GAO's Walker Calls Clinton Plan Worse Than Doing Nothing

November 11, 1999

The Clinton Administration Social Security plan, according to the GAO Comptroller General David Walker, "has the same effect on the economy and the federal budget as a policy of 'No Action' that would simply continue spending and revenue along it current path... In effect, the President's proposal does not address sustainable solvency. While it extends the [Trust Fund] by 16 years to 2050, it does this without substantive reform of the program."

Yet, though the Clinton plan is substantively equivalent to doing nothing, Walker told the House Ways and Means Committee Tuesday that, "the risk is that the transfers in the President's proposal would induce an unwarranted complacency about the financial health of the Social Security program. From a macro perspective, the critical question is not how much a trust fund has in assets---or solvency--but whether the government as a whole has the economic capacity to finance benefits now and in the future--namely sustainability." In other words, rather than fix Social Security's problems, the Clinton plan merely throws more money at them, but it is money that will have to be earned and paid by future generations.

"The proposal would not...reform the basic Social Security program in any way. Rather, [it] seeks to increase the likelihood that projected unified budget surpluses would be preserved for Social Security and debt reduction."

Walker also questioned the Clinton plan for "double counting" interest payments to the Trust Fund: "The trust funds already earn interest on their surpluses. Under the President's current proposal the trust funds will receive, in effect, a second interest payment... This is simply a grant of future general revenues to Social Security." Moreover, Walker pointed out, "The transfers would occur whether or not debt reduction actually takes place..."

"Nothing in [the Clinton] proposal changes the fundamental structural imbalance in Social Security. The system's cash flow still turns negative in 2014 and Social Security becomes a draw on the general fund as it redeems its Treasury securities to pay promised benefits.... If the President's proposal to transfer interest savings to the OASDI trust funds is adopted, their solvency on paper is extended, but the structural imbalance will remain. The new Treasury securities will be redeemed and constitute a new claim on the general fund until they run out in 2050. Cash to redeem these securities can only come from some combination of cuts in other spending, increases in taxes, or increases in borrowing from the public. Absent substantive program reform, our children and grandchildren will be saddled with a budget heavily burdened by commitments to fund entitlement programs for the elderly."

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