by: Dr. Lynn Reaser
The response from my class of MBA students was astounding. I asked how many of them thought that social security would be there when they retire and not a single one of them raised a hand. Skepticism is apparently only running in competition with fear.
The President is proposing a minor change in the way cost-of-living changes are made each year for social security benefits. He has called for using a “chain-weighted” measure of consumer prices instead of the consumer price index used today. This seemingly esoteric and technical change would be economically sound and fiscally prudent.
Most economists argue that a chain price index, by recognizing that consumers respond to changes in prices between product substitutes, better represents inflation. The change would reduce potential annual benefit increases by about 0.3%.
Other benefit modifications, including tying retirement ages to changes in longevity, increasing the average number of years to calculate the earnings base, indexing that base to prices rather than wages, and means testing benefits (paying lesser benefits to wealthier individuals), should be considered. Making a number of relatively small adjustments and phasing them in over time could help social security remain solvent. This is critical to helping avoid bankrupting the country or imposing oppressive tax increases on working families, while insuring that social security survives for the next generation.
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