Under the plan released December 1, 2010 by the co-chairs of President Obama’s National Commission on Fiscal Responsibility and Reform, most workers, including most low earners and workers approaching retirement, would see significant cuts in Social Security benefits. Even current retirees would see cuts due to a proposed reduction in the annual cost-of-living adjustment.

According to an analysis of the plan by Social Security’s chief actuary (Goss 2010a), middle-class workers with average earnings over the course of their careers (around $43,084 in 2010) would see a 22% cut in benefits by the end of the 75-year projection period, not significantly different from the 23.5% cut in benefits these workers would face in 2085 if nothing were done to shore up Social Security’s finances.

Because these cuts would fall on top of earlier cuts implemented in 1983, including a gradual increase in the normal retirement age from 65 to 67, the share of a middle-class worker’s pre-retirement earnings replaced by Social Security would fall from 49% in 1980 to 28% in 2080 if the worker retired at 65 (see Figure A).  If anything, this understates the problem, since most workers retire before age 65.