A New America Foundation proposal would cost 3.7 percent of GDP and crowd out the private saving that drives our economy.
"Expanded Social Security," a New America Foundation (NAF) policy white paper by Michael Lind, Joshua Freedman, Robert Hiltonsmith, and Steven Hill, argues for expanding Social Security by paying each retiree a flat annual benefit of $11,669 in addition to their traditional Social Security benefits. The idea is to provide the typical retiree with a guaranteed "replacement rate" of 60 percent of his pre-retirement earnings, with higher replacement rates for low earners. The supplement would cost around 3.7 percent of GDP. Added to Social Security's forecasted cost of 5.6 percent of GDP in 2035, total outlays would reach 9.3 percent of GDP.
I like anyone who is willing to look at Social Security reform, and I have some affinity for the simplicity and universality of flat benefits. But the NAF paper misses a few important factors in thinking about Social Security reform and the pros and cons of expanding the program. Some of these may seem obvious - for example, if we can't afford the entitlements we have now, where do we get almost 4 percent of GDP for a new expansion? - so I'll focus on two things they have not given due attention.
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