Monday, June 27, 2016

CRFB: Social Security Cost Growth Should Be Slowed, Not Accelerated

The Committee for a Responsible Federal Budget argues that policymakers should think about the opportunity costs of expanding Social Security – that is, all the other things they could do with the trillions of dollars required for a broad expansion of Social Security benefits.

Targeted benefit enhancements for Social Security recipients who need them most certainly should be considered in the context of a reform plan, and indeed they have been included in a number of bipartisan plans put forward in recent years.

But before advocating for broad expansions that would increase overall costs, policymakers must recognize that both costs and benefits are already growing rapidly. As recently as 2008, the program's costs consumed only 11.6 percent of payroll, well below the nearly 13 percent raised by the payroll tax and other sources. By 2035, that cost will grow to 16.6 percent according to the Social Security Trustees and almost 19 percent according to the Congressional Budget Office (CBO). Both the number of beneficiaries and benefit levels (as we discuss below) will grow significantly over time.

In light of the benefit growth under current law – which greatly outpaces the growth in available revenue – it is far from clear that further net increases are a wise use of scarce dollars, particularly since broad-based expansions can be quite costly. Democratic presidential candidate Senator Bernie Sanders's (I-VT) Social Security benefit expansions, as one example, would cost 1.3 to 1.4 percent of payroll once fully phased in, the equivalent of at least $1.2 trillion over ten years. For that cost, it would be possible to fully repeal the non-defense sequester, make college debt-free, double National Institutes of Health research funding, make community college free, establish universal pre-K, and fully fund the Highway Trust Fund.

Click here to read the whole article.

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