As I mentioned yesterday, I think the case for cutting Social Security is extremely weak. In part that’s because I think it’s just a bit conceptually confused—if you think about Social Security spending and Medicare spending as a single block that you want to cut by $X, I can’t think of any problem that’s solved by allocating a large share of X to Social Security as opposed to Medicare. The other thing is that, as suggested by Dylan Matthews yesterday, there’s a very straightforward solution:
While all proposals put a dent in the shortfall, completely eliminating the cap without increasing benefits actually creates a long-term surplus, and eliminating the cap while increasing benefits comes close. The nature of Social Security as a social insurance, rather than welfare, program suggests that the latter proposal may be more palatable, as it retains the connection between what wage-earners pay into Social Security and what they get out of it.
Option three is a very reasonable response to the fact that over the past thirty years the share of national income accruing to very high income individuals has gone up dramatically. Since Social Security taxes the incomes of very high income individuals at a very low rate, this increase is driving a shortfall. If the government started using the C-CPI-U measure of inflation for the purposes of indexing tax brackets and cost of living adjustments, I believe the rest of the problem would go away, and I think there are perfectly good reasons to believe that C-CPI-U better-captures the relevant issue.