I enjoyed debating you as well. It had been a while since I had debated anyone about Social Security and even longer since I had a discussion that got as deep into the substance of operations of Social Security as we did.  I intended to respond to this blog earlier but haven't had a chance to do so until now.

Stronger economic growth does improve Social Security finances, just as the revisions in the economic assumptions that the actuaries made last year as economists started to reflect the expectation that the economy would take longer to return to full strength resulted in the projected shortfall becoming much larger.  But economic only has a modest impact on the long term finances, and much less of an impact than demographic assumptions about life expectancy, fertility, mortality, etc., because as you note higher wages and contributions by workers leads to higher benefits (and higher program costs) when those workers retire.

The progressive replacement rate structure with a lower replacement rate for workers with higher average lifetime earnings does mean that additional contributions are not entirely offset by increased spending for higher benefits in the future, but every dollar of extra contributions is at least partially offset by higher spending later. Thus a modest impact on solvency. 

This is a function of the Social Security programs design as a social insurance program with constant replacement rates which ensure benefits (and as a consequence program costs) grow in real terms along with overall wage growth.The same statement is true for an increase in real wage growth; the sensitivity analysis in the Trustees reports shows that scenarios with higher real wage growth would result in a higher income rate and a cost rate that is higher as well but not as much as the increase in income rate, for a total shortfall that is smaller but not significantly so. 

In short, my statement that GDP growth only modestly affects program solvency was not a reflection about the assumptions the actuaries make regarding income inequality or how the benefits of stronger GDP would be distributed, but rather a reflection of the basic program design and social insurance nature of the program.

Having said all of that, it is undeniably true that stronger economic growth would help the trust fund, and if the actuaries are underestimating economic growth the true shortfall would be smaller than they project. But the evidence does not support the assertion the actuaries economic projections are notoriously conservative and underestimate economic growth. 

If you were to go back and compare the economic assumptions in Trustees reports over the last twenty years or so with the actual economic growth you will find that they are if anything too optimistic. That was clearly true in recent years in which they underestimated the impact of the great recession and overestimated the rate at which the economy would recover, but was also the case in prior years when the economy was less volatile. The only Trustees report I'm aware of that underestimated economic growth by a meaningful amount was in 1996, when most forecasters underestimate the boom of the late 1990s. But overall there just isn't evidence that the actuaries systematically underestimate growth.  Indeed, Social Security's finances are much worse today than they were projected to be in Trustees reports issued over the last couple of decades, with the system beginning to run cash shortfalls several years earlier than had been projected and the current projections of the shortfalls going forward much higher than the projections in the late 1990's and 2000's.

 A lot of people make that assertion that the economic assumptions in the Trustees' report are unrealistically low because they assume economic growth will be lower in the future than it has been in the past.  But if you drill down one level and look at the assumptions be. Aggregate GDP growth is a product of per capita GDP growth times workforce growth. Since workforce growth will clearly slow down with the boomers exiting the labor force, it's inevitable that aggregate GDP growth in the future will be slower than it has been in the past, unless we assume a historically unprecedented increase in per capita productivity growth. The projections of per capita GDP growth going forward is very much in line with, and actually somewhat greater than, historical averages.

Finally, I must take exception to your assertion that the Simpson-Bowles plan did nothing to address income inequality. That wasn't the primary focus of the Commission recommendations, because the Commission's mandate was to restore primary balance in the medium term and put the federal budget on a fiscally sustainable long term path.  But in developing recommendations to meet that mandate, the Commission adhered to a couple of key principles which were established in part based on concerns about income inequality.

First was the principle that there should not be reductions that harm the most vulnerable in society.  The plan did not include any reductions in food stamps, SSI, unemployment or other means tested benefits, and both the commission plan and the more recent plan Simpson and Bowles put forward included important benefit enhancements for low income and vulnerable populations. The protections for the disadvantaged in the most recent plan Simpson and Bowles put forward are outlined in more detail here: http://crfb.org/blogs/how-simpson-and-bowles-protect-disadvantaged

Second was the principle that tax reform should produce a tax code that was at least as progressive as CBO's alternative fiscal scenario, i.e. as progressive as a tax code in which the Bush tax cuts for those with incomes above $250K expire and the estate tax reverted to 2009 levels.  That would be more progressive than the tax code we have now following the fiscal cliff deal. The Commission report included an illustrative plan which would meet that standard even while reducing the top rate to 28 percent, primarily by eliminating the tax preferences for capital gains and dividends and reforming other tax expenditures to limit their value for upper income taxpayers.

I hope you don't mind me hijacking your blog with such a lengthy comment, but since we had a substantive discussion of the issue on twitter I wanted to take the time to lay out the facts and reasoning behind my points on Social Security and the Simpson-Bowles plan so your readers can make an informed judgment on the merits.