NU Online News Service, June 16, 2004, 7:38 p.m. EDT – Making relatively small adjustments in Social Security taxes and benefits obligations today could make life much easier for government officials in the 2040s.[@@]
David Walker, the comptroller general of the United States, made that plea Tuesday at a hearing of the U.S. Senate Special Committee on Aging.
Some think tanks that oppose privatization of Social Security say new projections show that the Social Security trust fund is stronger than previously suggested and that the Social Security program should remain solvent for at least 75 years.
But Walker said letting Social Security empty the trust fund in 75 years will cause huge problems for the country in 2080 because, in 2080, the government would have to come up with a huge amount of cash to cover the cost of maintaining Social Security benefits payments.
Current projections show that “the program’s financial imbalance gets worse in the 76th and each subsequent year,” Walker said, according to a written version of his remarks.
Technology, stronger economic growth and other factors could make the Social Security trust fund do better than expected.
But, if the number of workers continues to grow as slowly as expected, Congress extends all expiring tax cut provisions and discretionary government spending grows at the same rate as the U.S. gross domestic product, then spending by the federal government will eat up about half of GDP by 2040, and discretionary spending will account for less than one-quarter of federal government spending, Walker predicted.
Interest on the national debt will account for about one-third of federal government spending, and Social Security, Medicare and Medicaid will account for about half of federal government spending, or about one-quarter of U.S. GDP, Walker predicted.
“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,” Walker said.
If the government acts today, it could achieve true Social Security solvency by cutting program benefits 13% and increasing Social Security taxes 15%, Walker said.
If the government waits until 2042 to save Social Security, it would have to cut benefits 30% and increase taxes 43% to save the system, Walker warned.
A copy of Walker’s testimony is on the Web at http://www.gao.gov/new.items/d04747.pdf