Reach for the Low-Hanging Fruit
November 16, 2010
According to the Congressional Budget Office's alternative scenario (the one that makes realistic assumptions about future policies), by 2050 the national debt will reach 344 percent of the economy with entitlements consuming two-thirds of noninterest spending. While Medicare and Medicaid require some intricate work to reform, there are a few easy changes that could be done to Social Security, say Veronique de Rugy, a senior research fellow, and Jakina Debnam, a research associate, at the Mercatus Center at George Mason University.
This October, the Congressional Budget Office (CBO) released its Long-Term Projections for Social Security. The bottom line is that by 2014 Social Security will be broke.
For this reason, Social Security reform is needed now.
- Congress should cut benefits today for people who are 55 and younger -- those individuals still have plenty of time to adjust their expectations about future benefits and plan for retirement.
- Second, we should gradually raise the age of eligibility to at least 70 and progressively increase it to track with life expectancy -- life expectancy today is 78.8, but even with recent changes, the retirement age is far below that, averaging 66 for those born after 1943 and 67 for those born in 1960 and later.
- Third, we should allow these programs to be means tested so that only those who really need the help get it.
According to a recent CBO cost estimate measuring the potential budgetary impact of various Social Security reforms, the changes to the eligibility age suggested above would gradually decrease Social Security spending by 6 percent. An estimate of the budgetary effect of means testing the program found that it would decrease Social Security spending by an additional 6 percent. Taken together, these reforms would delay the trust fund exhaustion by 4 years, say de Rugy and Debnam.
Source: Veronique de Rugy & Jakina Debnam, "Reach for the Low-Hanging Fruit," Reason Magazine, November 12, 2010.
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