The Brookings Institution recently released its Social Security plan, which aims to address the program’s unsustainable finances through a mix of tax increases, benefit reductions, and expanded coverage. However, the plan falls short in several areas, relying too heavily on tax hikes and failing to address the core problem of excessive spending growth.
To strengthen the program’s finances, lawmakers should focus on reducing excessive benefits for wealthier retirees and lowering future worker tax burdens by protecting vulnerable seniors while enabling more Americans to save to achieve personal financial security. The plan also fails to index the eligibility age to future life expectancy gains, a policy adopted by many OECD nations.
Instead of raising taxes on younger workers to sustain increases in already excessive benefits, Congress should consider downsizing Social Security to reduce its drag on the federal budget and the economy. A more effective approach would be to align the program’s eligibility age with improvements in life expectancy and change benefit formulas to slow future benefit growth and eliminate further benefit increases for higher earners.
The Brookings plan proposes raising the payroll tax rate from 12.4 percent to 12.6 percent, but this is not a significant tax hike compared to other benefit reforms that could avoid burdening workers more. For example, adopting the chained CPI-U index could eliminate about three times more of the long-term shortfall than the proposed tax hike.
Ultimately, Congress should move beyond tweaks to the current outdated system and reimagine Social Security as an anti-poverty backstop, providing more predictable benefits to prevent old-age poverty. The Brookings plan’s failure to address these core issues makes it a less desirable solution for strengthening the program’s finances and ensuring its long-term sustainability.
Source: https://www.cato.org/blog/where-brookings-social-security-plan-falls-short