Opponents of the proposal have also been mobilizing. Under an inflation-linked formula, benefits would keep up with prices, but wage levels determine standards of living, Rother said. Social Security benefits currently equal 42 percent of the earnings of an average worker retiring at 65. Under the new formula, that benefit would fall to 20 percent of pre-retirement earnings. Future retirees would, in effect, be consigned to today's standard of living.
"It's like saying elderly people today should live at a 1940 standard of living," said Robert Greenstein, executive director of the liberal Center for Budget and Policy Priorities. "Part of our social contract has been to allow seniors to participate in rising standards of living rather than consigning them to some second-class status in retirement."
But proponents say the shift to price indexing has to be viewed with the addition of private accounts.
"If this was a case of just price indexing and doing nothing else, frankly, some of the [opponents'] charges are pretty valid," John said. "But if you give the personal accounts as well, you're giving people the opportunity to make up the difference. Not everyone will do that, but a substantial number will."
White House spokesman Trent Duffy said benefits under a revamped system should be compared with benefit levels that are possible under the current system, not benefit levels that are promised but cannot be financed. "A solution has to be compared to current law, and current law will guarantee huge tax increases or huge benefit cuts, or both," he said.
Administration officials point out that future retirees face two prospects: the amount of benefits the retirees were promised and the amount that can actually be paid.
If workers are allowed to divert four percentage points of their 12.4 percent payroll tax into personal investment accounts, future retirees would probably be able to raise their total benefits above the amount payable from taxes collected at that future time, according to the chief Social Security actuary. But those increased benefits still would not match the benefits currently being promised because future tax levels cannot keep pace with the rapid increase in the number of retirees.
A retiree in 2032 would see a promised monthly benefit of $1,343 drop to $1,231, an 8.3 percent cut from both the payable and promised levels. But by 2052, returns on personal accounts would push total benefits for a middle-income worker to 129.4 percent of the payable benefit, even though the total benefit would still be about 6 percent less than promised because of the rising number of retirees.