Wednesday, March 23, 2011

How to cut the Social Security deficit - The Washington Post

By Robert Pozen

Liberals should not be fighting Social Security reform — they ought to be leading the charge for change, for a simple reason: The program is no longer progressive. Contrary to popular opinion, the structure of federal retirement programs today favors middle and high earners over less well-off retirees.

The notion of Social Security as progressive is based on the criterion of annual benefits received per dollar of contributions. By that measure, the program offers a more generous return to those who earn less and therefore contribute less.

But a more accurate measure of the program’s distributional impact is total lifetime benefits received by workers at different wage levels. By this standard, Social Security is not progressive because low-wage workers live on average a few years less than wealthier workers.
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