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Sunday, June 12, 2005

Indexing Social Security for Longevity

Republicans met behind close doors to discuss the issue, Democrats such as Joe Lieberman have indicated support for the proposal, Bruce Bartlett of the NRO is pushing it, Columnist Robert Samuelson is certainly behind it, Greenspan is on board, Gramlich is with Greenspan, other Democrats have indicated it’s on the table as soon as private accounts are off. I’ve discussed the costs and benefits of the proposal here.

The issue is raising the retirement age. Dressed up in its new fancy name of longevity indexing, it’s the latest trial balloon - but if the polls are to be believed - this balloon won’t float for long:

In Overhaul of Social Security, Age Is the Elephant in the Room, By Robin Toner and David E. Rosenbaum, NY Times: … the House and Senate, struggling to produce Social Security legislation this summer, are beginning to confront the longevity issue.... But of all the options to shore up Social Security's finances, [raising the retirement age] ranks as one of the most unpopular ... In a New York Times/CBS News Poll ... nearly 8 out of 10 respondents ... oppose raising the age when people are eligible for Social Security benefits. … One way to address the problem - and the direction some lawmakers seem to be heading in - is an automatic adjustment in the retirement age or the benefits received at each age to reflect increases in life expectancy. … For individuals, such a change, called indexing for longevity, would be little different from a direct increase in the retirement age or a specified reduction in benefits … But for the system … it would make a big difference because the changes would be automatic and would not require new laws. It might also be politically attractive because politicians would be relieved of the responsibility of periodically voting to raise the retirement age or to cut benefits. Adjusting the system for longevity would not contribute much to solving Social Security's solvency problem over the next 30 years or so … But over 75 years and longer, he said, it would have an important effect. Still, pollsters question whether even a gradual adjustment based on life expectancy will sell. "You can call it indexing for longevity in Washington, but in America it's raising the retirement age," said Mr. Garin, the Democratic pollster. Mr. Bolger, his Republican counterpart, said, "There's no appetite for anything related to age among the public."

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