Social Security: What Now?

Abstract

Laurence Seidman is Chaplin Tyler Professor of Economics at the University of Delaware and the author of Funding Social Security: A Strategic Alternative (Cambridge University Press, 1999). He contends that even if nothing is done, Social Security will face a problem, not a crisis, after 2042: A 27 percent cut in the monthly benefit that would still leave the benefit after inflation larger than today's benefit. To avoid that 27 percent benefit cut after 2042, he offers three recommendations to be implemented as soon as possible: tax payroll above the Social Security ceiling; gradually reduce the replacement rate for high-income earners; and gradually raise the age of full benefits and the age of early retirement by one year. To achieve a bipartisan package, he recommends considering optional individual accounts provided seven conditions described in his article are met.