None of the changes since September 11  have lessened the pressures placed by Social Security, Medicare, and  Medicaid on the long-term fiscal outlook. This slowing labor force growth is not always considered as part of the  Social Security debate. 3.) Social Security Trust Funds, Cash Flow, and the Federal Budget

Within the federal budget, Social Security—more properly, the Old-Age and  Survivors Insurance and Disability Insurance programs (OASDI)—has two  trust funds that authorize Treasury to pay benefits as long as the applicable  trust fund has a positive balance. For example,  when a trust fund’s cash surpluses are used to reduce debt held by the  public, this increases national saving, contributes to higher economic  growth over the long term, and enhances the government’s ability to raise  cash in the future to pay benefits. According to the Trustees’ intermediate estimates, the combined Social  Security Trust Funds will be solvent until 2041. Decline in Budgetary Flexibility Will Be Severely Exacerbated Absent Entitlement Reform

From the perspective of the federal budget and the economy, the challenge  posed by the growth in Social Security spending becomes even more  significant in combination with the more rapid expected growth in  Medicare and Medicaid spending. To obtain balance, massive spending cuts,  tax increases, or some combination of the two would be necessary. Thus both sustainability concerns and solvency considerations drive us to  act sooner rather than later. Evaluating Social Security Reform Proposals

As important as financial stability may be for Social Security, it cannot be  the only consideration. Social Security remains the foundation of  the nation’s retirement system. As they fashion a  comprehensive proposal, however, policymakers will ultimately have to  balance the relative importance they place on each of these criteria. Although the program does not face an immediate solvency crisis as it did  in 1983, the fundamental nature of the program’s long-term financing  challenge means that timely action is needed. Focusing on comprehensive packages of reforms that protect the benefits  of current retirees while achieving the right balance of equity and adequacy  for future beneficiaries will help to foster credibility and acceptance. It will help build the bridges necessary to achieve  consensus.
What GAO Found

Social Security not only represents the foundation of our retirement income system; it also provides millions of Americans with disability insurance and survivor's benefits. Although the Social Security Trustees now project that under the intermediate or "best estimate" assumptions the combined Social Security Trust Funds will be exhausted 3 years later than in last year's estimates, the magnitude of the long-term funding shortfall is virtually unchanged. Without reform, Social Security, Medicare, and Medicaid are unsustainable, and the long-term impact of these entitlement programs on the federal budget and the economy will be dramatic. Social Security reform is part of a larger and significant fiscal and economic challenge. Absent reform, the nation will ultimately have to choose between persistent, escalating federal deficits, significant tax increases, or dramatic budget cuts. Focusing on trust fund solvency alone is not sufficient. Aiming for sustainable solvency would increase the chance that future policymakers would not have to face, on a recurring basis, the difficult questions of whether the government will have the capacity to pay future claims or what else will have to be squeezed to pay those claims. Comparing the beneficiary impact of reform proposals solely to current Social Security promised benefits is inappropriate since all current promised benefits are not funded over the longer term. Reform proposals should be evaluated as packages. If the focus is on the pros and cons of each element of reform, it may prove impossible to build the bridges necessary to achieve consensus. Acting sooner rather than later helps to ease the difficulty of change. Waiting until Social Security faces an immediate solvency crisis will limit the scope of feasible solutions and could reduce the options field to only those choices that are the most difficult and could also delay the really tough decisions on Medicare and Medicaid.