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The Regressive Impact of the Progressive Indexation of Social Security Benefits
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Dean Baker,
Center for Economic and Policy Research,
5/1/2005
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This paper examines the distributional impact of the formula for the progressive price indexation of Social Security benefits that President Bush endorsed in his April 28 press conference. This formula would not change the current indexation of benefits for the bottom 30 percent of wage earners, but would change the basis of indexation for the highest wage earners from wages to prices, thereby holding the real value of Social
Security benefits for maximum wage earners (those earning $90,000 or more a year in 2005) constant through time. Workers who are above the 30 percent cut off would see their benefits rise somewhere between the rate of wage growth and price growth.
While this schedule of benefit cuts is supposed to be progressive, the calculations in this paper show that middle--income earners would see large and growing benefit cuts (measured against currently scheduled benefits) under this formula.
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Link to Issue Brief (PDF)
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Pages: 14
Price: Free
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Center for Economic and Policy Research
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