Two major budget plans issued in recent weeks would affect Social Security along with other federal spending and revenues. The President’s fiscal commission is weighing the draft recommendations of co-chairs Alan Simpson and Erskine Bowles; the panel convened by the Bipartisan Policy Center — led by Pete Domenici and Alice Rivlin — has issued its final report. Though far from perfect, the Domenici-Rivlin plan’s Social Security proposals represent a much more balanced and better-targeted mix of benefit cuts and revenue increases. Both plans would achieve “sustainable solvency” in the program, according to the Social Security actuaries. And some of the plans’ provisions overlap. Both plans would:
Both plans would also gradually extend coverage to the roughly 30 percent of state and local government employees who don’t participate in Social Security. As CBPP has explained , the Bowles-Simpson plan’s Social Security recommendations are highly lopsided. Two-thirds of the Social Security savings over the first 75 years come from benefit reductions rather than revenue increases; by the 75th year, four-fifths of the savings come from benefit reductions. As a result, the plan’s benefit reductions for people with modest incomes are much too deep. The Domenici-Rivlin plan contains extensive benefit reductions as well, but the reductions are not as deep. That’s because the plan would significantly broaden the base for the Social Security payroll tax.
Because of these revenue measures, the Domenici-Rivlin package doesn’t need to cut benefits as sharply as the Simpson-Bowles plan. Domenici-Rivlin gets roughly half of its savings in Social Security from increased revenues and half from benefit reductions.