EBRI: Soc. Sec. Cutbacks Won't Push Scores of Americans into Poverty

June 13, 2006 (PLANSPONSOR.com) - Lawmakers could cut Americans' Social Security benefits without pushing large numbers of beneficiaries below the poverty line, a new research report has concluded.

A news release from the Employee Benefit Research Institute (EBRI) said researchers asserted that future political debate will concentrate on more than just how to bring the Social Security fund back into balance.

“Consequently, some cuts in the projected (Social Security) benefits could occur while still leaving the proportion of beneficiaries with benefits below poverty at the same level or at a lower level,” researchers wrote.” The political discussion is likely to be not just about cutting benefits, but also at what benefit level a cut is acceptable and what magnitude of a cut above that level is acceptable.”

After studying the financial effects of four proposed Social Security benefits changes, EBRI reported that extent and effects of across-the-board benefits cuts are different for each of the four scenarios:

  • a gradual reduction in benefits (GRB),
  • an increase in the normal retirement age (INRA),
  • aprogressive price indexing scheme (PPI), and
  • a combination of the progressive price indexing scheme and an increase in the normal retirementage (PPI/INRA).

“The most significant result of this study is that an across-the-board cut in benefits (such as those under GRB) clearly has a significantly different distributional effect than that under PPI,” the study said. “While the PPI/INRA alternative improves the financial soundness of the Social Security program by an amount similar to the projected elimination of the funding deficit under GRB, PPI/INRA obtains most of its savings from cuts in benefits to beneficiaries whose benefits are 125% of poverty.”

The study also examines the effects of Social Security benefit changes on five groups:

  • those about to retire,
  • those who are middle-aged,
  • those not yet born,
  • workers across birth years, and
  • workers starting out.

The research report is here .