NU Online News Service, Dec. 26, 2:53 p.m. – Congress may have to increase Social Security taxes 39%, or reduce benefit levels 30%, if it waits until 2038 to make the changes necessary to keep the Social Security system solvent.
Barbara Bovbjerg, an income security specialist at the U.S. General Accounting Office, gave that projection at a recent hearing of the U.S. Senate Special Committee on Aging.
Bovbjerg told the committee Congress could have kept the system solvent with a 13% cut in benefits or a 14% increase in taxes if it had made the changes this year, but that it may still be able to get by with a 16% cut in benefits or a 20% increase in taxes if it acts by 2016.
Bovbjerg said the effects of the Sept. 11 attacks on federal spending make reforming the Social Security system particularly important.
If, as some worry, increased defense spending eliminates the possibility of setting aside budget surpluses to pay for future Social Security benefits, and the government makes no major changes in the Social Security program, then Social Security, federal spending on Medicare and Medicare, interest on the federal debt, and other federal spending will account for more than 50% of the U.S. gross domestic product by 2050, according to Bovbjerg.
The GAO has saved a written copy of the testimony on its Web site, at http://www.gao.gov/new.items/d02288t.pdf
Other hearing testimony is available on the committee Web site, at http://aging.senate.gov/hr75.htm