The Real Deal: The History and Future of Social Security
Smetters, Kent, Journal of Risk and Insurance
The Real Deal: The History and Future of Social Security, by Sylvester Schieber and John Shoven, 1999, New Haven: Yale University Press
The old cliche that you have to know from where you came if you want to know where you are going is the basic theme of the "The Real Deal: The History and Future of Social Security," by Sylvester J. Schieber and John B. Shoven. The authors set out and accomplish an ambitious task to describe the evolution of the United States Social Security system from its very earliest point of conceptual development in the Roosevelt Administration to its modern-day full-blown implementation (Chapters 2 through 10). They reflect on good intentions gone bad and the deterioration of the present system (Chapters 11 through 16). And the authors consider options for future reforms, including a new plan, the Personal Security Accounts 2000 proposal, that would fundamentally change the financing design of Social Security benefits (Chapters 17 through 24). The PSA 2000 plan would not only fund a portion of Social Security's existing liabilities, but it would replace the one-part defined-benefit system with a two-part system: one part defined benefit (in the form of a flat pay-asyou-go benefit equal to $500 per month in Year 2000 dollars) and the other part defined contribution (a funded 5 percent payroll contribution split between workers and Social Security).
The authors are clearly qualified for the job. Syl Schieber is a key Washington beltway insider in the modern Social Security debate. He is a co-author of the Personal Security Account plan of the 1994-1996 Social Security Advisory Panel, on which he served as a member. The PSA 2000 plan proposed in the book is based on the original PSA plan. John Shoven is a professor of economics at Stanford and a leading academic who has made numerous contributions during the past two-and-a-half decades in modeling Social Security and various possible reforms. The book reflects this powerful synergy.
Policy wonks inside the Washington beltway might be tempted to jump directly to the mostly self-contained Chapter 23, which outlines the authors' PSA 2000 plan. But in doing so, they would miss a major part of the motivation for the PSA 2000 plan. In the earlier chapters, the authors review the political development of Social Security over the past several decades, including the legislative reforms and the major players inside and outside the beltway-and the often hidden agendas of everyone involved. They argue persuasively that Social Security today is very different from what FDR envisioned. By failing to increase payroll taxes along a (mostly) previously agreed on schedule, politicians after FDR effectively converted Social Security from a funded defined-benefit plan to a pay-as-you-go defined-benefit plan. Benefits also became more generous. In this sense, the authors do not see their PSA 2000 plan as that radical; rather, they view it, if anything, as closer to the system's true orthodoxy when compared against the system today. …