Toward the end of his address to Congress last Tuesday, President
Obama spoke of beginning a conversation on how to reform the Social
Such a suggestion makes Henry Aaron, a veteran analyst at the
centrist Brookings Institution in Washington a bit edgy. Sure, he
says, it's desirable to pay attention to Social Security, but "in
the right way. It's better to do nothing than the wrong thing."
Obama spoke of Social Security right after calling for
"comprehensive healthcare reform." Medicare and Medicaid are in far
worse financial shape than Social Security. The nation's primary
pension system could continue providing full benefits for decades to
retirees and the handicapped without running short of money.
Economist Aaron worries that some Democrats will not be tough
enough in bargaining with conservatives over Social Security changes
if a bill comes before Congress. If that were to happen, the final
bill could end up with unnecessary benefit reductions, he says.
The president himself, it's reported, originally considered
forming a bipartisan task force to propose Social Security reforms
to avoid a political dead end. But that idea ran into opposition
from some Democrats and was dropped.
President George W. Bush proposed in 2005 partial privatization
for younger Americans through personal savings accounts carved out
of the fixed system. That proposal got nowhere in Congress.
Somewhat mysteriously, Obama mentioned creating "tax-free
universal savings accounts for all Americans" in his address to
Given the economic crisis, a major alteration of Social Security
involving extra risk would be an even harder sell today to
"All the arguments for Social Security have been strengthened
rather than weakened," says Aaron.
For years the Social Security system has been running a surplus.
Payroll-tax revenues have exceeded outgo for pensions and other
payments, thereby building up reserves needed to deal with the
numerous baby boomers just starting to retire.
The Congressional Budget Office projects the surplus for fiscal
2009 will be 40 percent less than assumed in the fiscal 2008 budget
projections. A drop-off in tax revenues from millions of Americans
who have lost jobs is among the reasons for this development. On top
of that, some newly unemployed seniors may decide to collect their
Social Security pensions right away, figuring they won't be able to
get another job.
On the other hand, many older Americans have also seen their
retirement funds badly damaged by the plummeting stock market. …