There's No Shortage of Bad Ideas on Social Security

Even that huge tax increase wouldn’t balance the program’s finances over the long run, according to the Congressional Budget Office. It would do even less to achieve balance if some of the money were spent on higher benefits, as Senate Democrats want; and less still if, as would be likely, the tax increases suppressed economic activity. And a possible source of revenue to rescue Medicare from insolvency would have been taken off the table. 

Republicans, too, have some bad ideas about Social Security. New Jersey Governor Chris Christie has suggested gradually ending benefits for retirees with incomes of $80,000 to $200,000. He’s right to favor lower benefits for affluent people, but this is the wrong way to go about it. 

The kind of means-testing Christie is proposing would discourage people from saving for retirement, or working in retirement, when we should be encouraging both. But we can avoid this problem by basing means-testing on lifetime income, which Social Security already uses to calculate benefits. Future retirees who had high incomes over the course of their working lives should get lower benefits than similarly situated retirees today. At the very least, they should not get the much higher benefits that the system currently promises them. With that reform in place, the system could save money without imposing serious hardship or discouraging people from saving and working.  

Ideally we would move toward a better system that guaranteed all senior citizens a decent floor of income — something Social Security does not do — while expanding people’s ability to use their own savings to finance retirement above that floor. (More on that here.) But we won’t get that system if we listen to reflexive attacks on benefit cuts, or if we indulge the fantasy that we can pay for everything Social Security has promised, and more, with sky-high taxes on the rich.