Social Security is the federal government's most important and possibly its most successful social insurance program. Not only has it largely achieved its purposes of enhancing income security for American workers and their families after their departure from the workforce, but also it has done so while sustaining strong if not unique political support.
Social Security's projected financing shortfall may be its most salient challenge, but it is by no means the only one. The program has grown to the point where its real-world effects in many ways run counter to its intended policy purposes and where its uncontrolled further growth will, without reform, reduce its effectiveness in supporting a coherent income security policy. Specifically, the program engages in many forms of income redistribution that are counterproductive, regressive, or both, and these effects are becoming more problematic as the program grows automatically under current law. Reforms to render Social Security more progressive and better targeted as income insurance can also have the effect of slowing program cost growth and strengthening its finances.
In October 2020, Charles Blahous published a comprehensive study on Social Security, illustrating the funding shortfall, providing rough estimates of the extent to which different provisions can close this shortfall, and allowing readers to consider for themselves how they would design a reform plan to shore up Social Security.
This study reviewed several of the specific policy challenges facing the Social Security program, explaining their origins in law, and described possible measures to address them. No single reform to Social Security can simultaneously achieve all the appropriate objectives of improving its financial condition, achieving a sustainable rate of cost growth, improving intergenerational equity, restoring incentives to work and save, and better targeting benefits on households of greatest need. A balanced package of reforms, however, can include individual provisions pursuant to these various objectives and in combination can advance all of them together.
Policymakers need not share the subjective value judgements of the author about how to improve and strengthen Social Security. But regardless of their own policy objectives, it is important for lawmakers to understand how individual Americans are affected by the Social Security program. Only if the various effects of Social Security described in Blahous's study are fully understood will lawmakers be able to craft a package of reforms that suits the needs and policy preferences of a bipartisan majority.