Social Security: Reform Proposals Could Have a Variety of Effects
on Distribution of Benefits and Payroll Taxes (15-JUN-04,	 
GAO-04-872T).							 
                                                                 
Under the current Social Security benefit formula, retired	 
workers can receive benefits at age 65 that equal about 50	 
percent of preretirement earnings for an illustrative low-wage	 
worker but only about 30 percent for an illustrative high-wage	 
worker. Factors other than earnings also influence the		 
distribution of benefits, including the program's provisions for 
disabled workers, spouses, children, and survivors. Changes in	 
the program over time also affect the distribution of benefits	 
across generations. Social Security faces a long-term structural 
financing shortfall. Program changes to address that shortfall	 
could alter the way Social Security's benefits and revenues are  
distributed across the population and affect the income security 
of millions of Americans. The Chairman of the Senate Special	 
Committee on Aging asked us to discuss how selected Social	 
Security reform proposals might affect the distribution of	 
benefits and taxes.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-872T					        
    ACCNO:   A10544						        
  TITLE:     Social Security: Reform Proposals Could Have a Variety of
Effects on Distribution of Benefits and Payroll Taxes		 
     DATE:   06/15/2004 
  SUBJECT:   Federal aid programs				 
	     Financial analysis 				 
	     Financial management				 
	     Financial records					 
	     Future budget projections				 
	     Program management 				 
	     Projections					 
	     Strategic planning 				 

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GAO-04-872T

United States General Accounting Office

GAO Testimony

Before the Special Committee on Aging,

U.S. Senate

For Release on Delivery

Expected at 10:00 a.m. EDT SOCIAL SECURITY

Tuesday, June 15, 2004

Reform Proposals Could Have a Variety of Effects on Distribution of Benefits and
                                 Payroll Taxes

Statement of David M. Walker Comptroller General of the United States

GAO-04-872T

Highlights of GAO-04-872T, a testimony for the Special Committee on Aging,
United States Senate

Under the current Social Security benefit formula, retired workers can
receive benefits at age 65 that equal about 50 percent of preretirement
earnings for an illustrative low-wage worker but only about 30 percent for
an illustrative high-wage worker. Factors other than earnings also
influence the distribution of benefits, including the program's provisions
for disabled workers, spouses, children, and survivors. Changes in the
program over time also affect the distribution of benefits across
generations.

Social Security faces a long-term structural financing shortfall. Program
changes to address that shortfall could alter the way Social Security's
benefits and revenues are distributed across the population and affect the
income security of millions of Americans.

The Chairman of the Senate Special Committee on Aging asked us to discuss
how selected Social Security reform proposals might affect the
distribution of benefits and taxes.

www.gao.gov/cgi-bin/getrpt?GAO-04-872T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Barbara Bovbjerg at (202)
512-7215 or [email protected].

June 15, 2004

SOCIAL SECURITY

Reform Proposals Could Have a Variety of Effects on Distribution of Benefits and
Payroll Taxes

Two distinct perspectives on Social Security's goals suggest different
approaches to measuring "progressivity," or the distribution of benefits
and taxes with respect to various earnings levels. Both perspectives
provide valuable insights. An adequacy perspective focuses on benefit
levels and how well they maintain pre-retirement living standards. An
equity perspective focuses on rates of return and other measures relating
lifetime benefits to contributions. Both perspectives examine how their
measures are distributed across earnings levels. However, equity measures
take all benefits and taxes into account, which is difficult to calculate
for reform proposals that rely on general revenue transfers because it is
unclear who will bear the relative burden for those general revenues.

The Social Security program's distributional effects reflect both program
features and demographic patterns among its recipients. In addition to the
benefit formula, disability benefits favor lower earners because disabled
workers are more likely to be lower lifetime earners. In contrast, certain
household patterns reduce the system's tilt toward lower earners, for
example, when lower earners have high-earner spouses. The advantage for
lower earners is also diminished by the fact that they may not live as
long as higher earners and therefore would get benefits for fewer years on
average.

Proposals to alter the Social Security program would have different
distributional effects, depending on their design. Model 2 of the
President's Commission to Strengthen Social Security proposes new
individual accounts, certain benefit reductions for all beneficiaries, and
certain benefit enhancements for selected low earners and survivors.
According to our simulations, the combined effect could result in lower
earners receiving a greater relative share of all benefits than under the
current system if all workers invest in the same portfolio.

Social Security Benefit Formula Provides Higher Replacement Rates for
Lower Earners

Percentage replacement rate at age 65

60

49

50

40

30

20

10

0 Low Average High steady steady steady earner earner earner

Source: GAO analysis using SSA ANYPIA program.

Notes: Replacement rates are the annual retired worker benefits at age 65
for workers born in 1985 divided by the earnings in the previous year. For
such workers, the full retirement age will be 67. Steady earners have
earnings equal to various percentages of Social Security's Average Wage
Index in every year of their careers.

Mr. Chairman and Members of the Committee:

Thank you for inviting me here today to discuss the potential effects of
selected Social Security reform proposals.1 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. As a result, Social Security provides benefits that are critical
to the current and future well-being of virtually all Americans. However,
as I have said in congressional testimonies over the past several years,2
the system faces both solvency and sustainability challenges in the longer
term. The challenges of combating terrorism have come to the fore as
urgent claims on the federal budget. At the same time, Social Security's
long-term pressures on the budget have not diminished. Indeed, our
longrange challenges are greater than ever. Without substantive reforms,
Social Security and Medicare are unsustainable, and their long-term impact
on the federal budget and the economy will be dramatic.

Social Security faces a long-term structural financing shortfall largely
because people are living longer and having fewer children. According to
the 2004 intermediate-or best-estimate-assumptions of the Social Security
trustees, Social Security's annual benefit payments will exceed annual
cash revenues beginning in 2018, and it will be necessary to draw on trust
fund reserves to pay full benefits. To do this, the Treasury will need to
obtain cash for those redeemed securities either through increased taxes
and/or spending cuts and/or more borrowing from the public. In 2042, the
trust funds will be exhausted, and annual revenues will only be sufficient
to pay about 73 percent of benefits. As a result, some combination of
benefit and/or revenue changes will be needed to restore the long-term
solvency and sustainability of the program.

Last July, I testified before this committee on the need for early action
to reform Social Security and specifically how failing to do so would
place a burden on younger generations, lower earners, and the disabled. In
point of fact, any reform proposal will have implications for how benefits
and related taxes are distributed across the entire population. Today, we
are issuing a report you requested to examine such distributional effects,
specifically those effects relative to various earnings levels. I hope my

1Social Security refers here to the Old-Age, Survivors, and Disability
Insurance (OASDI) program.

2See the list of related GAO products at the end of this statement.

testimony today will help illustrate the potential distributional effects
of Social Security reforms and will place such effects in a broader
context.

Before I summarize the findings from this analysis, let me first highlight
a number of important points in connection with our Social Security
challenge.

o  Social Security reform is part of a broader fiscal and economic
challenge. If you look ahead in the federal budget, the combined Social
Security program (Old-Age and Survivors Insurance and Disability
Insurance), together with the rapidly growing health programs (Medicare
and Medicaid), will dominate the federal government's future fiscal
outlook. Absent reform, the nation will ultimately have to choose between
persistent, escalating federal deficits and debt, huge tax increases
and/or dramatic budget cuts.

o  Focusing on trust fund solvency alone is not sufficient. We need to put
the program on a path toward sustainable solvency. Trust fund solvency is
an important concept, but focusing on trust fund solvency alone can lead
to a false sense of security about the overall condition of the Social
Security program. The size of the trust fund does not tell us whether the
program is sustainable-that is, whether the government will have the
capacity to pay future claims or what else will have to be squeezed to pay
those claims. Aiming for sustainable solvency would increase the chance
that future policy makers would not have to face these difficult questions
on a recurring basis. Estimates of what it would take to achieve 75-year
trust fund solvency understate the extent of the problem because the
program's financial imbalance gets worse in the 76th and each subsequent
year.3

o  Solving Social Security's long-term financing problem is more important
and complex than simply making the numbers add up. Social Security is an
important and successful social program that affects virtually every
American family. It currently pays benefits to more than 46 million
people, including retired workers, disabled workers, the spouses and
children of retired and disabled workers, and the survivors of deceased
workers. The number of individuals receiving benefits is expected to grow
to over 68 million by 2020. The program has been highly

3In addition to assessing a proposal's likely effect on Social Security's
actuarial balance, a standard of sustainable solvency involves looking at
(1) the balance between program income and cost beyond the 75th year and
(2) the share of the budget and economy consumed by Social Security
spending.

effective at reducing the incidence of poverty among the elderly, and the
disability and survivor benefits have been critical to the financial well
being of millions of others.

o  Acting sooner rather than later would help to ease the difficulty of
change. As I noted previously, the challenge of facing the imminent and
daunting budget pressure from Medicare, Medicaid, and OASDI increases over
time. Social Security will begin to constrain the budget long before the
trust funds are exhausted in 2042. The program's annual cash flow is
projected to be negative beginning in 2018. Social Security's annual cash
deficit will place increasing pressure on the rest of the budget to raise
the resources necessary to meet the program's costs. Waiting until Social
Security faces an immediate solvency crisis will limit the scope of
feasible solutions and could reduce the options to only those choices that
are the most difficult. Acting soon would allow changes to be phased in so
the individuals who are most likely to be affected, namely younger and
future workers, will have time to adjust their retirement planning while
helping to avoid related "expectation gaps." It would also help to ensure
that the "miracle of compounding" works for us rather than against us.
Finally, acting soon reduces the likelihood that the Congress will have to
choose between imposing severe benefit cuts and unfairly burdening future
generations with the program's rising costs.

To assist the Congress in its deliberations, GAO has developed criteria
for evaluating various Social Security reform proposals. These criteria
aim to balance financial and economic considerations with benefit adequacy
and equity issues and the administrative challenges associated with
various proposals. The use of these criteria can help facilitate fair
consideration and informed debate about Social Security reform proposals.

To help ensure adequate incomes, Social Security's benefit provisions are
designed to favor lower earners, disabled workers, and workers with
dependents. Changes in the program over time also affect the distribution
of benefits and taxes across generations. So, Social Security's
distributional effects can vary by eligibility, household type, and birth
year, as well as by earnings level. Our focus today is the distribution of
benefits and taxes relative to various earnings levels, or
"progressivity." Two distinct perspectives on Social Security's goals
suggest different approaches to measuring progressivity, and both provide
valuable insights. One perspective focuses on measures of the adequacy of
benefits while the other focuses on "equity" measures, such as internal
rates of return. The measures themselves describe either adequacy or
equity, but their distribution with respect to earnings level describes
progressivity.

However, when proposals use general revenue transfers, estimating equity
measures becomes difficult because such proposals do not generally specify
what kind of future taxes or spending cuts will finance the transfers or
who will bear the related burden.

The Social Security program's distributional effects reflect both program
features and demographic patterns among its recipients. While the benefit
formula and disability provisions favor lower earners, household and
mortality patterns serve to reduce the system's tilt toward lower earners.

Alternative Social Security reform proposals would have different
distributional effects, reflecting the variety of provisions in them. The
various provisions include different ways, within the current program
structure, of reducing certain benefits, enhancing selected benefits, and
enhancing revenues. Certain reform provisions also include creating a new
system of individual retirement savings accounts with different account
contribution levels and different ways of adjusting Social Security
defined benefits to reflect the diversion of Social Security contributions
into the accounts. Individually and in combination, these provisions would
affect the distribution of benefits and taxes relative to various earnings
levels.

Today the Social Security program faces a long-range and fundamental
financing problem driven largely by known demographic trends. The lack of
an immediate solvency crisis affects the nature of the challenge, but it
does not eliminate the need for action. Acting soon reduces the likelihood
that the Congress will have to choose between imposing severe benefit cuts
and unfairly burdening future generations with the program's rising costs.
Acting soon would allow changes to be phased in so the individuals who are
most likely to be affected, namely younger and future workers, will have
time to adjust their retirement planning. Since there is a great deal of
confusion about Social Security's current financing arrangements and the
nature of its long-term financing problem, I would like to spend some time
describing the nature, timing, and extent of the financing problem.

Social Security's Long-Term Financing Problem Deserves Timely Action

Demographic Trends Drive As you all know, Social Security has always been
largely a pay-as-you-go Social Security's Long-system. This means that
current workers' taxes generally pay current Term Financing Problem
retirees' benefits. As a result, the relative number of workers and

beneficiaries has a major impact on the program's financial condition.
This

ratio, however, is changing. In 1950, before the Social Security system
was

mature, the ratio was 16.5:1. In the 1960s, the ratio averaged 4.2:1.
Today it

is 3.3:1, and it is expected to drop to around 2.2:1 by 2030. The
retirement of the baby boom generation is not the only demographic
challenge facing the system. People are retiring early and living longer.
A falling fertility rate is the other principal factor underlying the
growth in the elderly's share of the population. In the 1960s, the
fertility rate was an average of 3 children per woman. Today it is a
little over 2, and by 2030 it is expected to fall to 1.95 -a rate that is
below the level necessary to replace the population. Taken together, these
trends serve to threaten the financial solvency and sustainability of this
important program. (See fig. 1.)

Figure 1: Social Security Workers per Beneficiary

Covered workers per OASDI beneficiary 6

5

4

3

2

1

0 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Source: Office of the Chief Actuary, Social Security Administration.

Note: This is based on the intermediate assumptions of the 2004 Social
Security trustees' reports.

The combination of these trends means that annual labor force growth will
begin to slow after 2010 and by 2025 is expected to be less than a third
of what it is today. (See fig. 2.) Relatively fewer workers will be
available to produce the goods and services that all will consume. Without
a major increase in productivity, low labor force growth will lead to
slower growth in the economy and to slower growth of federal revenues.
This in turn will only accentuate the overall pressure on the federal
budget.

Figure 2: Labor Force Growth Is Expected to be Negligible by 2050

Percentage change (5-yr moving average)

3

2

1

0 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Source: GAO analysis of data from the Office of the Chief Actuary, Social
Security Administration.

Note: This analysis is based on the intermediate assumptions of the 2004
Social Security trustees' report. Percentage change is calculated as a
centered 5-year moving average.

This slowing labor force growth is not always recognized as part of the
Social Security debate. Social Security's retirement eligibility dates are
often the subject of discussion and debate and can have a direct effect on
both labor force growth and the condition of the Social Security
retirement program. However, it is also appropriate to consider whether
and how changes in pension and/or other government policies could
encourage longer workforce participation. To the extent that people choose
to work longer as they live longer, the increase in the share of life
spent in retirement would be slowed. This could improve the finances of
Social Security and mitigate the expected slowdown in labor force growth.
It could also help to encourage additional economic growth.

Social Security's Cash Flow Is Expected to Turn Negative in 2018

Today, the Social Security Trust Funds take in more in taxes than they
spend. Largely because of the known demographic trends I have described,
this situation will change. Although the trustees' 2004 intermediate
estimates project that the combined Social Security Trust Funds will be
solvent until 2042,4 program spending will constitute a rapidly growing
share of the budget and the economy well before that date. In 2008, the
first baby boomers will become eligible for Social Security benefits, and
the future costs of serving them have already become a factor in the
Congressional Budget Office's (CBO) 10-year projections. Under the
trustees' 2004 intermediate estimates, Social Security's cash surplus-the
difference between program tax income and the costs of paying scheduled
benefits-will begin a permanent decline in 2009. To finance the same level
of federal spending as in the previous year, additional revenues and/or
increased borrowing will be needed.

By 2018, Social Security's tax income is projected to be insufficient to
pay currently scheduled benefits. At that time, Social Security will join
Medicare's Hospital Insurance Trust Fund, whose outlays are projected to
begin to exceed revenues this year, as a net claimant on the rest of the
federal budget. The combined OASDI Trust Funds will begin drawing on the
Treasury to cover the cash shortfall, first relying on interest income and
eventually drawing down accumulated trust fund assets. The Treasury will
need to obtain cash for those redeemed securities either through increased
taxes, and/or spending cuts, and/or more borrowing from the public than
would have been the case had Social Security's cash flow remained
positive.5 Neither the decline in the cash surpluses nor the cash deficit
will affect the payment of benefits. The shift from positive to negative
cash flow, however, will place increased pressure on the federal budget to
raise the resources necessary to meet the program's ongoing costs.

4Separately, the Disability Insurance (DI) fund is projected to be
exhausted in 2029 and the Old-Age and Survivors' Insurance (OASI) fund in
2044.

5If the unified budget is in surplus at this point, then financing the
excess benefits will require less debt redemption rather than increased
borrowing.

Figure 3: Social Security's (OASDI) Trust Funds Face Cash Deficits as Baby
Boomers Retire

Billions of 2004 dollars

                                      200

                                   100 0 -100

                                      -200

                                      -300

                                      -400

2000 2005 2010 2015 2020 2025 2030 2035 2040

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. This growth in spending on federal entitlements for
retirees will become increasingly unsustainable over the longer term,
compounding an ongoing decline in budgetary flexibility. Over the past few
decades, spending on mandatory programs has consumed an ever-increasing
share of the federal budget. In 1964, prior to

                           Social Security cash flow

Source: GAO analysis based on data from the Office of the Chief Actuary,
Social Security Administration.

Note: These projections are based on the intermediate assumptions of the
2004 Social Security trustees' report.

Ultimately, the critical question is not how much a trust fund has in
assets, but whether the government as a whole can afford the benefits in
the future and at what cost to other claims on scarce resources. As I have
said before, the future sustainability of programs is the key issue policy
makers should address-i.e., the capacity of the economy and budget to
afford the commitment. Fund solvency can help, but only if promoting
solvency improves the future sustainability of the program.

Decline in Budgetary Flexibility Absent Entitlement Reform

the creation of the Medicare and Medicaid programs, spending for mandatory
programs plus net interest accounted for about 33 percent of total federal
spending. By 2004, this share had almost doubled to approximately 61
percent of the budget. (See fig. 4.)

Figure 4: Federal Spending for Mandatory and Discretionary Programs,
Fiscal Years 1964, 1984, and 2004 1984 2004 (estimate)

Net interest

Discretionary

Mandatory

Source: Budget of the United States Government, FY 2005, Office of
Management and Budget.

In much of the last decade, reductions in defense spending helped
accommodate the growth in these entitlement programs. Even before the
events of September 11, 2001, however, this ceased to be a viable option.
Indeed, spending on defense and homeland security will likely grow as we
seek to combat new threats to our nation's security.

GAO prepares long-term budget simulations that seek to illustrate the
likely fiscal consequences of the coming demographic tidal wave and rising
health care costs. These simulations continue to show that to move into
the future with no changes in federal retirement and health programs is to
envision a very different role for the federal government. Assuming, for
example, all expiring tax provisions are extended and discretionary
spending keeps pace with the economy, by midcentury federal revenues may
be adequate to pay no more than interest on the federal debt. To

obtain balance, massive spending cuts, tax increases, or some combination
of the two would be necessary. (See fig. 5.) Neither slowing the growth of
discretionary spending nor

Figure 5: Composition of Spending as a Share of Gross Domestic Product
(GDP), Assuming Discretionary Spending Grows with GDP after 2004 and All
Expiring Tax Provisions Are Extended

Percentage of GDP

50

40

30

20

10

0 2003 2015 2030 2040 Fiscal year

All other spending

Medicare and Medicaid

Social Security

Net interest

Revenue

Source: GAO's March 2004 analysis.

Note: Although expiring tax provisions are extended, revenue as a share of
GDP increases through 2014 due to (1) real bracket creep, (2) more
taxpayers becoming subject to the Alternative Minimum Tax, and (3)
increased revenue from tax-deferred retirement accounts. After 2014,
revenue as a share of GDP is held constant.

This testimony is not about the complexities of Medicare, but it is
important to note that Medicare presents a much greater, more complex, and
more urgent fiscal challenge than does Social Security. Medicare growth
rates reflect not only a burgeoning beneficiary population, but also the
escalation of health care costs at rates well exceeding general rates of
inflation. Increases in the number and quality of health care services
have

been fueled by the explosive growth of medical technology. Moreover, the
actual costs of health care consumption are not transparent. Third-party
payers generally insulate consumers from the cost of health care
decisions. These factors and others contribute to making Medicare a much
greater and more complex fiscal challenge than even Social Security. GAO
has developed a health care framework to help focus additional attention
on this important area and to help educate key policy makers and the
public on the current system and related challenges.6

Indeed, long-term budget flexibility is about more than Social Security
and Medicare. While these programs dominate the long-term outlook, they
are not the only federal programs or activities that bind the future. The
federal government undertakes a wide range of programs, responsibilities,
and activities that obligate it to future spending or create an
expectation for spending. GAO has described the range and measurement of
such fiscal exposures-from explicit liabilities such as environmental
cleanup requirements to the more implicit obligations presented by
life-cycle costs of capital acquisition or disaster assistance.7 Making
government fit the challenges of the future will require not only dealing
with the drivers- entitlements for the elderly-but also looking at the
range of federal activities. A fundamental review of what the federal
government does and how it does it will be needed.

At the same time it is important to look beyond the federal budget to the
economy as a whole. Figure 6 shows the total future draw on the economy
represented by Social Security, Medicare, and Medicaid. Under the 2004
Trustees' intermediate estimates and CBO's long-term Medicaid estimates,
spending for these entitlement programs combined will grow to 15.6 percent
of GDP in 2030 from today's 8.5 percent. Taken together, Social Security,
Medicare, and Medicaid represent an unsustainable burden on future
generations.

6GAO's health care framework can be found at
www.gao.gov/cghome/hccrisis/health.pdf. See also U.S. General Accounting
Office, Comptroller General's Forum on Health Care: Unsustainable Trends
Necessitate Comprehensive and Fundamental Reforms to Control Spending and
Improve Value, GAO-04-793SP (Washington, D. C.: May 1, 2004).

7U.S. General Accounting Office, Fiscal Exposures: Improving the Budgetary
Focus on Long-Term Costs and Uncertainties, GAO-03-213 (Washington, D.C.:
Jan. 24, 2003).

Figure 6: Social Security, Medicare, and Medicaid Spending as a Percentage
of GDP

Percentage of GDP

30

25

20

15

10

5

0 2000 2010 2020 2030 2040 2050 2060 2070 2080

Medicare

Medicaid

Social Security

Source: GAO analysis based on data from the Office of the Chief Actuary,
Social Security Administration, Office of the Actuary, Centers for
Medicare and Medicaid Services, and the Congressional Budget Office.

Note: Social Security and Medicare projections are based on the
intermediate assumptions of the 2004 trustees' reports. Medicaid
projections are based on CBO's January 2004 short-term Medicaid estimates
and CBO's December 2003 long-term Medicaid projections under midrange
assumptions.

When Social Security redeems assets to pay benefits, the program will
constitute a claim on real resources at that time. As a result, taking
action now to increase the future pool of resources is important. To echo
Federal Reserve Chairman Greenspan, the crucial issue of saving in our
economy relates to our ability to build an adequate capital stock to
produce enough goods and services in the future to accommodate both
retirees and workers in the future.8 The most direct way the federal
government can raise national saving is by increasing government saving,
i.e., as the economy returns to a higher growth path, a much more balanced
and disciplined fiscal policy that recognizes our long-term challenges can
help

8Testimony before the Committee on Banking, Housing, and Urban Affairs,
U.S. Senate, July 24, 2001.

provide a strong foundation for future economic growth and can enhance
future budgetary flexibility. In the short term, we need to realize that
we are already facing a huge fiscal hole. The first thing that we should
do is stop digging.

Taking action soon on Social Security would not only promote increased
budgetary flexibility in the future and stronger economic growth but would
also make the necessary action less dramatic than if we wait. Some of the
benefits of early action-and the costs of delay-can be seen in figure 7.
This compares what it would take to achieve actuarial balance at different
points in time by either raising payroll taxes or reducing benefits.9 If
we did nothing until 2042-the year the Trust Funds are estimated to be
exhausted-achieving actuarial balance would require changes in benefits of
30 percent or changes in taxes of 43 percent. As figure 7 shows, earlier
action shrinks the size of the adjustment.

9Solvency could also be achieved through a combination of tax and benefit
actions. This would reduce the magnitude of the required change in taxes
or benefits compared with making changes exclusively to taxes or benefits
as shown in figure 7.

Figure 7: Size of Action Needed to Achieve Social Security Solvency

Percentage

50

43

40

30

20

10

0

                         2004-2078 2018-2078 2042-2078

                               Benefit adjustment

                                 Tax adjustment

Source: Office of the Chief Actuary, Social Security Administration.

Note: This is based on the intermediate assumptions of the 2004 Social
Security trustees' report. The benefit adjustments in this graph represent
a one-time, permanent change to all existing and future benefits beginning
in the first year indicated.

Thus both sustainability concerns and solvency considerations drive us to
act sooner rather than later. Trust Fund exhaustion may be almost 40 years
away, but the squeeze on the federal budget will begin as the baby boom
generation starts to retire. Actions taken today can ease both these
pressures and the pain of future actions. Acting sooner rather than later
also provides a more reasonable planning horizon for future retirees.

As important as financial stability may be for Social Security, it cannot
be the only consideration. As a former public trustee of Social Security
and Medicare, I am well aware of the central role these programs play in
the lives of millions of Americans. Social Security remains the foundation
of the nation's retirement system. It is also much more than just a
retirement program; it pays benefits to disabled workers and their
dependents, spouses and children of retired workers, and survivors of
deceased workers. Last year, Social Security paid almost $471 billion in
benefits to

Evaluating Social Security Reform Proposals

more than 47 million people. Since its inception, the program has
successfully reduced poverty among the elderly. In 1959, 35 percent of the
elderly were poor. In 2000, about 8 percent of beneficiaries aged 65 or
older were poor, and 48 percent would have been poor without Social
Security. It is precisely because the program is so deeply woven into the
fabric of our nation that any proposed reform must consider the program in
its entirety, rather than one aspect alone. Thus, GAO has developed a
broad framework for evaluating reform proposals that considers not only
solvency but other aspects of the program as well.

The analytic framework GAO has developed to assess proposals comprises
three basic criteria:

o  the extent to which a proposal achieves sustainable solvency and how it
would affect the economy and the federal budget;

o  the relative balance struck between the goals of individual equity and
income adequacy; and

o  how readily a proposal could be implemented, administered, and
explained to the public.

The weight that different policy makers may place on different criteria
will vary, depending on how they value different attributes. For example,
if offering individual choice and control is less important than
maintaining replacement rates for low-income workers, then a reform
proposal emphasizing adequacy considerations might be preferred. As they
fashion a comprehensive proposal, however, policy makers will ultimately
have to balance the relative importance they place on each of these
criteria.

Financing Sustainable Solvency

Our sustainable solvency standard encompasses several different ways of
looking at the Social Security program's financing needs. While 75-year
actuarial balance is generally used in evaluating the long-term financial
outlook of the Social Security program and reform proposals, it is not
sufficient in gauging the program's solvency after the 75th year. For
example, under the trustees' intermediate assumptions, each year the
75year actuarial period changes, and a year with a surplus is replaced by
a new 75th year that has a significant deficit. As a result, changes made
to restore trust fund solvency only for the 75-year period can result in
future actuarial imbalances almost immediately. Reform plans that lead to
sustainable solvency would be those that consider the broader issues of
fiscal sustainability and affordability over the long term. Specifically,
a

standard of sustainable solvency also involves looking at (1) the balance
between program income and costs beyond the 75th year and (2) the share of
the budget and economy consumed by Social Security spending.

As I have already discussed, reducing the relative future burdens of
Social Security and health programs is essential to a sustainable budget
policy for the longer term. It is also critical if we are to avoid putting
unsupportable financial pressures on future workers. Reforming Social
Security and health programs is essential to reclaiming our future fiscal
flexibility to address other national priorities.

Balancing Adequacy and Equity

The current Social Security system's benefit structure attempts to strike
a balance between the goals of retirement income adequacy and individual
equity. From the beginning, benefits were set in a way that focused
especially on replacing some portion of workers' pre-retirement earnings.
Over time other changes were made that were intended to enhance the
program's role in helping ensure adequate incomes. Retirement income
adequacy, therefore, is addressed in part through the program's
progressive benefit structure, providing proportionately larger benefits
to lower earners and certain household types, such as those with
dependents. Individual equity refers to the relationship between
contributions made and benefits received. This can be thought of as the
rate of return on individual contributions. Balancing these seemingly
conflicting objectives through the political process has resulted in the
design of the current Social Security program and should still be taken
into account in any proposed reforms.

Policy makers could assess income adequacy, for example, by considering
the extent to which proposals ensure benefit levels that are adequate to
protect beneficiaries from poverty and ensure higher replacement rates for
low-income workers. In addition, policy makers could consider the impact
of proposed changes on various subpopulations, such as low-income workers,
women, minorities, and people with disabilities. Policy makers could
assess equity by considering the extent to which there are reasonable
returns on contributions at a reasonable level of risk to the individual,
improved intergenerational equity, and increased individual choice and
control. Differences in how various proposals balance each of these goals
will help determine which proposals will be acceptable to policy makers
and the public.

Implementing and Administering Proposed Reforms

Examining Social Security's Effects on Distribution of Benefits and Taxes

Program complexity makes implementation and administration both more
difficult and harder to explain to the public. Some degree of
implementation and administrative complexity arises in virtually all
proposed changes to Social Security, even those that make incremental
changes in the already existing structure. However, the greatest potential
implementation and administrative challenges are associated with proposals
that would create individual accounts. These include, for example, issues
concerning the management of the information and money flow needed to
maintain such a system, the degree of choice and flexibility individuals
would have over investment options and access to their accounts,
investment education and transitional efforts, and the mechanisms that
would be used to pay out benefits upon retirement. Harmonizing a system
that includes individual accounts with the regulatory framework that
governs our nation's private pension system would also be a complicated
endeavor. However, the complexity of meshing these systems should be
weighed against the potential benefits of extending participation in
individual accounts to millions of workers who currently lack private
pension coverage.

Continued public acceptance of and confidence in the Social Security
program require that any reforms and their implications for benefits be
well understood. This means that the American people must understand why
change is necessary, what the reforms are, why they are needed, how they
are to be implemented and administered, and how they will affect their own
retirement income. All reform proposals will require some additional
outreach to the public so that future beneficiaries can adjust their
retirement planning accordingly. The more transparent the implementation
and administration of reform, and the more carefully such reform is phased
in, the more likely it will be understood and accepted by the American
people.

Under Social Security, retired workers can receive benefits at age 65 that
equal about 50 percent of pre-retirement earnings for an illustrative
worker with relatively lower earnings but only about 30 percent of
earnings for one with relatively higher earnings. To help ensure that
beneficiaries have adequate incomes, Social Security's benefit formula is
designed to be "progressive," that is, to provide disproportionately
larger benefits, as a percentage of earnings, to lower earners than to
higher earners. However, the benefit formula is just one of several
program features that influence the way benefits are distributed. Other
such program features include provisions for disabled workers, spouses,
children, and survivors. Changes in the program over time also affect the

distribution of benefits across generations. So the distribution of Social
Security benefits can vary by eligibility, household type, and birth year
as well as by earnings level.

Over the past few years, we have been developing an increasing capacity at
GAO to estimate quantitatively the effects of Social Security reform on
individuals. Such estimates speak directly to applying our second
evaluation criterion to reform proposals. We have just issued a new report
that, in part, uses such estimates to illustrate the varying effects of
different policy scenarios on how Social Security benefits and taxes are
distributed relative to earnings levels.10 Today, I would like to share
our findings regarding how to define and describe "progressivity,"
defining appropriate benchmarks for assessing the future outlook for
individuals' Social Security benefits, what factors influence the
distributional effects of the current Social Security program, and how
various reform proposals might vary in their distributional effects.
Still, remember that progressivity is only one of several aspects of our
criterion of balancing adequacy and equity, which in turn is only one of
three criteria that each consist of several dimensions.

Different Distributional Measures Reflect Different Perspectives

Two distinct perspectives on Social Security's goals suggest different
approaches to measuring progressivity. Both perspectives provide valuable
insights. An adequacy perspective focuses on benefit levels and how well
they help ensure a minimal subsistence or maintain preentitlement living
standards. For example, replacement rates measure annual benefits as a
percentage of annual earnings before receiving benefits. An equity
perspective focuses on rates of return and other measures relating
lifetime benefits to lifetime contributions. This perspective gauges
whether the system gives all participants a "fair deal" on their
contributions. The measures themselves describe either adequacy or equity,
but their distribution with respect to earnings level describes
progressivity. Note however that equity measures cannot accurately assess
the distributional effects of reform proposals that rely on general
revenue transfers. Such proposals do not generally specify what kind of
future taxes or spending cuts will finance the transfers or who will bear
the related burden; but evaluating progressivity from an equity
perspective requires that all taxes and benefits be clearly allocated.

10U.S. General Accounting Office, Social Security: Distribution of
Benefits and Taxes Relative to Earnings Level, GAO-04-747 (Washington,
D.C.: June 15, 2004).

Benchmark Policy Scenarios Illustrate a Range of Possible Outcomes

Estimating future effects on Social Security benefits should reflect the
fact that the program faces a long-term actuarial deficit and benefit
reductions and/or revenue increases will be necessary to restore solvency.
To illustrate a full range of possible outcomes, we developed hypothetical
benchmark policy scenarios that would restore solvency over the next 75
years either by only increasing payroll taxes or by only reducing
benefits. Our tax-increase-only benchmark simulates "promised benefits,"
or those benefits defined under current law, while our
benefit-reduction-only benchmarks simulate "funded benefits," or those
benefits for which currently scheduled revenues are projected to be
sufficient. The benefit reductions are phased in between 2005 and 2035 to
strike a balance between the size of the incremental reductions each year
and the size of the ultimate reduction. At our request, Social Security
actuaries scored our benchmark policies and determined the parameters for
each that would achieve 75-year solvency. For our benefit reduction
scenarios, the actuaries determined these parameters assuming that
disabled and survivor benefits would be reduced on the same basis as
retired worker and dependent benefits. If disabled and survivor benefits
were not reduced at all, reductions in other benefits would be deeper than
shown in this analysis.11

Program's Distributional Effects Reflect Various Program Features and
Demographic Patterns

Social Security's distributional effects reflect program features, such as
its benefit formula, and demographic patterns among its recipients, such
as marriage between lower and higher earners. The retired worker benefit
formula favors lower earners by design, replacing about 50 percent of
preretirement earnings at age 65 for an illustrative low earner but only
about 30 percent of pre-retirement earnings for an illustrative high
earner.12 (See fig. 8.) The disability benefit formula also favors lower
earners, and disability recipients are disproportionately lower earners.
Our simulations suggest that for individuals born in 1985, compared with a
hypothetical program without disability insurance, Social Security's
disability

11For more details on the alternative benefit-reduction benchmarks, see
appendix I in U.S. General Accounting Office, Social Security:
Distribution of Benefits and Taxes Relative to Earnings Level, GAO-04-747
(Washington, D.C.: June 15, 2004).

12The annual trustees' report uses illustrative "scaled earnings"
patterns. The values of the replacement rates for these scaled earnings
patterns at age 65 are virtually identical to the ones presented in figure
1. See The Board of Trustees, Federal Old-Age and Survivors Insurance and
Disability Insurance Trust Funds, The 2004 Annual Report of the Board of
Trustees of the Federal Old-Age and Survivors Insurance and Disability
Insurance Trust Funds (Washington, D.C.: Mar. 23, 2004). pp. 186-187.

provisions increase lifetime Social Security benefits for the bottom fifth
of earners by 43 percent, compared with 14 percent for the top fifth of
earners. The extent to which the benefit formula and disability benefits
favor lower earners may be offset to some degree by demographic patterns.
Household formation tends to reduce the system's tilt toward lower earners
because some of the lower-earning individuals helped by the program live
in high-income households. For example, many of the lowerearning
individuals that the system favors through spouse and survivor benefits
actually live at some point in higher-income households because of
marriage. In our simulations, the ratio of benefits received to payroll
taxes contributed is higher for lower earners than for higher earners, but
this difference is reduced when we account for household formation. Also,
differences in mortality rates may reduce rates of return for lower
earners, as studies show they may not live as long as higher earners and
therefore would receive benefits for fewer years.

Figure 8: Social Security Benefit Formula Provides Higher Replacement
Rates for Lower Earners

                     Percentage replacement rate at age 65

60

                                       49

                                       50

Alternative Social Security reform proposals would have different
distributional effects, reflecting the variety of provisions in them. The
various provisions include different ways, within the current program
structure, of reducing certain benefits, enhancing selected benefits, and
enhancing revenues. The various reform provisions also include creating a
new system of individual retirement savings accounts with different
account contribution levels and different ways of adjusting Social
Security defined benefits to reflect the diversion of Social Security
contributions into the accounts. Individually and in combination, these
provisions would affect the distribution of benefits and taxes relative to
earnings levels.

                                       40

                                       30

                                       20

                                      10 0

Low steady earner Average steady earner High steady earner Taxable maximum
                                     earner

                 Source: GAO analysis using SSA ANYPIA program.

Note: Replacement rates are the annual retired worker benefits at age 65
for workers born in 1985 divided by the earnings in the previous year. For
such workers, the full retirement age will be 67. Steady earners have
earnings equal to a constant percentage of Social Security's Average Wage
Index in every year of their careers. Those percentages are 45, 100, and
160, respectively, for low, average, and high earners. Taxable maximum
earners have earnings equal to the maximum taxable earnings in each year.
Replacement rates are simulated under the tax-increase benchmark (promised
benefits); they would be lower under the proportional benefit-reduction
benchmark by a constant proportion and would therefore show a similar
pattern. See appendix I for more on the benchmark policy scenarios.

Distributional Effects Vary across Reform Proposals

For example, Model 2 of the President's Commission to Strengthen Social
Security (CSSS) proposes a new system of voluntary individual accounts
along with a combination of certain benefit reductions for all
beneficiaries and selected benefit enhancements for selected low earners
and survivors. One of its provisions would reduce Social Security defined
benefits proportionally for all workers by modifying the benefit formula.
At the same time, benefits would be enhanced for certain lower earners and
surviving spouses, and 4 percentage points of individuals' payroll taxes
(up to a $1,000 annual limit13) would be diverted into individual
accounts.

In contrast, a proposal offered by Peter Diamond and Peter Orszag would
also include a provision to reduce Social Security defined benefits
proportionally for all workers by modifying the benefit formula. It also
has provisions to enhance benefits for selected lower earners and
surviving spouses. However, it does not contain a provision for individual
accounts, and it does have a variety of provisions for enhancing revenues.
The Diamond-Orszag proposal also has other benefit reduction and benefit
enhancement provisions, such as modifying the benefit formula to reduce
benefits for higher earners only. Another provision would maintain
disability benefits and benefits for survivors of workers who die before
retirement in spite of the other benefit reductions.

Also in contrast to CSSS Model 2, a proposal offered by Peter Ferrara
provides for a new system of voluntary individual accounts but does not
contain any provisions to make changes to Social Security defined
benefits, except for individuals participating in the individual accounts.
Moreover, it would provide for substantially larger contributions to the
accounts than would the CSSS Model 2 proposal. Under this provision,
individual account contributions would be a larger percentage of payroll
for lower earners than for higher earners. Also, for those who participate
in the accounts, Social Security defined benefits would be reduced to
reflect the payroll taxes redirected into the accounts; this account
offset uses a different formula than does CSSS Model 2.

To illustrate the distributional effects of CSSS Model 2, we used a
microsimulation model to estimate benefits under it and under our
benchmark policy scenarios. We did not examine the distribution of equity
measures such as benefit-to-tax ratios or rates of return, because the

13The limit on account contributions would grow over time at the same rate
as wages.

proposal's individual account feature requires general revenue
transfers.14 Since account participation is voluntary, we used two
simulations to examine the effects of the Model 2 provisions, one with
universal account participation (Model 2-100 percent) and one with no
account participation (Model 2-0 percent). We also assumed that all
account participants would invest in the same portfolios; consequently we
did not capture any distributional effect that might occur if lower
earners were to make different account participation or investment
decisions than higher

15

earners.

According to our simulations, the distribution of benefits under Model 2
could favor lower earners more than the distribution of benefits under
either currently promised or currently funded benefits. For example,
assuming universal account participation, households in the lowest fifth
of earnings may receive about 14 percent of all lifetime benefits under
Model 2, compared with about 12.5 percent under the current program. (See
fig. 9.)

14See U.S. General Accounting Office, Social Security Reform: Analysis of
Reform Models Developed by the President's Commission to Strengthen Social
Security, GAO-03-310 (Washington, D.C.: Jan. 15, 2003), p. 24.

15Each participant has portfolio allocation of 50 percent in equities, 30
percent in corporate bonds, and 20 percent in U.S. Treasury long-term
bonds. All portfolios earn a constant 4.6 percent real rate of return. For
sensitivity analysis, we also simulated scenarios with rates of return
varying stochastically across individuals and with higher and lower
returns to equities. Shares of benefits by quintiles of lifetime earnings
were very similar under all specifications.

Figure 9: CSSS Model 2 Might Favor Lower Earners More than Benchmarks for
Individuals Born in 1985

Percentage share of all household lifetime benefits

30

27.4 27.2

25

20

15

10

5

0 Bottom fifth of Top fifth of total earnings total earnings

Promised benefits (tax-increase benchmark)

Funded benefits (proportional benefit-reduction benchmark)

Model 2-100 percent

Model 2-0 percent

Source: GAO analysis using the GEMINI model.

Note: Earnings fifths are based on the present value of total household
lifetime earnings. Household analysis is based on per capita benefits,
taxes, and earnings. This includes all sample members who survive past age
24. It assumes all account participants choose the same portfolio-50
percent equities, 30 percent corporate bonds, and 20 percent Treasury
bonds. Accounts earn a constant real return of 4.6 percent. For
sensitivity analysis, we also simulated scenarios with rates of return
varying stochastically across individuals and over time and scenarios with
higher and lower returns to equities. Shares of benefits by earning fifths
were similar under all specifications.

It should be noted that while the simulations suggest that the
distribution of benefits under Model 2 is more progressive than under the
benchmarks, this does not mean benefit levels are always higher for the
bottom fifth under Model 2. Progressivity is about how the "pie" is
divided up, not about how big the pie is. So, while Model 2 may improve
the relative position of lower earners, it may not improve the adequacy of
their benefits. (See fig. 10.) According to our simulation, median
household lifetime benefits for the bottom fifth under Model 2-0 percent
would be 3 percent higher than under the funded benefits scenario but 21
percent lower than under the promised benefits scenario. Median household

lifetime benefits for the bottom fifth under Model 2-100 percent would be
26 percent higher than under the funded benefits scenario but 4 percent
lower than under the promised benefits scenario.

Figure 10: Median Household Lifetime Benefits under Model 2 and the
Benchmarks for Individuals Born in 1985

Median household lifetime benefits in 2003 dollars (in thousands)

500

455

400

300

200

100

0 Bottom fifth of Top fifth of total earnings total earnings

Promised benefits (tax-increase benchmark)

Funded benefits (benefit-reduction benchmark)

Model 2-100 percent

Model 2-0 percent

Source: GAO analysis using the GEMINI model.

Note: Earnings fifths are based on the present value of total household
lifetime earnings. Household analysis is based on per capita benefits,
taxes, and earnings. This includes all sample members who survive past age
24. It assumes all account participants choose the same portfolio-50
percent equities, 30 percent corporate bonds, and 20 percent Treasury
bonds. Accounts earn a constant real return of 4.6 percent.

We also simulated each of Model 2's core features, assuming 100 percent
participation in the individual accounts, to illustrate the distributional
effect of each feature. (See fig. 11.) First we simulated a version of
Model 2-100 percent that included the individual accounts and the
reductions in Social Security defined benefits, but not the $1,000 cap on
account contributions or the enhanced benefits for low earners and
survivors. Next we simulated a version that included the defined-benefit
reductions and

the individual accounts with the $1,000 cap on account contributions.
Finally, we simulated the complete Model 2-100 percent scenario, which
included the enhanced benefits to lower earners and survivors. While the
proposal's individual accounts and benefit reductions together may favor
higher earners, this is more than offset by a limit on account
contributions and the enhanced benefits for low earners and survivors.
Again, this assumes that all account participants would invest in the same
portfolios. However, if individuals' investment decisions varied by
earnings level, then the distribution of income from the accounts would
differ from our simulations.

Figure 11: CSSS Model 2's Contribution Cap and Enhanced Benefits for Lower
Earners and Survivors Offset the Distributional Effect of the Accounts and
Reductions in Social Security Defined Benefits

Percentage share of all household lifetime benefits

35

30 28.8

25

20

15

10

5

0 Bottom fifth of Top fifth of total earnings total earnings

Promised benefits (tax-increase benchmark)

Funded benefits (proportional benefit-reduction benchmark)

Accounts and reductions in Social Security defined benefits

Accounts, reductions in Social Security defined benefits, and contribution
cap

Full Model 2, including enhanced benefits for low earners and survivors

Source: GAO analysis using the GEMINI model.

Note: Earnings fifths are based on the present value of total household
lifetime earnings. Household analysis is based on per capita benefits,
taxes, and earnings. This includes all sample members who survive past age
24 and assumes 100 percent account participation with all account
participants choosing the same portfolios-50 percent equities, 30 percent
corporate bonds, and 20 percent Treasury bonds. Accounts earn a constant
real return of 4.6 percent.

It should be emphasized that these simulations are only for individuals
born in 1985,16 and the distributional impact of Model 2 could be
different for individuals born in later years. For example, under the
proposal, initial

16In our modeling, we focused on workers born in 1985 because all
prospective program changes under all alternative policy scenarios would
be almost fully phased in for such workers.

Conclusion

Social Security defined benefits only grow with prices, while initial
benefits from account balances grow with wages. Since wages generally grow
faster than prices, Social Security defined benefits will decline as a
proportion of total benefits, reducing the importance of the progressive
benefit formula, disability benefits, and the enhanced benefits for low
earners and survivors.

It should also be noted that the account feature of Model 2-100 percent
likely exposes recipients to greater financial risk. Greater exposure to
risk may not affect the shares of benefits received by the bottom and top
fifths of earnings.17 However, greater risk may be more problematic for
lower earners, who likely have fewer resources to fall back on if their
accounts perform poorly.18

By design, Social Security distributes benefits and contributions across
workers and their families in a variety of ways. These distributional
effects illustrate how the program balances the goal of helping ensure
adequate incomes with the goal of giving all workers a fair deal on their
contributions. Any changes to Social Security would potentially alter
those distributional effects and the balance between those goals.
Therefore, policy makers need to understand how to evaluate distributional
effects of alternative policies.

Several key themes inform this understanding. First, it should be noted
that greater benefit progressivity is not the same thing as greater
benefit adequacy. Under some reform scenarios, Social Security could
distribute benefits more progressively than under current law while
providing lower, less adequate benefits. Secondly, our analysis
illustrates that it that is possible for some reform provisions that may
not favor lower earners to be counterbalanced by other, more favorable
ones. Finally, benefit progressivity is only one of several aspects of
balancing adequacy and equity. As our framework suggests, besides
balancing adequacy and equity, a proposal's effect on the economy and
whether it achieves sustainable

17We simulated an alternative version of Model 2-100 percent where the
return to equities varied stochastically across individuals and over time.
Shares of benefits by earnings quintile were almost identical to the
scenario that assumed constant returns to equities.

18Lower earners may be more risk averse than higher earners and therefore
suffer greater utility loss from increased risk.

solvency should also be considered, as well as how readily it could be
implemented and explained to the public.

As we have noted in the past before this committee and elsewhere, a
comprehensive evaluation is needed that considers a range of effects
together. Focusing on comprehensive packages of reforms will enable us to
foster credibility and acceptance. This will help us avoid getting mired
in the details and losing sight of important interactive effects. It will
help build the bridges necessary to achieve consensus.

The fundamental nature of the program's long-term financing challenge
means that timely action is needed. I believe it is possible to craft a
solution that will protect Social Security benefits for the nation's
current and near-term retirees, while ensuring that the system will be
there for future generations. Stated differently, I believe that it is
possible to reform Social Security in a way that will assure the program's
solvency and sustainability while exceeding the expectations of all
generations of Americans. In this regard, the sooner we act, the greater
the opportunity to achieve this desirable outcome. It is my hope that we
will think about the unprecedented challenge facing future generations in
our aging society. We need to act now before the approaching demographic
tidal wave makes the imbalances more dramatic and meaningful reform less
feasible. We at GAO look forward to continuing to work with this Committee
and the Congress in addressing this and other important issues facing our
nation. In doing so, we will be true to our core values of accountability,
integrity, and reliability.

GAO Contact and Staff Acknowledgments

Mr. Chairman, and members of the Committee, that concludes my statement.
I'd be happy to answer any questions you may have.

For information regarding this testimony, please contact Barbara D.
Bovbjerg, Director, Education, Workforce, and Income Security Issues, at
(202) 512-7215. Individuals making key contributions to this testimony
include Ken Stockbridge, Charles Jeszeck, and Gordon Mermin.

Related GAO Products �

Social Security: Distribution of Benefits and Taxes Relative to Earnings
Level (GAO-04-747, June 15, 2004).

Social Security Reform: Analysis of a Trust Fund Exhaustion Scenario

(GAO-03-907, July 29, 2003)

Social Security and Minorities: Earnings, Disability Incidence, and
Mortality Are Key Factors That Influence Taxes Paid and Benefits Received
(GAO-03-387, Apr. 23, 2003)

Social Security: Analysis of Issues and Selected Reform Proposals,
(GAO-03-376T, Jan. 15, 2003).

Social Security Reform: Analysis of Reform Models Developed by the
President's Commission to Strengthen Social Security (GAO-03-310, Jan. 15,
2003).

Social Security: Long-Term Financing Shortfall Drives Need for Reform

(GAO-02-845T, June 19, 2002).

Social Security: Program's Role in Helping Ensure Income Adequacy

(GAO-02-62, Nov. 30, 2001).

Social Security Reform: Potential Effects on SSA's Disability Programs and
Beneficiaries (GAO-01-35, Jan. 24, 2001).

Social Security: Evaluating Reform Proposals (GAO/AIMD/HEHS-00-29, Nov. 4,
1999).

Social Security: Issues in Comparing Rates of Return with Market
Investments (GAO/HEHS-99-110, Aug. 5, 1999).

Social Security: Criteria for Evaluating Social Security Reform Proposals
(GAO/T-HEHS-99-94, Mar. 25, 1999).

Social Security Financing: Implications of Government Stock Investing for
the Trust Fund, the Federal Budget, and the Economy

(GAO/AIMD/HEHS-98-74, Apr. 22, 1998).

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