Social Security Reform

Recent proposals regarding Social Security Disability Insurance range from increasing the substantial gainful activity level established for the program's blind beneficiaries to eliminating it completely. These proposals, if enacted, would likely increase beneficiaries' work effort but would raise program costs and could widen the differences in the program's treatment of blind and nonblind beneficiaries. Raising the level for blind persons could result in calls to increase it for nonblind persons, leading to significantly higher program costs and adverse effects on the solvency of the Social Security trust fund. Eliminating the level would fundamentally alter the purpose of the program. Other changes to work incentives being implemented or tested are likely to increase beneficiaries' work without changing the nature of the program.

GAO noted that: (1) GAO's assessment of Nick Smith's proposal is based on the analytic framework GAO provided to Congress last March, which consists of three basic criteria: (a) the extent to which the proposal achieves sustained solvency and how it would affect the economy and the federal budget; (b) the balance struck between the twin goals of income adequacy and individual equity; and (c) how readily such changes could be implemented, administered, and explained to the public; (2) as requested, GAO used its long-term economic model in evaluating the proposal against the first criterion, that of financing sustainable solvency; (3) specifically, GAO used this model to simulate the potential fiscal and economic impacts of the proposal over a 75-year projection period; (4) in simulating the reform proposal, GAO used the income and cost estimates prepared by the Office of the Actuary at the Social Security Administration, and GAO adapted the model as appropriate to reflect specific reform proposal provisions; (5) as requested, GAO's simulation results also compare the proposal with alternative fiscal policy paths developed in GAO's prior model work; and (6) in order to permit comparison with other reform plans discussed in GAO's issued work, the long-term simulations presented in this report are based on the economic and budget assumptions contained in the Congressional Budget Office's July 1999 baseline.