Academic journal article Policy Review

The Social Security Challenge

Academic journal article Policy Review

The Social Security Challenge

Article excerpt

SOCIAL SECURITY PRESENTS President Obama and Congress with a daunting policy challenge. The program currently faces both worsened near-term finances and a large long-term deficit. There is good reason to enact a correction soon, for solutions become less palatable with each year of delay.

Americans care deeply about Social Security, which is possibly the nation's most cherished domestic program. One might naively assume that political rewards would accrue to elected officials who accept responsibility--and credit--for strengthening the program's finances. But policy makers face a further challenge, in that not only are Americans sharply divided about Social Security policy choices, but they are divided even about the underlying facts and the problem to be solved. Despite years of bipartisan efforts to objectively define and quantify the Social Security financing challenge, consensus agreement even on basic factual predicates remains elusive. An equitable solution will be unobtainable unless elected leaders bring stakeholders together around a common understanding of the facts and the need to take reformative action.

Social Security is fully able to meet today's benefit payments. Although the program is now running cash deficits, no one is seriously worried about whether current payments will be interrupted. But the trends that threaten Social Security's future have begun to be felt and will intensify sharply in the coming years. In a perfect world, this challenge would be easily understood. Social Security financing is one of the easiest issues in all areas of federal policy to grasp, once it is shorn of superfluous detail. But arcane concepts such as "solvency," "actuarial balance," and Trust Fund accounting can make a simple problem seem very complex.

In reality, it is not at all complex: More people are now heading into retirement than ever before and stand to collect larger benefits for a longer time. This means higher costs facing our children and grandchildren than previous Americans were ever asked to shoulder. And, despite some misrepresentations to the contrary, the government has no credible plan for financing these growing costs. In addition, the longer we put off dealing with Social Security, the less fair the solution will be. Action today could render the current system permanently sustainable without changing benefits for those now in or near retirement, without raising taxes, and while allowing future retirees to receive higher benefits than today's (even relative to inflation). Within a few years this will no longer be true. At that point, we'd need either to tell young Americans that their taxes are going up or future retirees that their standards of living are going down.

Action on Social Security, perhaps more than on any other issue, is paralyzed by conflicting views of underlying facts. Many of these conflicting interpretations are driven by misunderstandings of the 1983 program reforms. That legislation placed a layer of confusion over program finances, and engendered a further tendency toward gridlock in what was already an intensely polarizing issue. Before 1983, there existed profound disagreements about Social Security policy choices, but general agreement on the state of program finances. Today, there is widespread disagreement on both. This has had a paralyzing effect on our capacity to agree on adjustments to Social Security policy, and has perpetuated confusion that will fatally undercut future legislative discussions until it is untangled.

To understand the choices now before us, it's useful to know what happened in 1983, why it did, and how the result has led to sharply divergent views of program finances today.

How we got here: The 1983 amendments

THE 1983 SOCIAL Security reforms achieved much that is praise-worthy. The reforms, a combination of tax increases and restraints on benefit growth, averted what was previously projected to be imminent program insolvency. …

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