Social Security’s $2.4-trillion trust fund contains no real resources. It merely tracks past surpluses that the government spent for other purposes. Paying all benefits until the trust fund runs out in 2037 would require an extra $4.2 trillion, even as the rest of the budget is stretched to the breaking point.

Chapter Two: “A Political Fraud”

Social Security’s history over the past quarter-century reveals that today’s predicament of a worthless trust fund didn’t take anyone by surprise. In fact, many of the same Democrats who now treat the trust fund like money in the bank once fought to end the deceptive accumulation of trust fund reserves.

Chapter Three: The Price of Delay

Quantifying the cost of delayed action drives home the urgency of Social Security reform. For example, Social Security’s full 75-year cash flow gap could be closed now with extra revenue equal to 1% of GDP each year. But if we wait to act until the trust fund runs out, the budget gap tied to Social Security could average close to 3% of GDP.

Part II: No Easy Answers

Chapter Four: “A Bad Idea”

As even the Bush White House concluded, a leading conservative plan to privatize Social Security is “a bad idea.” As the enormous debt incurred under the plan pushes up interest rates and hurts the economy, their free lunch would result in a miserable case of heartburn.

Chapter Five: “It’s Kind of Muddled”

President Bush’s efforts to reform Social Security were doomed because his proposal failed on the two most important fronts: It could seriously undermine income security in very old age, yet didn’t even come close to addressing Social Security’s financial challenges.

Chapter Six: Cold Comfort

A reform proposal from Utah Sen. Robert Bennett reveals how deeply benefits would have to be cut to close Social Security’s shortfall without raising taxes, as Republicans insist. Instead of a safety net, Social Security could become a lifeline.

Chapter Seven: A No-Brainer

Democrats would like to fix Social Security by raising taxes on higher earners in order to avoid any benefit cuts. This approach isn’t just politically unrealistic; it would be counterproductive for the economy and could limit the resources available for defense, healthcare, children and the poor.

Chapter Eight: A Crack in the Foundation

Even if no more cuts were needed, workers who retire at 62 will see their benefits slashed by 30%. Because benefits must be cut, this early-retirement penalty – the crack in Social Security’s foundation – leaves policymakers no choice but to bolster Social Security’s unsturdy structure by raising the earliest retirement age.

Chapter Nine: A Fix That Doesn’t Fix Very Much

The proposal that represents, perhaps, the closest thing to a liberal framework for Social Security reform might solve just one-fourth the program’s funding problem. Instead of boosting support for poor retirees, the plan would create a less-efficient safety net by increasing benefits for higher earners and directing its biggest cuts at the disabled and very old.

Part III: Principles for Reform

Chapter Ten: A Bad Comb-Over

A more fiscally responsible liberal reform plan (Diamond-Orszag) calls for gradual increases in the payroll-tax rate in coming decades, but the extra revenue would still be insufficient to patch over Social Security’s shortcomings that would grow more obvious as the plan prescribes increasing benefit cuts.

Chapter Eleven: The Problem Is Part of the Solution

As baby boomers stretch the safety net, their retirement will stretch the capacity of a work force that will come to depend more heavily on older workers. The opportunity for workers to extend their careers can help solve the challenge of maintaining living standards for retirees with longer life spans.

Chapter Twelve: “The Obvious Thing To Do”

Among our best hopes for saving Social Security without starving other critical programs is to increase the savings available to invest in the economy’s productive capacity so that the nation will be able to afford its promises. There are moral and economic grounds for doing this new saving within individual accounts.

Chapter Thirteen: A Bridge Too Far

A constructive effort at compromise crafted by three economists from across the political spectrum likely raises taxes too high for Republicans to consider it affordable and exposes modest earners to too much risk to please Democrats.

Chapter Fourteen: The Hilda & David and Irene & Bernie Tests

The author’s grandparents lived worlds apart, financially speaking, but both couples came to depend on Social Security. Their examples show why we need a strong safety net in very old age for all income groups and how to reconcile that goal with cost-saving measures that ask more of high earners.

Part IV: Laying Out a Solution

Chapter Fifteen: Old-Age Risk-Sharing

The author offers a new reform that cuts benefits early in retirement in order to encourage more work and avoid benefit cuts in very old age. The cuts would be smaller for lower earners and fully unwind to ensure a robust safety net in very old age for all retirees.

Chapter Sixteen: A Fair and Constructive Sacrifice

The author offers two options for raising more revenue for Social Security, one that includes a gradual scaling back of the tax-free status of employer-provided care. Both paths require additional savings to offset benefit cuts that are roughly proportional to income.

Chapter Seventeen: A Helping Hand, Not an Empty Promise

The author offers new policies to help workers adapt to less support from Social Security in their early 60s. Benefits would ramp up as careers wind down; employers would be rewarded for providing older workers with flexible, low-intensity jobs; and workers would automatically enroll in a new supplemental savings program.

Chapter Eighteen: A Well-Tailored Account Structure

The author introduces a new approach to personal accounts that includes their most progressive feature – the chance for wage earners with little savings outside of Social Security to accumulate financial assets and leave a modest inheritance – without the downside of previous plans that involve undue risk or massive government borrowing.

Chapter Nineteen: Measuring Up

A detailed look at how A Well-Tailored Safety Net stacks up against other serious reform plans – including one that might emerge if Democrats get serious about reform – makes clear that it goes further than any other proposal to create an efficient safety net that meets the responsibility of caring for an aging population in a fiscally responsible way.

Conclusion: Key Findings To Guide Social Security Reform

Appendix #1: Details of A Well-Tailored Safety Net Social Security Reform Plan

Appendix #2: Solvency Impact of A Well-Tailored Safety Net

Reference Notes

Index