Long-Term Debt and Social Security Reform: Yes, There is a Relationship. - time.com/AESG
The mind-boggling gap between federal revenue and federal spending–pegged at $1.7 trillion for 2023–and the resultant nearly doubling of the year-over-year federal budget deficit is the subject of an analysis by University of Maryland professor Melissa Kearney and former U.S. Senator and OMB Director Rob Portman posted on time.com yesterday. Consistent with many similar analyses of the current financial struggles facing the U.S. economy in the years ahead, the post highlights the threats that forecasts of publicly-held federal debt rising above 100 percent of GDP pose for “the resiliency of the U.S. economy” and the potential negative effects on national priorities. Click here for the full post.
Included in the Kearney-Portman post is a summary of The Aspen Economic Strategy Group’s (AESG) creation of a “bipartisan forum of leading economic thinkers and doers—CEOs, academics, and policymakers—to address our nation’s ongoing pressing economic challenges.” The policy volume published via this initiative presents eight “forward actionable approaches” to address these formidable challenges, with one of the core ideas focusing on Social Security reform.
The Keaney’Portman post summarizes a November 8 AESG document developed by Stanford University professor Mark Duggan framing the current Social Security financial dilemma and putting forth a series of policy recommendations intended to “put the program back on a sustainable path and avoid imposing economic hardship on America’s older population.” Included in this document, which you can read in full here), are these suggested policy changes:
- A 1% increase in the payroll tax rate
- Increasing the maximum taxable earnings at a rate higher than the average annual wage growth, along with a relatively small tax assessment on earnings above the maximum
- Change the full retirement age from 67 to 68, without changing the reduction rate for those claiming benefits at ages 62 to 64
- Modify the benefit calculation formula to slow benefit growth for high-income retirees
- Allow the Social Security trust funds to cover shortfalls via borrowing from the U.S. Treasury.
As we’ve pointed out repeatedly on this website, there are many proposals and strategies emerging to address the evolving Social Security financial predicament. No doubt, the suggestions by Duggan will find their way into the mix when Congress focuses on the problem, hopefully sooner than later so that corrective measures can be undertaken without causing major disruptions in the program.