Monday, March 26, 2007
From a recently released GAO report on saving Social Security:
Fourteen of 17 proposals GAO reviewed provided GR (general revenues) 1) as needed to maintain trust fund solvency or (2) as specified by formula, amount, or source. Nine of the 17 achieved “sustainable solvency” under OCACT’s definition using the first approach. This type of unlimited transfer poses the greatest potential risk to the federal budget, especially when combined with benefit guarantees. In proposals reviewed, amounts of GR under both types of approaches ranged up to about twice program shortfall.
In all proposals using GR, the GR was reallocated from the non–Social Security budget. While any additional revenue to the trust fund will help solvency, unified federal budget effects depend on the type of revenue—whether it is new revenue (additional payroll tax revenue or GR that is new to the federal budget) versus reallocated GR. Absent other changes, new revenue would improve the long-term fiscal imbalance while reallocated GR would do nothing to address it. Although raising taxes (payroll or other) or cutting benefits would have tangible consequences for taxpayers and beneficiaries, e.g., less take-home pay or smaller benefit checks, the consequences of transfers from the non–Social Security budget in the form of reallocated GR are less likely to be clearly observable. Reallocated GR, however, is not free. Regardless of how GR is provided to Social Security, it must be paid for at some point. The question is when, and by whom.