.R. 3673 ); change the procedure by which pay for Members of Congress is adjusted or disbursed by linking it to other action or economic indicators (for example, H.R. 124 , H.R. 172 , H.R. 236 , H.R. 994 , H.R. 1454 , H.R. 3136 , H.R. 3565 , H.R. 3774 , H.R. 3799 , H.R. 3883 , H.R. 4036 , H.R. 6438 , S. 1442 ); reduce the pay of Members of Congress (for example, H.R. 204 , H.R. 270 , H.R. 335 , H.R. 1012 , H.R. 4399 ); otherwise alter or restrict pay for Members under certain conditions (for example, H.R. 6108 ); and freeze Member pay (for example, S. 1931 , S. 1936 , S. 2065 , S. 2079 , S. 2210 , H.R. 3858 , H.R. 6474 , H.R. 6720 , H.R. 6721 , H.R. 6722 ).

Actions Related to Member Pay During a Lapse in Appropriations

Legislation was also introduced in the 112 th Congress that would have affected Member pay in the event of a lapse of appropriations resulting in a government shutdown. These included H.R. 819 , H.R. 1255 , H.R. 1305 , H.Con.Res. 56 , and S. 388 .

The Senate passed S. 388 on March 1, 2011. The bill would have prohibited Members of the House and Senate from receiving pay, including retroactive pay, for each day that there is a lapse in appropriations or the federal government is unable to make payments or meet obligations because of the public debt limit. The House passed H.R. 1255 on April 1, 2011. The bill would have prohibited the disbursement of pay to Members of the House and Senate during either of these situations. No further action was taken on either bill.

On April 8, 2011, the Speaker of the House issued a "Dear Colleague" letter indicating that in the event of a shutdown, Members of Congress would continue to be paid pursuant to the Twenty-Seventh Amendment to the Constitution, which as stated above, states: "No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened"—although Members could elect to return any compensation to the Treasury.

Additional Legislation Receiving Floor Action but Not Enacted

Additional legislation to prohibit any Member pay adjustment in 2013 was introduced but not enacted in the 112 th Congress, including the following:

Section 5421(b)(1) of H.R. 3630 , as introduced in the House, would have prohibited any adjustment for Members of Congress prior to December 31, 2013. Section 706 of the motion to recommit also contained language freezing Member pay. On December 13, 2011, the motion to recommit failed (183-244, roll call #922), and the bill passed the House (234-193, roll call #923). The House-passed version of the bill was titled the "Middle Class Tax Relief and Job Creation Act of 2011." The Senate substitute amendment, which did not address pay adjustments, passed on December 17. It was titled the "Temporary Payroll Tax Cut Continuation Act of 2011." The bill was enacted on February 22, 2012 ( P.L. 112-96 ), without the pay freeze language. H.R. 3835 , introduced on January 27, 2012, also would have extended the pay freeze for federal employees, including Members of Congress, to December 31, 2013. This bill passed the House on February 1, 2012. H.R. 6726 , introduced on January 1, 2013, would have extended the pay freeze for federal employees, including Members of Congress, to December 31, 2013. This bill passed the House on January 2, 2013.

Reference and Historical Information and Explanation of Tables

Table 1 provides a history of the salaries of Members of Congress since 1789. For each salary rate, both the effective date and the statutory authority are provided.

Table 2 provides information on pay adjustments for Members since 1992, which was the first full year after the Ethics Reform Act that Representatives and Senators received the same salary. The table provides the projected percentage changes under the formula based on the Employment Cost Index and the actual percentage adjustment. The differences between the projected and actual Member pay adjustments resulted from

the enactment of legislation preventing the increase (adjustments for 1994, 1995, 1996, 1997, 1999, 2007, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019); limits on the percentage increase of Member pay because of the percentage increase in GS base pay (adjustments for 1994, 1995, 1996, 1998, 1999, 2001, 2003, 2007, 2008, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, and 2019); and a combination of the above. In some years, the percentage adjustment for Member pay would have been lowered to match the percentage adjustment in GS base pay if Congress had not passed legislation denying the adjustment (adjustments for 1994, 1995, 1996, 1999, 2007, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, and 2019).

Table 3 lists the laws which have previously delayed or prohibited Member pay adjustments, the dates these laws were enacted, and the text of the provision. While many of the bills in this list are appropriations bills, a prohibition on Member pay adjustments could be included in any bill, or be introduced as a separate bill.

Figure 1 , which follows, shows the salary of Members of Congress in current and constant (inflation adjusted) dollars since 1992. It shows that Member salaries, when adjusted for inflation, decreased 15% from 2009 until 2019.


Deficits, Debt, and the Economy: An Introduction

Summary: The federal government incurs a budget deficit when its total outgoing payments (outlays) exceed the total money it collects (revenues). If instead federal revenues are greater than outlays, then the federal government generates a surplus. Deficits are measured over the course of a defined period of time—in the case of the federal government, a fiscal year.

Summary: Debt measurements may be taken at any point in time, and represent the accumulation of all previous government borrowing activity from private citizens, institutions, foreign governments, and other parts of the federal government. Federal debt increases when there are net budget deficits and outflows made for federal credit programs, which combine to represent debt held by the public. Federal debt also rises through increases in intragovernmental debt, which is generated by trust fund surpluses that are used to finance other government activity. Federal debt declines when there are budget surpluses, a reduction in the federal credit portfolio, or decreases in intragovernmental borrowing.

Summary: Federal deficit and debt outcomes are interdependent: budget deficits increase federal debt levels, which in turn increase future net deficits. The nature of the relationship between deficits and debt varies depending on the type of debt considered. Budget deficits are the principal contributor to debt held by the public. The effect of deficits on intragovernmental debt is less certain than their contribution to debt held by the public. All else equal, increases in net trust fund deficits will lead to increases in total budget deficits but decreases in intragovernmental debt.

Summary: Interest payments made on publicly held debt instruments contribute directly to federal deficits. Holders of federal debt are compensated by receiving interest payments from Treasury. Intragovernmental debt does not contribute to future deficits.

Summary: Persistent budget deficits and a large and increasing federal debt have generated discussions over the long-term sustainability of current budget projections. Federal budget deficits declined from 9.8% of gross domestic product (GDP) in FY2009 to 2.4% of GDP in FY2015, and subsequently increased to 3.8% of GDP in FY2018. Recent estimates forecast that the government will run deficits in every year through FY2029.

Summary: Federal debt totaled $21.516 trillion at the end of FY2018, which as a percentage of GDP (106.0%) was its highest value since FY1947; of that debt, $15.761 trillion (or 77.8% of GDP) was held by the public.

Summary: Over time, persistent budget deficits can hamper economic growth. Deficits represent an intertemporal transfer from later generations to the current one, as money borrowed now will eventually require repayment with interest. The effect of deficit financing on economic output depends on the nature of the government activity being financed and the private activity that would have otherwise taken place.

Summary: Federal debt is constrained by the willingness of investors to finance borrowing. While the amount of federal borrowing investors will finance may be affected by economic growth and other factors, real federal debt cannot increase indefinitely. There are no signs that federal borrowing capacity will be exhausted in the short term. However, the consequences of exhausted fiscal space may be worth considering when examining the medium- and long-term trajectory of the federal budget.

Persistent annual budget deficits and a large and increasing federal debt have generated discussions over the long-term sustainability of current budget projections. Federal budget deficits declined from 9.8% of gross domestic product (GDP) in FY2009 to 3.8% of GDP in FY2018. However, recent estimates forecast that the government will run deficits (i.e., federal expenditures will exceed revenues) in every year through FY2029. Federal debt totaled $21.516 trillion at the end of FY2018, and as a percentage of GDP (106.0%) was at its highest value since FY1947; $15.761 trillion of that debt (or 77.8% of GDP) was held by the public. This report explores distinctions in the concept and composition of deficits and debt and explains how they interact with economic conditions and other aspects of fiscal policy.

A deficit describes one of the three possible outcomes for the federal budget. The federal government incurs a deficit (also known as a net deficit) when its total outgoing payments (outlays) exceed the total money it collects (revenues). If instead federal revenues are greater than outlays, then the federal government generates a surplus. A balanced budget describes the case where federal receipts equal federal expenditures. The size of a deficit or surplus is equal to the difference between the levels of spending and receipts. Deficits are measured over the course of a defined period of time—in the case of the federal government, a fiscal year.

Federal budget outcomes incorporate both "on-budget" activities, which represent the majority of federal taxes and spending, and "off-budget" government activities, which include revenues and outlays from Social Security trust funds and the Postal Service. For federal credit programs, the subsidy cost of government activities is included in deficit and surplus calculations. The federal budget is constructed in a manner that provides for lower net deficits in more robust economic conditions, attributable to higher revenues (from taxes on increased output) and, to a smaller degree, lower spending levels (from reduced demand for programs like unemployment insurance).

The federal government incurred a deficit of $779 billion in FY2018, equivalent to 3.8% of GDP. From FY1969 to FY2018, the average net deficit equaled 2.9% of annual GDP ($587 billion in 2018 dollars). Over the FY1969-FY2018 period, the government generated a surplus on five occasions: in FY1969 and in each year from FY1998 through FY2001. In all other years, the federal government incurred a net deficit.

The federal debt is the money that the government owes to its creditors, which include private citizens, institutions, foreign governments, and other parts of the federal government. Debt measurements may be taken at any time and represent the accumulation of all previous government borrowing activity. Federal debt increases when there are net budget deficits, outflows made for federal credit programs (net of the subsidy costs already included in deficit calculations), and increases in intragovernmental borrowing. Federal credit programs include loans issued for college tuition payments, small business programs, and other activities the government may seek to support. In those cases, debt levels increase as additional loans are granted and decrease as money for such programs is repaid.

Intragovernmental debt is generated when trust funds, revolving funds, and special funds receive money from tax payments, fees, or other revenue sources that is not immediately needed to make payments. In those cases the surpluses are used to finance other government activities, and Government Account Series (GAS) securities are issued to the trust fund. GAS securities may then be redeemed when trust fund expenditures exceed revenue levels. Intragovernmental debt may be thought of as money that one part of the government owes another part.

The Department of the Treasury is responsible for managing federal debt. The primary objective of Treasury's debt management strategy is to fulfill the government's borrowing needs at the lowest cost over time. Treasury finances federal borrowing activities by issuing government-backed securities that generate interest payments for their owners. Treasury securities are typically sold to the public through an auction process, and have maturity periods (the length of time that they are held before repayment) of anywhere from several weeks to 30 years.

Comparing Debt Held by the Public and Intragovernmental Debt

Federal debt may be divided into two major categories: (1) debt held by the public, which is the sum of accrued net deficits and outstanding money from federal credit programs; and (2) intragovernmental debt. As of February 28, 2019, the amount of federal debt outstanding was $22.087 trillion, with 73.6% of that debt held by the public and 26.4% held as intragovernmental debt. Table 1 summarizes the composition of debt held by the public and intragovernmental debt.

Individuals, firms, the Federal Reserve, state and local governments, and foreign governments are all eligible to purchase publicly held debt. Debt may be acquired directly through the auction process, from which most publicly held debt is initially sold, or on the secondary market if the debt is deemed "marketable" or eligible for resale. The total amount of publicly held debt outstanding was $16.251 trillion as of February 28, 2019.

The majority of publicly held debt is marketable, and includes all Treasury Notes, Bonds, Bills, Treasury Inflation Protected Securities (TIPS), and Floating Rate Notes (FRNs) issued by Treasury. Nonmarketable debt held by the public is composed of U.S. Savings Bonds, State and Local Government Securities (SLGS), and other, smaller issues. As of February 28, 2019, 96.8% of publicly held issues, or $15.741 trillion, was marketable.

Intragovernmental debt is debt where the federal government is both the creditor and the borrower. Intragovernmental debt issuances are almost exclusively nonmarketable, as marketable debt comprised only $0.029 trillion (0.5%) of the $5.836 trillion in total intragovernmental debt on February 28, 2019. The majority of nonmarketable intragovernmental debt was held by trust funds devoted to Social Security and military and federal worker retirement. Marketable intragovernmental debt is composed primarily of debt held by the Federal Financing Bank, which is a government corporation created to reduce the cost of federal borrowing.

Since intragovernmental debt is held only in government accounts, such debt cannot be accessed by institutions outside the federal government. Conversely, the bonds that finance publicly held debt activity may compete for assets in private and financial markets. Public debt issues may be a particularly attractive collateral option on the secondary market if the federal government is perceived as a safe credit risk.

Federal deficit and debt outcomes are interdependent; budget deficits increase federal debt levels, which in turn increase future net deficits because of the need to service higher interest payments on the nation's debt. The nature of the relationship between deficits and debt varies depending on the type of debt considered. This section describes the relationship between federal deficits and debt.

Budget deficits are the principal contributor to debt held by the public. To finance budget deficits, Treasury sells debt instruments. The value of those debt holdings (which include interest payments) represents the vast majority of publicly held debt. From FY1969 to FY2018, annual nominal budget deficits and surpluses of the federal government summed to $13.745 trillion; over the same period, total debt held by the public increased by $15.473 trillion. Publicly held debt has been the biggest determinant of historical changes in the total stock of federal debt. Figure 1 shows changes in federal debt levels from FY1969 through FY2018. Though there has been a gradual increase in intragovernmental debt in recent decades, the decline in real debt following World War II and subsequent increase in debt levels beginning in the late 1970s were each caused primarily by similar changes in the stock of publicly held debt over those time periods.

Present borrowing outcomes affect future budgeting outcomes. Publicly held debt contributes directly to federal deficits through interest payments on debt issuances. Interest payments are made to both debt held by the public and intragovernmental debt. As the government serves as buyer and seller of intragovernmental debt, interest payments on those holdings do not affect the federal budget deficit. However, interest payments made on publicly held debt represent new federal spending, and are recorded in the budget as outlays when payments are made. The government incurs interest costs when it opts to finance spending through borrowing rather than through increased revenues. Net interest payments represent the amount paid from the government to debt holders in a given time period , less interest payments received for federal loan programs .

For investors, purchasing a debt issuance represents both a loss of liquidity relative to currency holdings (money paid for the debt holding can be used immediately, while the debt issuance may only be resold on the secondary market or held until the date of maturity) and an opportunity cost (the money used for the purchase could have been spent on other items, invested elsewhere, or saved). Debt holders are compensated for those costs by receiving interest payments from Treasury on their issuances.

From FY1969 to FY2018 net interest payments averaged 2.0% of annual GDP, equivalent to about $407 billion annually in 2018 dollars. High interest rates and increasing debt levels caused the net interest burden to peak in the 1980s and 1990s. Recent net interest payments have been lower than their long-term averages; in FY2018, net interest payments were $325 billion, or 1.6% of GDP. FY2018 payments were the product of real low interest rates and relatively high levels of real debt. Unless the federal debt is reduced, net interest payments will likely increase if interest rates shift toward their long-term averages. In its most recent forecast, the Congressional Budget Office (CBO) projects that real net interest payments will increase to 3.0% of GDP by FY2029.

One way to measure the effect of debt on future deficits is to examine the relationship between total federal deficits and the primary deficit , which measures the balance of revenues and expenditures with net interest payments excluded. Figure 2 shows total and primary budget outcomes from FY1969 through FY2018. The gap between the total and primary outcomes in a given year is explained by net interest payments. The primary deficit averaged 0.9% of GDP from FY1969 to FY2018, as compared to the average total budget deficit of 2.9% of GDP recorded over the same time period. While the federal government recorded a budget surplus five times from FY1969 to FY2018, in nine other years it registered a primary surplus, most recently in 2007.

Economic Theory, Deficits, and Debt: In Brief

This section provides a primer of how government deficits and debt are integrated into the larger economy in both the short and long run, and provides some ways to measure such interactions. The nature of interaction between fiscal outcomes and economic performance may have ramifications for how Congr ess wishes to distribute its activity both within a recession or expansion and for what fiscal targets it wishes to set in the long run.

How Deficits and Debt Contribute to the Economy: Short-Run Effects

In the short run, when economic output is assumed to be fixed, output is a function of both private and public activity. Equation (1), also known as the national accounting identity , shows the different choices that can be made with all economic output in a given time period. It states that output ( Y ) in a given economy is equal to the sum of private consumption ( C ), private investment ( I ), net government investment ( G ), and net exports ( X ). Put another way, equation (1) asserts that output is the sum of private consumption, private saving, and net government activity. The net government deficit, or G , is shown in equation (2) as spending ( S ) less revenues ( R ). Absent a monetary policy intervention by the Federal Reserve (which makes monetary decisions independently), G must be obtained through government borrowing, or debt.

Since the levels of output ( Y ) and consumption ( C ) in a given time period are fixed, increases in government investment ( G ) will reduce private investment ( I ), net exports ( X ), or some combination thereof. Government borrowing increases that reduce private investment are commonly categorized as "crowding out," and represent a shift from private investment to public investment.

Increased government borrowing that reduces net exports (generated by borrowing from foreign sources) represents an expansion of the short-term money supply, as money is being brought into the economy now at the expense of the future stock of money (as foreign borrowing is repaid). Such a fiscal expansion increases the quantity of money demanded, which drives up interest rates (or cost of borrowing).

The federal government may choose to generate short-run budget deficits for a few reasons. Deficit financing, or payment for federal government activity at least partly through debt increases, increases the total level of spending in the economy. Most economists believe that the implementation of deficit financing can be used to generate a short-term stimulus effect, either for a particular industry or for the entire economy. In this view, increases in expenditures and tax reductions can be used to generate employment opportunities and consumer spending and reduce the intensity of stagnant economic periods.

Deficit financing is a less effective countercyclical strategy when it leads to "crowding out," or when government financing merely replaces private-sector funding instead of inducing new economic activity, and is more likely to occur in periods of robust economic growth. Deficit reduction when the economy is operating near or at full potential can help prevent the economy from overheating and avoid "crowding out" of private investment, which could have positive implications for intergenerational equity and long-term growth.

Deficit financing may also be used as part of a structurally balanced budget strategy, which alters government tax and spending levels to smooth the effect of business cycles. Smoothing budgetary changes may reduce the economic shocks deficits induce among businesses and households. Governments may also use federal deficits or surpluses to spread the payment burden of long-term projects across generations. This sort of intergenerational redistribution is one justification for the creation of long-run trust funds, such as those devoted to Social Security.

How Deficits and Debt Contribute to the Economy: Long-Run Effects

In the long run, when economic output is affected by supply-side choices, the effect of government borrowing on economic growth depends on how amounts borrowed are used relative to what would have otherwise been done with those savings (i.e., an increase in private investment or net exports) if such borrowing had not taken place. As shown in equation (3), economic growth, or the change ( Δ ) in output ( Y ), is a function ( f ) of the stock of labor ( L , or the number of people working and hours that they work), the stock of capital ( K , which includes equipment, machines, and all other nonlabor factors), and the knowledge and technological capability (A) that determines the productivity of labor and capital.

Assuming that the stock of labor is insensitive to fiscal policy choices, the effect of federal debt on economic growth depends on how the additional government activity affects the capital stock and productivity of labor and capital relative to what would have happened had amounts borrowed been invested privately or increased net exports. If that government activity (debt-financed spending) contributes to those factors more than the economic activity it replaced, than that debt financing will have had a positive effect on future economic growth (or potential). Alternatively, if such activity contributes less to those factors than the replaced private investment and net exports, it will reduce long-term economic potential.

Changes in federal debt levels shift economic resources across time periods, a process sometimes described as an intertemporal transfer . Federal debt issuances represent an increase in the current level of federal resources and a decrease in future federal resources. Net interest payments, or the total interest payments made by the federal government (to creditors) on borrowed money less interest payments received (from individuals and institutions borrowing from the federal government or debtors), may be thought of as the total expense associated with past federal borrowing. Those resources cannot be allocated to other government services.

Total borrowing is constrained by the money available for investment (savings in dollars) at a given point in time. This limit means that the amount of federal debt relative to output cannot increase indefinitely. The trajectory of federal debt is therefore thought to be unsustainable if debt taken as a share of output (measured in this report with gross domestic product, or GDP) rises continuously in long-term projections. This happens when growth in the stock of debt outpaces total economic growth, which can cause a variety of adverse outcomes, including reduced output, increased unemployment, higher inflation, higher private interest rates, and currency devaluation.

Recent international experiences speak to the complexity of borrowing capacity. Both Greece and Japan experienced rapid growth in government debt in the past decade. Organization for Economic Co-operation and Development (OECD) data on general government debt (including municipal government debt) indicate that Greek debt rose from 115% of GDP in 2006 to 189% of GDP in 2017, while Japanese debt rose from 180% of GDP to 234% of GDP over the same time period. A loss in market confidence in Greek debt led to a severe recession, with GDP contracting by 9 percentage points in 2011 and long-term interest rates reaching 22% in 2012. Japanese borrowing was viewed to be more sustainable despite being higher, with relatively flat GDP levels and long-term interest rates close to zero in recent years. Among 31 OECD countries, the United States had the fifth-largest level of general government debt (136% of GDP, including debt from state and local governments) in 2017, the most recent year for which full data are available.

The deficit's cyclical pattern can be attributed in part to "automatic stabilizers," or spending programs and tax provisions that cause the budget deficit to move in tandem with the business cycle without any change in law. More robust economic periods generally produce lower net deficits (or higher net surpluses), due to increases in receipts (from greater tax revenues) and reduced expenditures (from decreased demand for public assistance). The opposite effect occurs during recessions: as incomes and employment fall, the existing structure of the federal tax system automatically collects less revenue, and spending on mandatory income security programs, such as unemployment insurance, automatically rises. CBO estimates that the share of the deficit attributable to automatic stabilizers fell from 1.9% of GDP in FY2010 to 0.0% of GDP in FY2018. In other words, the budget deficit recorded in FY2018 (3.8% of GDP) is nearly identical to the "structural deficit" that economists would expect with automatic stabilizer effects removed from the budget.

Figure 3 shows the real economic growth (as a percentage on the horizontal axis) and the federal budget outcome (as a percentage of GDP, on the vertical axis) in each fiscal year from FY1969 through FY2018. The positive correlation between economic outcomes and budget outcomes is picked up by the general direction of the trend line from the lower left part of the graph to the upper right area.

All else equal, higher levels of nominal GDP make a given amount of debt easier to repay by eroding its real value. For example, the highest measurement of debt since 1940 occurred in 1946, when the federal debt level was 118.9% of GDP, or $271 billion in (nominal) FY1946 dollars. In contrast, $271 billion was equivalent to only 1.3% of GDP in FY2018. Increases in nominal GDP may be caused by productivity increases, economic inflation—which measures the purchasing power of currency—or a combination of each factor.

Though changes in economic growth rates typically have a relatively small effect on real debt levels in the short run, long-run changes in economic productivity can have a significant effect on the trajectory and sustainability of the debt burden. For instance, from FY2009 through FY2018, federal deficits averaged 5.3% of GDP, and real economic growth averaged 1.76% per year over the same period; those factors combined to increase federal publicly held debt from 39% of GDP at the beginning of FY2008 to 78% of GDP at the end of FY2018. Though real deficits were actually larger from FY1943 to FY1952 (averaging 7.3% of GDP), robust real economic growth over that period (3.6% per year) meant that the change in publicly held debt in that decade was smaller (45% of GDP to 60% to GDP) than in the FY2009-FY2018 period.

The FY2018 real deficit equaled 3.8% of GDP, which was higher than the average federal deficit from FY1969 to FY2018 (2.9% of GDP). Both real deficits and real debt are projected to increase over the course of the 10-year budget window, which runs through FY2029. In its latest economic forecast, the CBO projected that the total burden of U.S. debt held by the public would steadily increase over the course of the budget window, from 77.8% of GDP in FY2018 to 92.7% of GDP in FY2029.

Table 2 provides the most recent forecasts for publicly held debt issued by the CBO. Each forecast projects an increase in publicly held debt over the next 5, 10, and 25 fiscal years.

The CBO baseline assumes that current law continues as scheduled. Specifically, the CBO baseline assumes that discretionary budget authority from FY2020 through FY2021 will be restricted by the caps created by the Budget Control Act (BCA; P.L. 112-25 ), as amended, and that certain tax policy changes enacted in the 2017 tax revision ( P.L. 115-97 ) and in other laws will expire as scheduled under current law. CBO also provides alternative projections where such assumptions are revised. If discretionary spending increases with inflation after FY2019, instead of proceeding in accordance with the limits instituted by the BCA, and if tax reductions in the 2017 tax revision are extended, CBO projects that federal debt held by the public would increase to 97% of GDP by FY2029.

CBO also produces a long-term baseline that uses a number of additional assumptions to extend its standard baseline an additional 20 years (thus the 2018 long-term baseline runs through FY2049). The current long-term forecast projects that publicly held federal debt will equal 147% of GDP in FY2049, which would exceed the highest stock of federal debt experienced in the FY1940-FY2018 period (106% of GDP in FY1946).

CBO projects increases in both interest rates and publicly held federal debt over the next 10 years, leading to a significant rise in U.S. net interest payments. As noted above, CBO projects that publicly held federal debt will rise from 77.8% of GDP in FY2018 to 92.7% of GDP in FY2029, and projects that the average interest rate on three-month Treasury bills will rise from 1.66% in FY2017 to 2.81% in FY2029. Those factors combine to generate federal net interest payments of 3.0% of GDP in FY2029 under the CBO projections, which would be just under the highest amount paid from FY1940 through FY2017 (3.2% of GDP in FY1991).

It may be useful to compare the recent U.S. federal borrowing trajectory with the practices of international governments, because future interest rate and fiscal space considerations will both be affected by the behavior of other major actors. Table 3 includes the general government debt history and projections for G-7 countries and the European Area from FY2000 to FY2023.

The worldwide impact of the Great Recession led to increased general gross debt levels for all G-7 countries in 2013 relative to their 2000-2009 average. As shown in Table 3 , U.S. debt levels rose by 40% of GDP over that time period, which was larger than increases in Canada and the European Area but smaller than rises in the United Kingdom and Japan. General debt levels largely stabilized from 2013 to 2018, with decreases in Germany and the European Area and small increases in other countries.

Future projections of debt included in Table 3 are characterized by a divergence between U.S. general gross debt levels and those in other G-7 countries. The IMF forecast projects that U.S. general gross debt will rise from 106% to 117% from 2018 to 2023, while those same projections forecast a decrease in debt owed by all other G-7 governments and in the European Area.

Addressing the potential consequences of those projections will likely involve policy adjustments that reduce future budget deficits, either through tax increases, reductions in spending, or a combination of the two. Under CBO's extended baseline, maintaining the debt-to-GDP ratio at today's level (78%) in FY2048 would require an immediate and permanent cut in noninterest spending, increase in revenues, or some combination of the two in the amount of 1.9% of GDP (or about $400 billion in FY2018 alone) in each year. Maintaining this debt-to-GDP ratio beyond FY2047 would require additional deficit reduction. If policymakers wanted to lower future debt levels relative to today, the annual spending reductions or revenue increases would have to be larger. For example, in order to bring debt as a percentage of GDP in FY2048 down to its historical average over the past 50 years (40% of GDP), spending reductions or revenue increases or some combination of the two would need to generate net savings of roughly 3.0% of GDP (or $630 billion in FY2018 alone) in each year.