The Social Security Administration (SSA) and Entitlement Reform

Bipartisan entitlement reform was the issue on the table on May 23, 2013, when the House Ways and Means Social Security Subcommittee convened for a hearing. Concerned with securing the future of Social Security, the Committee examined and discussed proposals set forth by the Simpson-Bowles Commission’s chairmen and the Domenci-Rivlin Taskforce (a debt-reduction taskforce from the Bipartisan Policy Center).

The two plans have a number of common objectives for Social Security. In order to understand how and why they are similar, and where they differ, let’s take a closer look at each.

The Bipartisan Policy Center’s Plan to improve the future of Social Security is a comprehensive, six-part proposal that looks like this: (1) re-work the benefit calculation formula to account for longer life expectancy, (2) reduce the percentage of income replaced by benefits for higher earners when they reach age 62, (3) modestly increase benefits for beneficiaries between ages 81-85, (4) institute the chained consumer price index (CPI) (which is a cost-of-living adjustment formula that would lower benefit amounts), (5) provide coverage for new workers at the state and local levels, and (6) apply payroll taxes to a larger amount of income.

The co-chairmen of the Simpson-Bowles Commission’s proposal, much like the Bipartisan Policy Center’s proposal, recommends re-working the benefit calculation formula, instituting the chained CPI, and extending coverage to new workers at the state and local levels. However, this proposal also includes increasing both the early and the full retirement ages such that they would increase by approximately one month every two years. This plan would also institute a “hardship exemption” for a portion of eligible retirees (the exemption would exclude them from the benefit reduction resulting from retirement age increase).

As far as the future of Social Security is concerned, there is bipartisan agreement that any reforms should secure appropriate benefits for current and future generations of workers such that earners at both ends of the spectrum are neither over nor underserved. How that gets accomplished in terms of policy reform, however, remains to be seen.