Social Security

The President's Social Security transfer proposal, embodied in S. 1831 and H.R. 3165, would not in any way reform the basic Social Security program, although the administration is committed to long-term reform. The proposal seeks to increase the likelihood that projected unified surpluses would be preserved for Social Security and debt reduction. It would provide additional program funding by transferring general funds to the Old Age and Survivors Insurance and Disability Insurance trust funds. This shift in program financing would reduce publicly held debt but would not modify the program's underlying commitments for the future. The proposed transfer, by extending trust fund solvency, could create complacency about the program's financing, making it more difficult to engage in substantive program reform.

GAO noted that: (1) according to Administration officials, the President's proposal would constitute a "significant down payment" on Social Security reform while contributing to achieving the Administration's goal of eliminating publicly held debt by 2015; (2) while the President's proposal for Social Security financing differs in some respects from his earlier proposals, the bottom line of the proposal with respect to sustainable solvency is unchanged; (3) the proposal: (a) reduces debt held by the public from current levels, which reduces net interest costs, and raises national saving, thereby contributing to future economic growth; (b) provides general revenues to the Old Age and Survivors Insurance and Disability Insurance trust funds, thereby representing a fundamental change in Social Security financing; (c) has no effect on the projected cash flow imbalance in the Social Security program's taxes and benefits, which begins in 2014; and (d) represents a financing, rather than a Social Security reform proposal; (4) GAO's analysis shows that the President's Social Security transfer proposal has the same effect on the economy and the federal budget as a policy of "No Action" that would simply continue spending and revenue along its path while making no change in Social Security or Medicare benefits; (5) the President's Social Security transfer proposal does not address sustainable solvency; (6) because the President proposes no changes to the structure of the current Social Security system, his proposal does not affect income adequacy; (7) specifically, the President's proposal maintains current-law benefits for current and future retirees, including low-income workers and others most reliant on Social Security, and makes no changes to disabled, dependent or survivor benefits; (8) the proposal also makes no changes from the current Social Security structure in the way workers are covered, and it preserves the progressivity of the system; (9) in addition, it retains the compulsory nature of the current payroll tax; (10) because the President's transfer proposal does not alter the Social Security program in any way, there are no implementation costs, and the program's current administrative costs will remain less than 1 percent of benefit outlays; and (11) without programmatic change, there are no changes that must be explained to the public and no risk of an "expectations gap" with respect to benefits.