The future of the Social Security system: Part nine

Stephen<lovejoy@msu.edu> Lovejoy, Michigan State University Extension - September 22, 2015

Is Social Security reform too difficult?

Reforms of the Social Security System have often been characterized as too hard to fix but Michigan State University Extension discusses some options for securing this program for future generations.

While Social Security reform is politically difficult, it is not difficult to come up with policies to keep the program solvent. There are countless options available to adjust the benefit formula for future beneficiaries, modify cost-of-living adjustments, change eligibility, increase payroll tax rates, increase the amount of income subject to the payroll tax, increase the retirement age, or change other parameters in the system. The Social Security Chief Actuary has published a list of 121 such options and variations, and the Congressional Budget Office has published several lists with over 40 options combined.17

If enacted soon, a combination of changes could be phased in gradually and still achieve solvency over the next decade. For example, the Simpson-Bowles plan would increase the normal retirement age from 67 to 69 by about 2075, transition to a new more progressive benefit formula by 2050, grow the taxable maximum to cover 90 (as opposed to 83) percent of wages by 2050, and index COLAs to an alternative measure of inflation that grows about 0.25 percent slower than the current formula each year.

The options available to reform Social Security are well-known. CRFB has created an interactive tool, The Reformer, to allow anyone to design their own. The Reformer lets users pick from a set of commonly-discussed options and then shows the effect of the user’s plan on solvency, spending, and revenue.

Reforming Social Security may be politically challenging, but the policy options are relatively straightforward. Policymakers should take on the challenge of addressing Social Security so it can be around for another 80 years.