January 29,2021

New CBO Average Wage Projection Undermines Push to Amend Social Security Benefits Formula

In letter to Grassley, CBO projects much smaller drop in Average Wage Index

WASHINGTON – In response to an inquiry from Sen. Chuck Grassley (R-Iowa), the Congressional Budget Office this week projected only a 0.5 percent decrease in the national Average Wage Index (AWI), a significantly smaller reduction than prior predictions of 3.8 percent.  
 
The AWI is used in the calculation of Social Security benefits. A substantial decrease may have had a significant impact on the benefits for some beneficiaries turning 60 years old, leading some to suggest that the benefits-determining formula should be changed.  
  
This new projection shows that the change in AWI is far less than the 1.51 percent decline seen in 2009, after which Congress made no changes to the benefit determination formula. The CBO indicates that the actual change in AWI will not be known until later this year, since the AWI depends partly on tax data that still need to be collected and compiled. But that actual change may end up even smaller yet, or it could turn out that there wasn’t even a decline. 
 
Full text of Grassley’s inquiry to CBO can be found HERE.  
 
CBO’s response to Grassley can be found HERE.  
 
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