One type of Social Security adjustment could cut the 75-year shortfall in half - Fox Business

What the report says

Fox Business reported that a proposed change to Social Security’s annual cost-of-living adjustment could significantly reduce the program’s long-term financing gap, according to analysis cited by the Committee for a Responsible Federal Budget. The idea, described as a flat-rate COLA, would give beneficiaries the same dollar increase each year rather than raising payments by the same percentage across all benefit levels.

The proposal examined by CRFB and Urban Institute analyst Karen Smith would set the flat COLA at the amount received by beneficiaries around either the 20th or 30th percentile of the benefit distribution. Fox Business reported that the 20th-percentile version would close about half of Social Security’s 75-year shortfall, while the 30th-percentile version would close roughly 40%. The approach would slow benefit growth more for higher earners while having smaller effects, or in some cases increases, for lower-income retirees.

Fox Business noted that the concept resembles a plan advanced in 1987 by former Rep. Tim Penny, now a CRFB co-chair. CRFB estimated that if such a policy had been adopted then, it could have kept Social Security solvent for decades longer, highlighting the budgetary effect of delaying changes. Today, the same approach would reportedly postpone insolvency of the main trust funds by only about two years unless paired with other reforms.

The issue matters because Social Security’s trust funds are projected to be depleted in 2032 under current estimates, at which point benefits would face automatic cuts unless Congress acts. CRFB President Maya MacGuineas told Fox Business that policymakers still have multiple options, but waiting narrows the choices available to avoid abrupt reductions.