Mr. Chairman and Members of the Committee, it is an honor to appear before you this morning to discuss Social Security reform and long-term budgetary pressures. My testimony will focus on the interaction between the recently enacted tax cut and the prospects for Social Security reform.
On May 2, President Bush appointed a commission on Social Security reform, which held its first meeting on June 11 and its second meeting on July 24. The commission faces a daunting challenge: how, in the aftermath of the enactment of the recent tax cut, to finance such accounts.
Contributions to individual accounts could be financed either by transfers from the non-Social Security budget or by diverting revenues from the Social Security Trust Fund. The new tax law, in combination with other priorities reflected inteh Congressional budget resolution, has consumed essentially all of the previously projected surpluses in the non-Social Security budget. As a result, any attempt to transfer funds out of the non-Social Security budget to create “add on” accounts (that are aded on top of existing Social Security revenue) would cause large deficits outside of Social Security and Medicare.