Mandatory Spending

Function 650 - Social Security

Establish a Uniform Social Security Benefit

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of dollars		2025	2026	2027	2028	2029	2030	2031	2032	2033	2034	2025– 2029	2025– 2034
Change in outlays
	Set Social Security benefits to 150 percent of the federal poverty guidelines	0	-1	-4	-8	-14	-22	-34	-50	-65	-85	-27	-283
	Set Social Security benefits to 125 percent of the federal poverty guidelines	0	-3	-10	-21	-35	-52	-75	-106	-135	-170	-69	-607

This option would take effect in January 2026.

Estimates displayed in this table include budgetary effects for Social Security benefits; that spending is classified as off-budget.

Initial Social Security benefits for retired and disabled workers are based on their average lifetime earnings, which are adjusted for changes in economywide wages. A progressive formula is then applied to that average amount, which means that benefits replace a higher percentage of earnings for workers with lower earnings than for workers with higher earnings. However, benefits are still higher for workers with higher earnings than for workers with lower earnings.

For retired worker beneficiaries, initial benefits are also adjusted depending on the age at which a recipient chooses to start claiming them relative to the full retirement age (FRA). (The FRA varies by the year of birth of the worker and is 67 for workers who turn 62 in 2022 or later.) People who claim benefits before their FRA receive a smaller initial benefit, and people who claim after their FRA up to age 70 receive a larger initial benefit.

This option consists of two alternatives. Under both alternatives, Social Security benefits for all newly eligible beneficiaries at their FRA would be the same in any given year—an amount that would be determined relative to the federal poverty guidelines (commonly known as the federal poverty level, or FPL) for a single person. The FPL is adjusted annually using the consumer price index for all urban consumers (CPI-U).

Under the first alternative, the benefit amount would be same for all beneficiaries, set to 150 percent of the FPL, which would equal about $1,990 per month in calendar year 2026. In 2026, about one-third of newly eligible beneficiaries would receive higher benefits than under current law and about two-thirds would receive lower benefits. Under the second alternative, the uniform benefit amount would be set to 125 percent of the FPL, equaling about $1,660 per month in calendar year 2026. That year, about one-quarter of newly eligible beneficiaries would receive higher benefits and about three-quarters would receive lower benefits.

For both alternatives, eligibility criteria for Social Security benefits and adjustments to benefit levels for early and delayed claiming would remain unchanged from current law, and all retired and disabled workers would be eligible for the same dollar amount of benefit upon entitlement. Additionally, both alternatives would provide benefits to dependents and survivors as under current law.

Information about the long-term and distributional effects of this option appear in the following tables.

Table A-7. Long-Term Effects on Social Security's Finances of the First Alternative
Percent
		Under current law	Change from current law
Spending, as a percentage of GDP
	Calendar year 2054	5.9	-1.5
	Calendar year 2098	6.7	-3.7
The 75-year actuarial balance for the combined OASDI trust funds^a
	As a percentage of GDP	-1.5	1.7
	As a percentage of taxable payroll	-4.3	4.9
The exhaustion year for the balance of the combined OASDI trust funds (fiscal year)		2034	1^b

GDP = gross domestic product; OASDI = Old-Age, Survivors, and Disability Insurance.

Under this alternative, Social Security benefits would be set to 150 percent of the federal poverty guidelines.

The estimates displayed in this table assume that benefits will be paid as scheduled under the Social Security Act, regardless of the balances in the trust funds.

a. The actuarial balance is the sum of the present value of projected income and the current trust fund balance, minus the sum of the present value of projected outlays and a year's worth of benefits at the end of the period. For Social Security, that balance is traditionally presented as a percentage of the present value of GDP or of taxable payroll over 75 years. (A present-value estimate translates a flow of current and future income or payments into an equivalent lump-sum value today.)

b. Under this alternative, the balance of the combined trust funds would be exhausted in calendar year 2035, one year later than the projected exhaustion date under current law. However, under this alternative, the trust funds' income would rise above the scheduled benefits later in the projection period. If scheduled benefits were paid in full throughout the period, as assumed for this analysis, and the trust funds operated with temporarily negative balances, the annual surpluses later in the projection period would result in a positive trust fund balance again in the 2080s.

Table A-8. Distributional Effects of the First Alternative
	Under current law			Change from current law^a
Lifetime household earnings quintile^b	Birth year 1960–1969	Birth year 1970–1979	Birth year 1980–1989	Birth year 1960–1969	Birth year 1970–1979	Birth year 1980–1989
	Average annual benefits for retired workers if they claimed benefits at age 65^c
	(thousands of 2024 dollars)			(percent)
Lowest	12	13	14	35	52	42
Middle	23	24	26	-11	-21	-26
Highest	32	35	39	-25	-46	-51
	Average lifetime benefits relative to average lifetime earnings for beneficiaries (percent)^d
Lowest	31	32	31	18	36	34
Middle	17	18	18	-7	-17	-23
Highest	8	7	7	-24	-46	-51
	Ratio of average Social Security benefits to average payroll taxes over beneficiaries' lifetime^e
Lowest	2.6	2.7	2.5	18	36	34
Middle	1.4	1.5	1.5	-7	-17	-23
Highest	1.0	1.0	0.9	-24	-46	-51

Under this alternative, Social Security benefits would be set to 150 percent of the federal poverty guidelines.

The estimates displayed in this table assume that benefits will be paid as scheduled under the Social Security Act, regardless of the balances in the trust funds.

a. Effects are measured as a percentage change from the current-law value. For example, under current law, the average lifetime benefits for low earners born in the 1960s will be 31 percent of lifetime earnings. The 6 percentage-point increase in that ratio—from 31 percent to 37 percent—is expressed as an 18 percent increase in this table.

b. The lowest, middle, and highest fifths of people within a 10-year birth cohort ranked by lifetime household earnings. For someone who is single in all years, lifetime household earnings equal the present value of inflation-adjusted earnings over that person's lifetime. In any year in which a person is married, lifetime household earnings equal the average of the couple's earnings, adjusted for economies of scale in household consumption.

c. CBO projected the benefit amounts that retired workers would receive in their first year of receiving such benefits if they began claiming them at age 65. To remove the effects of inflation on those benefits, CBO used the price index for all goods and services that make up gross domestic product. The agency computed those benefits for all people who are eligible to claim retirement benefits at age 62 and who have not yet claimed any other Social Security benefits. All amounts are net of income taxes paid on benefits.

d. Lifetime benefits include the present value of all Social Security benefits except those received by young widows, young spouses, and children, which are excluded from this measure because of insufficient data for years before 1984. To calculate present value, CBO adjusted the amounts to remove the effects of inflation and discounted the amounts to age 65. (A present-value estimate translates a flow of current and future income or payments into an equivalent lump-sum value today.)

e. Lifetime payroll taxes consist of the present value of the employer's and employee's shares of Social Security payroll taxes. To calculate present value, CBO adjusted the amounts to remove the effects of inflation and discounted the amounts to age 65.

Table A-9. Long-Term Effects on Social Security's Finances of the Second Alternative
Percent
		Under current law	Change from current law
Spending, as a percentage of GDP
	Calendar year 2054	5.9	-2.1
	Calendar year 2098	6.7	-4.3
The 75-year actuarial balance for the combined OASDI trust funds^a
	As a percentage of GDP	-1.5	2.2
	As a percentage of taxable payroll	-4.3	6.4
The exhaustion year for the balance of the combined OASDI trust funds (fiscal year)		2034	2^b

GDP = gross domestic product; OASDI = Old-Age, Survivors, and Disability Insurance.

Under this alternative, Social Security benefits would be set to 125 percent of the federal poverty guidelines.

The estimates displayed in this table assume that benefits will be paid as scheduled under the Social Security Act, regardless of the balances in the trust funds.

b. Under this alternative, the balance of the combined trust funds would be exhausted in calendar year 2036, two years later than the projected exhaustion date under current law. However, under this alternative, the trust funds' income would rise above the scheduled benefits later in the projection period. If scheduled benefits were paid in full throughout the period, as assumed for this analysis, and the trust funds operated with temporarily negative balances, the annual surpluses later in the projection period would result in a positive trust fund balance again in the 2050s.

Table A-10. Distributional Effects of the Second Alternative
	Under current law			Change from current law^a
Lifetime household earnings quintile^b	Birth year 1960–1969	Birth year 1970–1979	Birth year 1980–1989	Birth year 1960–1969	Birth year 1970–1979	Birth year 1980–1989
	Average annual benefits for retired workers if they claimed benefits at age 65^c
	(thousands of 2024 dollars)			(percent)
Lowest	12	13	14	19	27	18
Middle	23	24	26	-19	-34	-38
Highest	32	35	39	-31	-55	-59
	Average lifetime benefits relative to average lifetime earnings for beneficiaries (percent)^d
Lowest	31	32	31	10	19	15
Middle	17	18	18	-13	-29	-34
Highest	8	7	7	-29	-53	-58
	Ratio of average Social Security benefits to average payroll taxes over beneficiaries' lifetime^e
Lowest	2.6	2.7	2.5	10	19	15
Middle	1.4	1.5	1.5	-13	-29	-34
Highest	1.0	1.0	0.9	-28	-54	-58

Under this alternative, Social Security benefits would be set to 125 percent of the federal poverty guidelines.

The estimates displayed in this table assume that benefits will be paid as scheduled under the Social Security Act, regardless of the balances in the trust funds.

a. Effects are measured as a percentage change from the current-law value. For example, under current law, the average lifetime benefits for low earners born in the 1960s will be 31 percent of lifetime earnings. The 3 percentage-point increase in that ratio—from 31 percent to 34 percent—is expressed as a 10 percent increase in this table.

Refine Results By

Mandatory Spending

Function 650 - Social Security

Establish a Uniform Social Security Benefit

Extended Discussion in Previous Volume