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Letter from Donald B. Marron, Acting Director to Robert F. Bennett regarding long-term effects of S. 2427, the Sustainable Solvency First for Social Security Act of 2006 1 (April 2006)

handle is hein.congrec/cbo10192 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE U.S. Congress Washington, DC 20515 April 5, 2006 Honorable Robert F. Bennett Vice Chairman Joint Economic Committee U.S. Senate Washington, DC 20515 Dear Vice Chairman Bennett: As requested in your letter of April 3, the Congressional Budget Office (CBO) has analyzed the long-term effects of S. 2427, the Sustainable Solvency First for Social Security Act of 2006. The proposal would reduce scheduled Social Security benefits, primarily by adjusting the benefit formula but also by accelerating the increase in the normal retirement age. The bill would generally result in improved federal budget balances and, CBO projects, in positive and large trust fund balances throughout the next century. Under current law, the trust funds will become exhausted in 2052, CBO estimates, at which point annual benefits would be limited to annual revenues. Total benefits received by participants under S. 2427 would be lower than under current law from 2012 until 2052. The reductions would be largest for the highest earners and smallest for the lowest earners. After 2052, total benefits under the proposal would be similar to those that would be paid under current law. Under the proposal, automatic transfers from the general fund would be made when necessary to ensure that the Social Security trust funds remained solvent, but CBO projects that no transfers would be necessary. This analysis examines Social Security revenues and outlays on the basis of current law, meaning that outlays are limited to current revenues in years after trust fund exhaustion. The appendix contains a similar analysis based on scheduled benefits, which incorporates the assumption that those benefits are paid in full even after the trust funds are exhausted.

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