Social Security Reform:

Evaluation of the Gramm Proposal

AIMD/HEHS-00-71R: Published: Feb 1, 2000. Publicly Released: Feb 1, 2000.

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Pursuant to a congressional request, GAO provided information on the potential budgetary and economic effects of Senator Phil Gramm's social security reform proposal, focusing on: (1) the extent to which the proposal achieves sustainable solvency and how it would affect the economy and federal budget; (2) the balance struck between the twin goals of income adequacy and individual equity; and (3) how readily such changes could be implemented, administered, and explained to the public.

GAO noted that: (1) GAO used a long-term economic model in evaluating the proposal against the first criterion, that of financing sustainable solvency; (2) specifically, GAO used this model to simulate the potential fiscal and economic impacts of the Gramm proposal over a 75-year projection period; (3) in simulating the reform proposal, GAO relied on income and cost estimates prepared by the Office of the Actuary at the Social Security Administration, and GAO adapted the model as appropriate to reflect specific reform proposal provisions; (4) GAO's simulation results also compare the proposal with alternative fiscal policy paths developed in its prior model work; (5) GAO used qualitative research to examine how well the Gramm proposal balances adequacy and equity concerns and provides for reasonable implementation and communication of any changes; (6) in so doing, GAO relied on its issued and ongoing body of work on social security reform; and (7) this body of work addresses a number of issues raised by various reform approaches, including establishing individual accounts, raising the retirement age, and determining the impact of reforms on minorities and women.

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