Final answer:
Diamond and Orzag have proposed a) increasing the retirement age, means-testing benefits, and adjusting payroll taxes by lifting the income cap on taxed wages to address earnings inequality in Social Security.
Step-by-step explanation:
Diamond and Orzag proposed ways to address the effect of earnings inequality in Social Security. Their proposals involve adjustments to the program that include increasing the retirement age, considering means-testing benefits, and changing payroll taxes, particularly by removing the income cap. This removal would lead to higher-income individuals paying more into the system, better reflecting their earnings. Additionally, changing the structure of the system to have workers save over their lifetimes and then draw out after retirement for healthcare costs has been suggested. This approach targets the sustainability of the program given the aging population and the fluctuating ratio of workers to beneficiaries.