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[quote=Anonymous][quote=Anonymous]OP here. Does anyone know how high up the income ladder we need to move the cap to keep the program solvent for the next 75 years? An increase to $200k would be around an extra $5000  - manageable at that level, and perhaps it could even be viewed  as a wise " investment"' to ensure the program is solvent when it's time to claim. (The other "half" would have to be paid by the employer, but again, not a deal-killer at that level.)

While I like the idea of raising the cap, for political purposes it would be easier to get through if changes are seen as a "shared burden." How high would the cap have to be raised if we ALSO moved the retirement age up by one year, gradually over time?

I ask because we seem to have some very knowledgeable people responding. Anyone know the numbers?

[/quote]

Hi Op, this is the PP from last night. Your questions are good ones. The answers will feed into any political compromise about Social Security, including the one I mentioned earlier this am about deciding at what level to set benefit levels under Social Security as a pay-as-you-go first-tier benefit. There seems to be a growing consensus around that one. Two guys from Heritage (very right) and Brookings (middle-of-the-road/left) collaborated on inventing the auto-IRA (personal savings) tier. Obviously conservatives would like a lower first tier SS system, but at this point I only know of a few conservatives, and these guys are really out there on the right, who are still saying publicly that it's a good idea to do away with a first-tier guaranteed, inflation-indexed SS benefit completely. Most conservatives get that asking their housekeepers to save the necessary 15% out of their incomes just isn't going to happen, politically or realistically, and so we need SS's progressive structure to give low-income workers a solid base for retirement. Liberals are happily working away on the 2nd tier personal savings (auto-IRA) part. Really there does seem to be room for consensus here.

So yes, your questions will be important in establishing a solid first tier of SS benefits. Here are some thoughts. I have to run off soon, but this should get you started.

1. You're correct that a balance of benefit cuts and tax increases would be more politically realistic. In fact, balance between tax increases and benefit cuts was the stated goal of Reagan's Greenspan commission in the early 1980s.
2. You're correct that raising the retirement age is effectively a benefit cut. As you probably know, but others may not, there's a reduction to monthly benefit amounts if you claim your benefits before your early retirement age. If you raise everybody's retirement age, then somebody who still claims at a given age (62, 63 or whenever) gets an even bigger cut than they do today.
3. An issue with raising the retirement age, as some have mentioned, is that some workers who do hard labor can't keep working past 62. It's not going to work to ask people to do construction work or lift heavy things at age 63. So you need a plan to protect these people, and that's going to cost money. So far nobody has come up with a good solution for identifying who needs to be protected or how to help them.
4. Re raising the income cap, many shy away from completely eliminating the cap, for political reasons. Instead, most proposals would raise the cap to cover 90% of national aggregate wages (long story, but historically the cap covered 90% but growing income inequality has changed that). Or, some proposals would do a donut as somebody mentioned. Or, some proposals would tax all wages/salaries above the current cap, but they'd only tax the higher wages/salaries at 3%. As an aside, I didn't totally follow the response that said the increase would be more than $5K, but to the extent that person said that workers generally absorb any payroll tax increases in the form of lower wages, that's true.
5. Also re raising the income cap, many proposals would pay more benefits to those who have to contribute more because they're above the current cap. It's a tough call. Do we want to pay Bill Gates more benefits? On the other hand, for a lot of people earning somewhat less above $118,000, paying more benefits seems a reasonable compromise.

Some of the links I gave you go through these issues in more detail.

OK, on to solvency estimates. That will be my next post.[/quote]

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