Revisiting My February Social Security Proposal in View of the Debt Ceiling Deal

Social Security Death Benefit

February Social Security proposal

For better or for worse, the President and leaders of Senate and House have agreed to a tentative deal on the debt ceiling. It looks likely that the Senate will pass the proposed compromise; prospects in the House are significantly murkier based on a combination of liberal Democrats and Tea Party Republicans opposing the agreement for different reasons. Additionally, Moody's has suggested that a credit rating downgrade is still possible even with the debt deal because of insufficient firm budget cuts.

Back in February, I proposed a five-step solution to stabilizing Social Security--a combination of raising the base of income which is subject to the present 6.2% rate; a gradual increasing of age to qualify to 70 (for babies born after 2020) for full benefits and a phase-in (for those born between 1981 and 2024) to age 63 for limited benefits. Finally, I proposed elimination of the $255 death benefit which I believe has an excessive administrative cost for the actual benefit received and limiting minimum/floor benefits to those with at least 80 covered quarters (20 working years).

I still believe in this proposal but would make the following adjustments on the base and minimum benefits parts: for the income base provision--because of the shaky economy, I would phase-in the base increase to $140,000 in 2013, $175,000 in 2015 and $200,000 in 2017 with indexing of the base starting in 2019. Additionally, I would reduce the rate to 6.0% in 2015--this should provide some limited economic stimulus. On the minimum benefit side, I would also phase this in as follows: 48 quarters starting with those retiring in 2013, 56 quarters in 2015, 64 quarters in 2017, 72 quarters in 2019 and 80 quarters in 2021. This would give potential recipients who are 45 and older a longer time to plan and work toward getting the necessary number of covered quarters. Admittedly, these adjustments also reduce the level of stabilization accomplished by this plan; nevertheless, even this revised plan should significantly improve the long-term stability of Social Security over the present state.