Abstract
This article explores policy alternatives that can bring Social Security (OASDI) into long-term balance. The alternatives conform to long-standing principles that benefits are: an earned right, related to pay and time in the workforce, not based primarily on need; and related to annual changes in the cost of living. Furthermore, the OASDI is self-financed, employers and employees contribute equally, and participation is compulsory. In order to maintain public support, the policy alternatives also spread the "pain" of change between workers and beneficiaries, maintain income replacement rates for low-income earners, and retain a positive correlation between taxes and benefits. The article discusses varying four policy parameters to balance the funds: the primary insurance amount, the cost-of-living adjustment; the normal retirement age; and the payroll tax rate. Only by changing several policy parameters can all the objectives be satisfied. Discussed in detail are three scenarios, each of which includes a COLA cut and a pay-as-you-go FICA tax rate.
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