Debating Social Security Fixes
The AARP has just released a helpful new paper considering the pros and cons of different options to reform Social Security. Our fiscal outlook in the long run shows that the Social Security program is in need of change, but how to best address the issue remains up for debate. The paper provides two useful different perspectives, Virginia Reno of the National Academy of Social Insurance and David John of the Heritage Foundation, on reform options such as Raising the Full Retirement Age, Recalculating COLA, and Increasing the Payroll Tax Rate.
This paper provides invaluable insight on the promise and peril of making needed reforms to the Social Security program. For example, the two scholars discuss the option of indexing either the retirement age or the benefit formula to longevity. John argues that longevity indexing would be more fair then cutting benefits or raising the retirement age because it would automatically take into account how long Americans are living. But Reno also argues that gains in longevity are not distributed equally throughout the population, with high earners increasingly living longer than lower earners. Longevity indexing would not take this disparity into account. This is just one example of how reform options can be evaluated.
In total, the options included:
- Raising the Full Retirement Age
- Begining Longevity Indexing
- Recalculating the COLA
- Increasing the Payroll Tax Cap
- Eliminating the Payroll Tax Cap
- Reducing Benefits for High Earners
- Benefit Improvements
- Increasing the Payroll Tax Rate
- Taxing All Salary Reduction Plans
- Covering All Newly Hired State and Local Government Workers
- Increasing the Number of Years Used to Calculate Initial Benefits
- Begining to Means-Test Social Security Benefits
It is good to have these debates, as from our long-term projections, we have seen that rising health care costs and population aging will cause our current entitlement programs to be unsustainable, including Social Security. Looking for solutions now, even if they are difficult, will also allow Americans to plan for the future and preserve the program without resorting to persistent deficit spending. It will also allow for a fuller debate that allows the pros and cons to be weighed carefully.
A link to the full paper can be found here.