Social Security
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Jim Spaulding

The Century Foundation www.tcf.org
Meeting Social Security’s Long-Range shortfall
How we can cope---calmly---with a readily manageable challenge
By Robert M. Ball,   The Century Foundation, 9/5/2006

(Updated to include numbers from 2006 Report of Social
Security’s Trustees)

Longtime Social Security Commissioner Robert M. Ball has
developed a comprehensive plan to resolve the program’s
projected financial shortfall through a simple combination of
revenue of revenue increases and cost reductions.  
Demonstrating that there is little merit to claims that the
program is in crisis and requires surgery.  Ball’s plan would put
Social Security on a firm financial booting for the next 75 years
and beyond.  And unlike proposals which would reduce
guaranteed benefits over time.  Ball’s relatively painless reforms
would preserve Social Security’s vital role in Americans’
retirement security for generations to come.

Avoiding unpopular fixes such as raising the retirement age or
taxing all income, Ball’s plan would:
•        Gradually raise the cap on earnings covered by Social
Security so that once again 90 percent of all income would be
taxed and counted for benefits.  This was the threshold set by
Congress in 1983, the last time it considered this issue.  Social
Security taxes are now being applied to only 83 percent of
earnings.  By very slowly phasing in the change, the impact on
the 6 percent of affected workers would be relatively modest.
•        Dedicate future proceeds of revised estate tax to Social
Security beginning in 2010.  Present law gradually reduces the
estate tax so the by 2009, only extates above $3.5 million ($7
million per couple) will be taxed.  The tax should be frozen at
that level, with the revenues directed towards Social Security.
•        Improve the return on Social Security funds by investing
part of them in equities, as just about all other public and private
pension plans do.  Other government retirement systems such
as ones for employees of the Federal Reserve Board, the
Federal Railroad Retirement Board, and the Tennessee Valley
Authority also invest directly in stocks.

Together, these three adjustments---each desirable in itself---
would eliminate the 75-year projected shortfall.  But Ball details
two other desirable small adjustments that cold contribute to a
Social Security surplus.  First, adopt the more accurate
consumer price index recently develpled by the Bureau of Labor
Statistics (the so-call “chained” index), and, second, cover all
new state and local employee under Social Security.  With these
additional adjustments, most people who work would be under
Social Security and the system would generate a small surplus
over the 75 year planning horizon, even using the cautious
intermediate cost projections.

This brief should not be construed as reflecting the views of The
Century Foundation or The Retired Public Employees
Association or as an attempt to aid of binder the passage of any
bill before Congress.