Mandatory Spending
Function 650 - Social Security
Change Cost-of-Living Adjustments for Social Security
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.
The Social Security system’s ability to pay full benefits in the future will depend on depend on whether there are positive balances in the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund. If current laws remain generally in place, outlays for the program will outstrip revenues and the trust funds are projected to be exhausted by 2029.
CBO analyzed four policy options that would change would change spending for Social Security by altering its formula for setting cost-of-living adjustments (COLAs):
- Base COLAs on the chained consumer price index for all urban consumers (CPI-U)
- Base COLAs on the chained CPI-U and increase benefits 20 years after initial eligibility
- Base COLAs on the consumer price index for the elderly
- Reduce COLAs for people with higher primary insurance amounts