Social Security Reform: How Different Options Might Affect Future Funding

20 Pages Posted: 23 Sep 2009

See all articles by Craig Copeland

Craig Copeland

Employee Benefit Research Institute (EBRI)

Date Written: September 1, 2009

Abstract

Social Security (technically called the Old-Age, Survivors, and Disability Insurance Program, or OASDI) is currently facing a long-term projected financial shortfall, due in large part to the changing demographics and aging of the U.S. population, and it has been in this position for a number of years (a significant worsening in the funding status was reported in 2009). This projected shortfall has been the center of discussion whenever advocates and policymakers have called for significant changes to the program to address the issues that are pushing it into financial trouble. Without changes to eliminate the shortfall, the program ultimately will be able to pay only about 75 percent of promised benefits called for under current law. This paper analyzes various potential reform provisions that have been widely discussed that would affect the benefit levels and program revenues of Social Security. This analysis also discusses the potential impact of these provisions on the financial status of the OASDI program. The provisions discussed are those that would: lower the scheduled increase in future benefit levels by changes to the benefit formula; change the contribution and benefit base (amount of earnings that are taxable and used for the calculation of benefits under OASDI) and the taxation of benefits; increase the retirement age. All of these approaches have been part of various comprehensive reform proposals over the last two decades. The degree to which any of the options analyzed in this paper would improve the actuarial balance of Social Security depends on how much emphasis policymakers might place on a specific provision. Consequently, a range of provisions is presented showing a variety of possible results. Each provision has certain drawbacks, but if the projected funding status of the program is to be improved, some compromises will have to be made: either benefits will need to be cut, or revenues raised, or some combination of these two options.

Keywords: Social Security benefits, Social Security financing, Social Security reform

JEL Classification: H55

Suggested Citation

Copeland, Craig, Social Security Reform: How Different Options Might Affect Future Funding (September 1, 2009). EBRI Notes, Vol. 30, No. 9, September 2009, Available at SSRN: https://ssrn.com/abstract=1477124

Craig Copeland (Contact Author)

Employee Benefit Research Institute (EBRI) ( email )

1100 13th Street, NW
Suite 878
Washington, DC 20005-4204
United States
202-775-6356 (Phone)
202-775-6312 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
114
Abstract Views
731
Rank
435,891
PlumX Metrics