Addressing Social Security’s Long-Range Financial Stability

Significant proposals to enhance Social Security’s long-range financial stability are emerging from a variety of sources. Although there was only one mention of Social Security during the first round of Democratic Presidential debates in June, it is likely to get much more attention from candidates in the coming months.

Recently, I attended the annual Peter G. Peterson Foundation’s Fiscal Summit in DC. (The Peterson Foundation has been a long-time supporter of the Academy’s work.)

The Summit featured a “Solutions Initiative,” in which seven policy organizations from across the political spectrum put forward plans “to set America on a stronger, more sustainable fiscal path.” In keeping with Peterson’s priorities, the overriding goal of each plan was to reduce the federal debt over the next 30 years. Each organization’s plans include proposals that would change elements of Social Security, which the Peterson Foundation notes is “currently the largest program in the federal budget and represents an essential part of Americans’ retirement.”

Given this range of political perspectives, it should be no surprise that the seven organizations – American Action Forum (AAF), American Enterprise Institute (AEI), Bipartisan Policy Center (BPC), Center for American Progress (CAP), Economic Policy Institute (EPI), Manhattan Institute (MI), and Progressive Policy Institute (PPI) – address Social Security’s challenges in different ways. Five of the seven propose some reduction in benefits for some beneficiaries, and all but one propose raising additional revenues.

Of the seven organizations, four identify Social Security as one of their top three priorities.

The following is a summary of each organization’s Social Security proposals.

American Action Forum (AAF)

• Move to price indexing in the calculation of benefits
• Means-test benefits for higher-earnings beneficiaries
• Incorporate the chained Consumer Price Index (CPI) to calculate Cost-of-Living Adjustments (COLAs)
• Reform the Disability Insurance (DI) formula for the calculation of work history

(Douglas Holtz-Eakin, AAF’s President, serves on the Academy’s Board of Directors.)

American Enterprise Institute (AEI)

• Institute a flat-dollar benefit paid to all retirees and widow(er)s, regardless of their earnings history or labor force attachment
• Supplement this benefit with automatic enrollment of workers in employer-sponsored retirement plans with a default contribution of 3 percent of earnings split evenly between the worker and the employer
• Increase the early retirement age gradually from 62 to 65
• Eliminate Social Security contributions for all workers age 62 and older
• Institute experience rating for the employer share of the DI payroll tax

Bipartisan Policy Center (BPC)

• Establish a Basic Minimum Benefit and replace Supplemental Security Income (SSI) for beneficiaries with low incomes
• Index the full retirement age to account for ongoing increases in longevity, gradually raising the age over decades
• Allow surviving spouses to receive 75 percent of their deceased spouse’s benefit in addition to their own
• Base COLAs on the Chained CPI
• Make the benefit formula more progressive
• Limit the spousal benefit
• Calculate benefits using annual, rather than averaged, income, and count more years in the benefit formula

(Bill Hoagland, BPC’s Sr. Vice President, is a former member of the Academy’s Board of Directors. Jason Fichtner, who helped in the development of BPC’s plan, serves on the Academy’s Board of Directors.)

Center for American Progress (CAP)

• Eliminate the taxable maximum wage base
• Improve Social Security benefits

In a memorandum accompanying its plan, CAP noted that: “Public investments in areas like infrastructure, education, and social insurance make workers more productive, help sustain employment, and reduce inequality.”

(Rebecca Vallas, a CAP Senior Fellow, serves on the Academy’s Board of Directors.)

Economic Policy Institute (EPI)

• Raise the taxable maximum payroll cap to a level that would cover 90 percent of earnings
• Adopt the coverage expansions in the Sanders-DeFazio Social Security Expansion Act

Manhattan Institute (MI)

• Gradually raise the full-benefit retirement age from 67 to 69 by 2030
• Set initial Social Security benefits lower than under current law for those with higher lifetime earnings
• Eliminate COLAs for those whose post-retirement incomes exceed $85,000 (single) and $170,000 (married)
• Increase the contribution rate by 1 percentage point.

Progressive Policy Institute (PPI)

• Establish a flat work credit for each year an individual spends in the workforce regardless of what they were paid
• Earn up to five years of work credits for time taken out of the workforce to serve as a caregiver
• Index the ages at which an individual may claim both reduced and maximum benefits to longevity
• Retain a special early retirement age that allows low-income workers to claim an unreduced benefit at age 62
• Link annual COLAs to the Chained CPI
• Index the COLA to average wage growth after a beneficiary has been eligible for Social Security for 15 years
• Increase benefits for widow(er)s who are at risk of falling into poverty when their spouse dies
• Cap and means-test spousal benefits

More information about these proposals may be found on the Peterson Foundation’s website.

The Academy’s Ongoing Focus on Social Security

As we noted in the Academy’s 2017 Report to the New Leadership and the American People on Social Insurance and Inequality: “To continue to provide adequate benefits over the long term, reforms will be needed.”

The Academy continues to focus on Social Security in many ways.

Our website contains a robust collection of Social Security materials, which we update regularly.

Our “outside the Beltway” forums over the past year have featured Academy Founding Board Member Henry Aaron’s Social Security plan as a framework for discussing policy options to restore the program to financial soundness.

We produce an annual Issue Brief, Social Security Finances: Findings of the 2019 Trustees Report.

Our 2019 Annual Policy Conference, Regenerating Social Insurance for Millennials and the Millennium, included a panel on “Social Security Across the Lifespan: Addressing Misconceptions among Young People.”

We conduct an annual Summer Academy for Interns and Young Professionals, Demystifying Social Security. This year’s will be held on August 13th from 8:30 am to 4:30 pm. Please encourage people in your network to attend.

Our Concept Paper, Assured Income, published in April, includes a section on how Social Security might provide a vehicle for delivering some form of assured income to all Americans.

In collaboration with AARP, we are conducting a Social Security Policy Innovations Challenge. The Challenge is focused on workers with limited employment opportunities who lack the financial security to postpone claiming Social Security benefits until they reach full retirement age. Awardees will be announced soon.

Looking Ahead

In collaboration with Matthew Greenwald & Associates, we will be conducting an update to our 2014 survey and report, Americans Make Hard Choices on Social Security: A Survey with Trade-Off Analysis. We expect to release our new survey findings in early 2020.

As always, we welcome your comments, suggestions, and questions about the Academy’s Social Security activities, as well as any other aspects of our policy work.

Please send them to me at warnone@nasi.org.