Social Security Reform: Analysis of a Trust Fund Exhaustion Scenario

Social Security is an important social insurance program affecting virtually every American family. It is the foundation of the nation's retirement income system and also provides millions of Americans with disability insurance and survivors' benefits. Over the long term, as the baby boom generation retires, Social Security's financing shortfall presents a major solvency and sustainability challenge. The Chairman of the Senate Special Committee on Aging and the Chairman of the Senate Committee on Finance asked GAO to use its analytic framework to evaluate an illustrative "Trust Fund Exhaustion" scenario under which benefits are reduced proportionately for all beneficiaries by the shortfall in revenues occurring upon exhaustion of the combined Old-Age and Survivors Insurance and Disability Insurance Trust Funds. The analytic framework consists of three basic criteria: (1) the extent to which the proposal achieves sustainable solvency and how it would affect the U.S. economy and the federal budget; (2) the balance struck between the twin goals of income adequacy and individual equity; and (3) how readily changes could be implemented, administered, and explained to the public. The Trust Fund Exhaustion scenario is intended as an analytic tool, not a legal determination.