- Federal gov't's largest fiscal challenge is the aging populace - less workers to support more retirees #SocialSecurity
- Public policy should encourage working individuals to save more and retire later
- A strong growing #economy is the only way where #entitlement reform can avoid being a zero-sum game #incentives
Chairman Johnson, Ranking Member Becerra and Members of the Committee. Thank you for offering me the opportunity to testify with regard to Social Security's finances. My name is Andrew Biggs and I am a resident scholar at the American Enterprise Institute. The views I express today are my own and do not represent those of AEI or any other institution.
Elected officials and the American people face a daunting challenge. As the Congressional Budget Office has confirmed, over the next several decades the largest fiscal challenge facing the federal government is the aging of the population, which will drive up costs for Social Security, Medicare and Medicaid. In an aging society, smaller numbers of working-age individuals must be sufficiently productive to support ever-increasing numbers of retirees. If society can sufficiently increase economic output it is possible to support larger populations of retirees without reducing the standard of living of working age Americans. In short, a strong and growing economy is the only way in which entitlement reform can avoid being a zero-sum game between young and old.
When smaller numbers of workers must support larger numbers of retirees, public policy should encourage individuals to do three things:
- First, work more, meaning more hours of the week and more weeks of the year;
- Second, save more, meaning higher participation in an employer-sponsored retirement plan and increased contribution levels; and
- Third, retire later, meaning putting off retirement from 62, when most Americans currently claim Social Security benefits, until a later age.
If we improve the incentives for Americans with regard to work, saving and retirement ages, we can boost the economy and increase our capacity to finance the Social Security program,alongside the even more daunting challenges of Medicare and Medicaid. This context should inform our view of whether to address Social Security's financing challenges through increased taxes or reduced benefits.
Andrew G. Biggs is a resident scholar at AEI.