How Might Earnings Patterns and Interactions among Certain Provisions in OASDI Solvency Packages Affect Financing and Distributional Goals?



Analysts often compile packages of Social Security changes based on publicly available projections of the effects of individual provisions.  Such analyses may neglect issues of whether and how the provisions might interact to alter intended outcomes, thwarting the proposal’s financing and distributional goals.  To inform policymakers about the importance of such interactions in examining the cost and distributional implications, we catalog a range of possible interactions, including some that are subtle and not well understood.  Using data on U.S. workers from the Survey of Income and Program Participation matched to administrative records, we document important patterns in work and benefit histories to show how several commonly discussed Social Security proposals would affect different population groups.  We then use DYNASIM, the Urban Institute’s dynamic microsimulation model, to measure how accounting for interactions among a few of these provisions changes projections of distributional effects.

The study found that:

  • Interactions between Social Security parameters and between Social Security and personal income taxes can be significant.
  • Modelers may thus wish to display incremental analyses of combinations of provisions and gross and net Social Security benefits in their distributional analyses.

The policy implications of the findings are:

  • Social Security packages are best evaluated holistically. The whole does not always equal the sum of its parts, either in terms of costs or distributional effects.