The analytic framework GAO has developed to assess proposals comprises three basic criteria: the extent to which a proposal achieves sustainable solvency and how it would affect the economy and the federal budget; the relative balance struck between the goals of individual equity and income adequacy; and   how readily a proposal could be implemented, administered, and explained to the public. However, the greatest potential implementation and administrative challenges are associated with proposals that would create individual accounts. Our recent report did not, however, present estimates of effects on individual equity. The poverty threshold provides a minimal standard of adequacy; other standards reflect different outlooks on what adequacy means. For any of these measures, the meaning of a given value of the measure is not clear. Our tax-increase-only benchmark simulated benefits at currently promised levels while our benefit-reduction-only benchmarks simulated benefits funded at current tax levels. Varying Approaches to Benefit Reductions Would Have Different Effects on Adequacy

Future benefit levels and income adequacy will depend considerably on how any benefit reductions are made. It remains true that the longer we wait to take action on the programs driving long-term deficits, the more painful and difficult the choices will become. Today I have described GAO’s three basic criteria against which Social Security reform proposals may be measured: financing sustainable solvency, balancing adequacy and equity, and implementing and administering reforms. Related GAO Products

Social Security: Program’s Role in Helping Ensure Income Adequacy (GAO-02-62, Nov. 30, 2001). Social Security: Criteria for Evaluating Social Security Reform Proposals (GAO/T-HEHS-99-94, Mar.
Why GAO Did This Study

This testimony discusses the long-term viability of the Social Security program.

What GAO Found

Social Security's Trust Funds will not be exhausted until 2038, but the trustees now project that the program's cash demands on the rest of the federal government will begin much sooner. Aiming for sustainable solvency would increase the chance that future policymakers would not have to face these difficult questions on a recurring basis. GAO has developed the following criteria for evaluating Social Security reform proposals: financing sustainable solvency, balancing adequacy and equity, and implementing and administering reforms. These criteria seek to balance financial and economic considerations with benefit adequacy and equity issues and the administrative challenges associated with various proposals. GAO's recent report on Social Security and income adequacy (GAO-02-62) makes three key points. First, no single measure of adequacy provides a complete picture; each measure reflects a different outlook on what adequacy means. Second, given the projected long-term financial shortfall of the program, it is important to compare proposals to both benefits at currently promised levels and benefits funded at current tax levels. Third, various approaches to benefit reductions would have differing effects on adequacy.