1. The Super Committee and Social Security: Should the Bowles-Simpson Proposals Be on The Table?
Comments by
Wilhelmina A. Leigh
Senior Research Associate
Joint Center for Political and Economic Studies
16 September 2011
Rayburn House Office Building

2. Should the Bowles-Simpson Proposals Be On The Table?
No, not all of them
If the Bowles-Simpson proposals were revised so that the proportion of the 75- year shortfall to be eliminated by increasing revenue were to exceed the proportion to be eliminated by reducing benefits, then the entire package of proposals should be on the table.
Joint Center for Political and Economic
Studies

3. Percent of Shortfall Eliminated Method of Elimination of Shortfall
Bowles-Simpson: Percent of Shortfall Eliminated by Method of Elimination
Percent of Shortfall Eliminated
Method of Elimination of Shortfall
63 percent
Net benefit reductions (changing method of calculating COLA, increasing age eligibility thresholds, and modifying benefit formula)
30 percent
Lifting cap on taxable payroll
7 percent
Extending coverage to newly hired state and local government employees
Reno and Walker, How Would Seniors Fare—by Age, Gender, Race and Ethnicity, and Income—Under the Bowles-Simpson Social Security Proposals by 2070? Social Security Brief No. 38, NASI, September 2011
Joint Center for Political and Economic
Studies

4. Why Do I Answer As I Do?
Social Security benefits are an essential source of support for retirees.
Thus, reducing benefits would impoverish many future retirees.
In particular, reducing benefits by raising the age eligibility thresholds would disproportionately disadvantage some subpopulations.
Joint Center for Political and Economic
Studies

5. Social Security Benefits Are An Essential Source of Support for Retirees
Percent of Income from Social Security Benefits Among Retiree Households Ages 65+ (2008)
SSA, Income of the Population 55 or Older, 2008, Table 9.A3 at
Joint Center for Political and Economic Studies

6. Reducing Benefit Levels Would Impoverish Many Future Retirees
Average Monthly Retiree Benefit Payments, by Race (2009)
SSA, Annual Statistical Supplement 2010, Table 5.A6 at
Joint Center for Political and Economic Studies

7. Life Expectancy at Birth, by Race and Gender
68.3
68.0
CDC, NCHS, Health, United States, 2010, Table 22 at
Joint Center for Political and Economic
Studies

8. Under Bowles- Simpson Proposals Retiree Benefits Would Be Reduced Notably by 2070
Example: African-American Males
Amount of Projected Benefit Cut for African Americans Under Bowles-Simpson Proposals (2070)
Percent of African Americans Projected to Receive Benefit Cuts Under Bowles-Simpson Proposals (2070)
Average Monthly Retiree Benefits Received by African-American Males (2009)
Average Monthly Retiree Benefits Received by African-American Males (2070)
10 percent or more
52 percent
$1,120.00
$1, or less
20 percent or more
28 percent
$ or less
Reno and Walker, How Would Seniors Fare—by Age, Gender, Race and Ethnicity, and Income—Under the Bowles-Simpson Social Security Proposals by 2070? Social Security Brief No. 38, NASI, September 2011
Joint Center for Political and Economic
Studies

9. … delete modifications to PIA formula that would reduce benefits
How Would I Revise Bowles-Simpson Proposals for Social Security Reform?
… delete modifications to PIA formula that would reduce benefits
… delete proposed COLA calculation change
… delete increase in age eligibility thresholds
… delete proposal to lift cap on taxable wages
Joint Center for Political and Economic
Studies

10. How Would I Revise* Bowles-Simpson Proposals for Social Security Reform? (cont’d)
Add proposal: eliminate cap on taxable earnings and count all earnings toward benefits, but using a much flatter formula
Add proposal: treat all salary reduction plans as if they were 401(k) plans (i.e., tax them for Social Security and Medicare)
* NB: Among the Bowles-Simpson Proposals, extending coverage to newly hired state and local government employees would be retained.
Joint Center for Political and Economic
Studies

11. How Would I Revise Bowles-Simpson Proposals for Social Security Reform
How Would I Revise Bowles-Simpson Proposals for Social Security Reform? (cont’d)
Suggested modifications on previous slides would generate more than enough revenue to cover the projected 75-year shortfall.
Reno and Lavery, Fixing Social Security: Adequate Benefits, Adequate Financing NASI, October 2009
Joint Center for Political and Economic
Studies

12. How Would I Revise Bowles-Simpson Proposals for Social Security Reform
How Would I Revise Bowles-Simpson Proposals for Social Security Reform? (cont’d)
Revenue generated in excess of 75-year shortfall by suggested revisions could be used for purposes such as:
… those included in Bowles-Simpson proposals (new special minimum benefit, and 5% increase in benefits for long-term recipients)
… and/or alternatives (e.g., paying widowed spouses 75% of the couple’s prior worker benefits, and reinstating student benefit beyond ages of 18 or 19
Joint Center for Political and Economic
Studies