Idea: Peg Social Security To Productivity

The government might be able to improve the solvency of Social Security and increase benefits payments by basing future growth partly on changes in productivity.

John Sabelhaus and Julie Topoleski, researchers in the Congressional Budget Office, make that suggestion in a new CBO working paper.

The problem with the current reform strategy, which would respond to increases in retirees’ life expectancy by sharply decreasing benefits payments, is that there is still a high probability that Social Security could become insolvent and an equal probability that the program could be too stingy and end up accumulating too much cash, the researchers write.

If officials tied Social Security payments at least partly to productivity, then payments could rise faster than inflation when productivity growth was higher than expected without hurting program solvency, the researchers write.