1983 Reform: Social Security Benefits Were Cut by 19 Percent

This is according to a report by AEI scholar, Andrew Biggs, who adds:

  • First, the 1983 reforms didn’t only reduce benefits; they also increased taxes, by covering newly hired federal workers and non-profit associations, accelerating tax increases already on the books, prohibiting state/local workers from leaving the system, and so on.
  • Second, while benefits in any given month will be lower in the future than they would have been under 1983 rules, that doesn’t mean they’d be lower in real terms.
  • Third, future retirees will live longer than those in the past did, so while they may receive somewhat lower replacement rates than in the past, they’ll collect them over longer retirements.

Comments (5)

Trackback URL | Comments RSS Feed

  1. Devon Herrick says:

    Social Security is the third rail of politics. But, had Congress made it clear back in the 1930s that yearly adjustments would have to be made, the send of entitlement might (possible) not be so great. Any adjustment (including something as simple as no cost of living raise in years without inflation) is enough to cause the senior lobby grief.

  2. John Polgar says:

    That’s a terrific “what if,” though. What if any Member of Congress tried to update Social Security based on what the 1930s parameter would be today? E.g., what is today’s age that corresponds to 65 when SS was first passed. My guess is it’s nearer 80. But what if? Talk about third rail!

  3. Kennedy says:

    Interesting. I was not aware that social security had ever been reformed in that manner.

  4. John R. Graham says:

    Mr. Biggs is actually criticizing the report in question, which is by three other authors at the National Academy of Social Insurance. And good thing too.

    The NASI authors advocate hiking taxes to increase benefits, asserting (after a fashion) that the 1983 reform cut Social Security to the bone. They do not take into account the losses that will come from the reduction in productivity improvements and, therefore, prosperity, that would occur as a consequence of further tax hikes.

  5. Greg says:

    If Congress did it once, it can do it again.