GAO: If benefits were reduced people might work longer and to save more, in turn having an impact not only on Social Security but the economy as a whole. Image: Steve Heap/Shutterstock.com
By: FEDweek StaffWhile the Social Security program is now less than a decade away from the point in which its trust fund will be exhausted, changes to shore up its finances would be difficult to both design and to carry out, the Government Accountability Office has said.
A report notes—as have many before it—that around 2033 the program is projected to have to rely on only current receipts to pay benefits, and that those receipts will be enough to cover only about three-fourths of those benefits.
Any changes to the program’s design would have to make certain projections regarding income and outgo over a long period and “future demographic or economic trends could worsen—or improve—solvency in unanticipated ways and may require additional changes,” it said. Such uncertainties could include, for example, rates of fertility, mortality and immigration, as well as economic productivity, inflation, average earnings, interest rates, and more.
Further, changes to benefits could change people’s behavior, it said. For example, if benefits were reduced people might choose to work longer and to save more for retirement, in turn having an impact not only on Social Security but the economy as a whole.
Other considerations include issues of equity between generations as benefits are made less valuable for younger persons than for older persons; the decrease of traditional employer pension programs causing workers to rely more on Social Security in retirement; and the rise in the percentage of total earnings going to those earning more than the cap for Social Security payroll taxes, making less of the earnings total subject to those taxes.
Regarding implementation, it said that “Changes to Social Security that reduce costs may be phased in over time so workers can adapt their retirement plans. For instance, 1983 legislation gradually increases the full retirement age from 65 to 67 over decades. Phasing in changes can be particularly important if policymakers cut benefits. As retirement planning is a long-term process, workers affected by benefit cuts would benefit from advance notice to adapt.”
Another issue is “the degree of complexity that could be involved with implementing and administering proposed changes to Social Security. The complexity may vary based on factors such as the information and time required to implement and administer changes as well as interactions with other federal programs and across government. Changes that are more complex may also be harder for the public to understand,” it said.
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