Sen. Hutchison Unveils Social Security Plan
Sen. Kay Bailey Hutchison unveiled her Social Security reform plan today, and conveniently, it already has its own score from the Office of the Chief Actuary (OACT) at the Social Security Administration.
Her plan would use two of the "levers" of Social Security reform: the retirement age and cost-of-living-adjustments (COLAs). Her proposal would speed up the increase in the Normal Retirement Age, making it three months per year starting in 2016 until it reached 69 in 2027. In addition, she would raise the early retirement age by three months per year starting in 2016 until it reached 64 in 2023. Her other change would reduce COLAs by one percentage point, a larger cut than switching to the chained CPI would make, starting in 2012.
The combined effect of these changes would restore solvency to the program over 75 years, but it would not meet the OACT's definition of sustainable solvency. This is because despite the magnitude of these changes, Social Security would still have cash flow deficits throughout most of the 75-year window. These deficits result in a declining trust fund by the end of the 75-year window, which means that under current projections, it would become insolvent somewhere past 2085. The cash flow issue could be remedied by making the retirement ages increase very gradually beyond their specified levels. But regardless of the cash flow deficits, this plan would significantly improve Social Security's financial outlook.
It's good to see Social Security proposals still popping up, especially as changes to the program have seemed to have been left behind in the current debt talks. Although this plan focuses solely on the benefits side of the equation, another plan to prevent insolvency to this program and to help address our fiscal situation is a step in the right direction.