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Improving Social Security's Progressivity and Solvency With Hybrid Indexing

Jan 2004
Working Paper
By  Robert Pozen, Sylvester Schieber, John Shoven
Virtually everyone familiar with U.S. Social Security financing understands that the system cannot pay currently legislated benefits for more than another three or four decades without significant, probably politically unacceptable, tax increases. Some analysts predict that the cash crunch will come substantially sooner than that. Various ways to measure the financial inadequacy of the system are outlined in recent annual reports of the Social Security Trustees. However, all reasonable measures of the system’s finances lead to the same fundamental conclusion that the system’s benefits and revenue sources must be significantly rebalanced. The only issue is when the necessary policy changes should be imposed.