New CRS report discusses impact of SS reform proposals on elderly poor

Social Security Reform: Possible Effects on the Elderly Poor and Mitigation Options
April 04, 2008

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Summary:  SocialSecurity has significantly reduced elderly poverty. The elderly povertyrate has fallen from 35% in 1959 to an all-time low of 9% in 2006, inlarge part because of Social Security. If Social Security benefits didnot exist, an estimated 44% the elderly would be poor today assuming nochanges in behavior. The Supplemental Security Income (SSI) program,also provides benefits to the poorest elderly, many of whom do notqualify for Social Security benefits. However, despite these programs,about 3.4 million elderly individuals remained in poverty in 2006. TheSocial Security system faces a long-term financing problem. The SocialSecurity Trustees project cash-flow deficits beginning in 2017 andtrust fund insolvency in 2041. Many recent proposals to improve systemsolvency would reduce Social Security benefits in the future. Benefitreductions could affect the lowincome elderly, many of whom rely onSocial Security benefits for almost all of their income. Such potentialbenefit reductions could lead to higher rates of poverty among theelderly compared to those projected under the current benefit formula.Because the low-income elderly are especially vulnerable to benefitreductions, many recent Social Security reform proposals have includedminimum benefits or other provisions that would mitigate the effect ofbenefit cuts on the elderly poor. This report analyzes the projectedeffects of four possible approaches to mitigating the effects of SocialSecurity benefit reductions on elderly poverty in 2042, the first fullyear of projected trust fund insolvency. The options are compared to apayable baseline, which assumes current-law benefits would need to becut across the board to balance Social Security’s annual income andspending at the point of insolvency. The four options examined are (1)a poverty-line Social Security minimum benefit; (2) a sliding-scaleSocial Security minimum benefit; (3) a povertyline SSI benefit; and (4)a poverty-line SSI benefit with liberalized eligibility.