Comments on Social Security Reform

By :: August 27th, 2010

We’ve gotten some interesting comments on our recent post about Social Security reform. In the post, we note that many reform options would slow the growth of benefits from one age cohort to the next, but not cut lifetime benefits relative to what people receive today. We didn’t focus on the specific issue of raising the retirement age, but used that option as an example of how benefits could continue to grow over time, but at a slower rate than what is currently being promised.

Regardless of the reform option in question, we certainly agree with those commenters who urged that we consider how reform might affect different groups in the population. We have long advocated proposals such as a minimum benefit level to maintain and increase progressivity—and offset the impact of other changes such as any increase in retirement age.

As a technical matter, however, it should be noted that adjusting the retirement age for life expectancy does not disproportionately affect lower-income groups, mainly because it does not affect disability insurance, and the disabled come disproportionately from lower-income groups. However, one should be debating the effects of the package as a whole on different groups—not one aspect of reform at a time.

The bottom line, though is that benefit reforms--whether increasing the retirement age, indexing benefit growth differently, or a variety of other schemes-- can be designed so that on average lifetime benefits continue to increase over time, though at a slower rate. That still leaves open the issue of how to distribute any particular level of benefits.