A Summary of Saving Social Security: A Balanced Approach

Abstract

This paper reviews the financial position of Social Security, presents a plan for saving it, and discusses why Social Security revenue should not be diverted into individual accounts. Our approach preserves the value of Social Security in providing a basic level of benefits for workers and their families that cannot be decimated by stock market crashes or inflation, and that lasts for the life of the beneficiary; it increases benefits for some particularly needy groups such as those who have worked at low pay over long careers and widows and widowers with low benefits; it eliminates the long-term deficit in Social Security without resorting to accounting gimmicks, thereby putting the program and the federal budget on a sounder financial footing. Our plan combines revenue increases and benefit reductions - the same approach taken for reaching a consensus in the last major Social Security reform in 1983.

Keywords: Social Security, actuarial balance, individual accounts

JEL Classification: H550