A Village consensus

No matter what plan emerges from the debt talks in Washington, future Social Security benefits will be trimmed back.

As Congress and the White House continue their dysfunctional dance toward financial Armageddon, the elusive, $4 trillion Grand Plan that would include Social Security and Medicare reform has fallen off the table.

But in the early stages of the budget battle, a series of proposals surfaced that provide some clues about what broad reform of Social Security might look like.

There’s widespread agreement that the program needs fixing. When first created in 1935, the earliest retirement age was 65, a year older than the average life expectancy. Today, beneficiaries can begin collecting at 62, and can be expected to live another 17 years.

Meanwhile, the base of support from workers paying into the system has shrunk dramatically. In 1950, there were 16 active workers paying for every retiree. Today the ratio is three to one, according to the National Committee on Fiscal Responsibility and Reform, the authors of the so-called Simpson-Bowles plan to cut the federal budget deficit.

This wouldn’t be the first time Congress enacted major changes to get Social Security back on track. In 1983, a series of tax increases and future benefit cuts extended the program’s financial lifespan. The full-benefit age was lifted from 65 to 67; a portion of benefits were subject to taxes; and cost of living adjustments were delayed by six months. The overall impact was to cut benefits for a current retiree by about 19 percent, according to the National Academy of Social Insurance

None of the current proposals envisions a cut in current benefits. But they all employ a mix of future cuts, taxes, and changes in the cost of living formula.