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Treasury Issues Fifth Issue Brief on Social Security Reform

The U.S. Treasury has issued an issue brief on Social Security reform, the fifth in a series. The fundamental reason Social Security must be reformed is that scheduled benefits under current law exceed the future revenues that the system is projected to take in. This brief discusses the possible role that progressive reductions in scheduled benefits would play in Social Security reform. A progressive reduction in scheduled benefits would have high earners bear a relatively larger share of the burden of the adjustments needed to make Social Security permanently solvent, while workers with low earnings would be relatively shielded from the impact of benefit reductions. Under such a change, the reduction in scheduled benefits expressed as a share of wages while working would be higher for high-wage workers than it is for low-wage workers. While there is considerable disagreement about the precise nature and timing of the reforms that will ultimately make Social Security solvent, there is broad agreement that progressive benefit adjustments will be a key component of those reforms. Indeed, most proposed reforms to move Social Security toward permanent solvency call for benefit changes of this type.

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