Securing
Social Security
Revamping the Social Security program
has become a domestic policy priority of the Bush
administration. The President has stated that the
system is facing a “crisis” and will
be “bankrupt” in 2041. This conclusion
about Social Security finances is presented as the
justification for drastic changes in the existing
system of retirement benefits.
A new paper by GDAE researchers Brian
Roach and Frank Ackerman develops a model of Social
Security finances, in order to determine whether
Social Security is really facing a crisis, and to
analyze the impacts of policies that might be undertaken
to remedy future shortfalls. Their research illustrates
the extreme sensitivity of Social Security projections
to the underlying economic assumptions. One analysis
in the paper projects Social Security’s finances
using the more optimistic economic assumptions made
in the federal budget; this change alone eliminates
virtually the entire projected 75-year Social Security
shortfall.
The paper also models a variety of
policy options that could secure the finances of
Social Security through 2080. These include increasing
the cap on income subject to Social Security taxation,
slowing the growth in average benefits, and raising
the Social Security tax rate. The results suggest
that any of several, moderate adjustments could
secure the finances of Social Security for the next
75 years without major structural changes. The paper
concludes that the Social Security program can be
adjusted at the margin to reflect modern realities,
just as it has been many times over the last 70
years, without a drastic overhaul.
Download
a copy of the paper in PDF format.
