As we’ve been noting, if productivity rises faster than anticipated, that will make Social Security’s deficit smaller than anticipated. And there’s very good reason to think that productivity will rise faster than the Social Security administration is predicting. It’s very unlikely that productivity will rise fast enough to make the whole problem go away, but it probably will be smaller.
Now insofar as one is inclined to contemplate benefit cuts as a method of closing the whole, it stands to reason that if the problem turns out to be smaller, the cuts will also be smaller. Makes sense, right? The less you need to cut, the less you cut.
But since the president’s plan cuts benefits by the difference between wage growth and price growth, and that difference gets bigger the faster productivity grows, it would accomplish the reverse. The less we need to cut, the more he cuts! If I had a seat in the White House press room, I would ask someone about that.
