1. For each of the following proposed reforms to the Social Security program, briefly discuss the pros and cons of the reform, paying attention in particular to efficiency implications (through potential behavioral responses to the change) and equity implications (who wins and who loses). Note that all reforms are intended to save the system money, so do not list this as a benefit.

a. Increase the number of years used to calculate benefits from 35 to 40.

b. Reduce benefits for beneficiaries with high asset levels (wealth).

c. Add new state and local government workers to the pool of covered workers (i.e., they pay payroll taxes now and receive benefits when they are old).

d. Gradually increase the normal retirement age (NRA) from 65 to 70 (under current laws, the NRA will gradually rise to 67 by 2022; the proposal is to continue this process so that the NRA will be 70 by 2025).