Social Security
Today, Social Security is the largest program in the federal budget, making up more than one-fifth of total federal spending. As the large baby boom generation retires and average life expectancy continues to rise, the program will come under escalating financial strain. Putting Social Security’s finances on sustainable footing will not only strengthen the program for current and future generations, but will also improve the government’s long-term fiscal trajectory. Participants propose changes to benefits and funding for the program.
Comparison Table
Comparison of Social Security Policy Proposals
Summary: How the Proposed Social Security Plans Compare
All seven groups would extend the solvency of Social Security’s trust funds by at least 30 years over the next few decades. The participants would address Social Security’s challenges by implementing a range of proposals related to both benefit adjustments and dedicated revenues, including:
- Better targeting of benefits to those most in need
- Raising the retirement age
- New measures for cost-of-living adjustments
- Reforming payroll taxes
Five out of the seven participants (AAF, AEI, BPC, MI, and PPI) propose some changes to Social Security that, on average, would likely decrease total benefits received over one’s lifetime. Examples include raising the early or normal retirement age (AAF, BPC, MI, and PPI) and changing the indexing of benefits (AAF, BPC, MI, and PPI).
However, many organizations take care to protect benefits for vulnerable and/or lower-income beneficiaries. BPC, CAP, and PPI enhance surviving spouse benefits. PPI would maintain a special early retirement age and increase benefits for low-income workers, and three organizations (BPC, CAP, and MI) would establish a basic minimum benefit. EPI would increase benefits substantially and CAP proposes more modest increases, both targeting lower-income beneficiaries.
Four organizations raise additional revenues dedicated to the program as part of improving its solvency. AAF, BPC, CAP, and EPI propose raising or eliminating the cap on earnings subject to the payroll tax. BPC also would increase the payroll tax rate, and EPI would broaden the tax base leading to higher revenues into the trust funds.
The three other organizations propose reforms to Social Security that could influence the trust funds. AEI would fully tax Social Security benefits; BPC and PPI would tax the benefits of those with high incomes more aggressively. MI would eliminate the Social Security payroll tax at age 62. PPI would phase out all federal payroll taxes (although they would implement other taxes to more than make up for the lost revenue).
Further Reading
Social Security Reform: Options to Raise Revenues
Here are the pros and cons for three approaches to increasing funds dedicated to Social Security.
Social Security Reform: Should We Reduce Benefits?
Proponents argue that a well-designed benefit reduction policy would improve the equitability by better balancing the payouts between low- and high-income earners.
Social Security Reform: Should We Raise the Retirement Age?
Many policymakers have called for the full retirement age to be gradually raised and ultimately pegged to average life expectancy.