Urban InstituteRetirement Policy Center

June 2, 2010

The Future of Social Security

Securing Social Security: Does It Need to Be Fixed Now?
On May 19th, the Urban Institute organized a forum on Capitol Hill addressing the solvency and sustainability of Social Security. An expert panel, including UI's Eugene Steuerle and moderated by Howard Gleckman of the Urban/Brookings Tax Policy Center, examined the urgency and necessity of Social Security reform. Participants placed reform within the context of the larger budget debate, described the political economy of raising taxes to fund Social Security, and discussed the challenge of predicting and defining solvency.

Social Security and the Budget
In contrast to rising health care and interests costs, Social Security's growing benefits relative to taxes received represent only a modest part of the nation's major fiscal problems. Nonetheless, Social Security serves as the flagship of social welfare policy, and it places increasing demands on the economy as annual benefits grow, life expectancies increase, and the baby boomers retire. Social Security reform, moreover, has far-reaching implications. Done the right way, it can generate higher national output, personal income, and revenues for Social Security and other purposes, helping the nation achieve budget sustainability and a stronger Social Security system. (Brief)

Distributional Effects of Alternative Social Security Reforms: Details Matter
Social Security’s current path is unsustainable. With average life spans increasing, the working-age population is not growing fast enough to support the growing number of retirees at current benefit levels and tax rates. Benefit cuts, revenue enhancements, or some combination could return the system to balance. The arithmetic is fairly straightforward, but impacts on workers and retirees depend crucially on design details. Using a microsimulation model, we show distributional effects of illustrative benefit-cut and revenue-enhancement options on retirees. Results show that impacts differ greatly for workers in different generations and age groups and with different lifetime earnings. (Fact Sheet)

For more analysis of Social Security Reform, see our Social Security Reform page.

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