American Enterprise Institute economist Alex Brill's testified yesterday before the Senate Finance Committee.
In his testimony, titled "An Incremental Approach to Social Security Reform," Brill offers a blueprint for "meaningful, incremental change to strengthen Social Security" and reduce the long-term fiscal burden on the budget. Brill's blueprint includes the following changes:
1. Raise both the normal retirement age and the early retirement age. Raising the early eligibility age from 62 to 65, while only having a modest impact on the trust fund insolvency date by pushing it back about five years, would promote labor market participation and, as estimated by AEI scholar Andrew Biggs, would increase GDP by about 5 percent.
2. Modify the benefit formula to slow future benefit growth by reducing the benefits that higher earners receive.
3. Adopt a chain-weighted consumer price index as a substitute for the annual Social Security cost of living adjustment. A chain-weighted index reflects both the change in prices over time and the shift in consumption as various products' relative prices change. It is estimated that this change would eliminate about one-sixth of the financing gap over the course of 75 years.
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