Want Social Security Reform? Then Don't Overplay The (Relatively Modest) Problem
As we head into the season of talking about Social Security reform, bear in mind the lessons of the past: the more you exaggerate, the less chance there is of getting anything done.
I was reminded of this lesson when reading a piece of revisionist history by Amity Shlaes for Bloomberg on Social Security. She tells us that a noble George W. Bush, haunted by the numbers his actuaries were pulling together, vowed to get the job done in his second term:
In the days after his re-election, Bush was ready to spend political capital, as he put it, to reform the program. But he found himself forced to instead spend that capital on maintaining support for the war in Iraq. The legislation he roughed out never went anywhere.No mention of the bait-and-switch here. You know -- the Bush who said not a word during the campaign about his plan for dismantling part of Social Security and replacing it with private accounts, but then suddenly embraced the cause in early 2005. Remember that guy? He's the one who torpedoed the chance for change, not Iraq. He campaigned as the victor of the war (remember when it seemed like an easy victory had been won?) and then insisted we needed to revamp Social Security. "Headed toward bankruptcy," were told. The lesson: mislead the public about your priorities, and you won't get them done.
No, the program can't go bankrupt unless the U.S. government goes there first. What would happen is that if the trust fund reaches zero, a distinct possibility in 2037 thanks to the retiring baby boomers, then Social Security benefits would fall to match incoming revenue from FICA taxes. There's (probably) no getting around that, but closing the funding gap is simply a question of who pays: higher taxes now would spread it out across more age cohorts, while simply letting benefits fall would saddle retirees with the cost.
And, according to the Social Security Administration, the gap is just not that large. An increase of 1.84 percentage points of the Social Security tax, split evenly between employers and employees would do it. That's 1.2 percent of GDP, a respectable amount of money but no big crisis.
These are figures worth bearing in mind, since we know that President Obama's fiscal commission is chewing over plans on Social Security. Expect a biiiiig fight when this comes down the pike in December, even though this is a manageable problem.
So why is the political management of the Social Security issue so difficult? On the Republican side, some people never miss a change to try to scare people about a popular program that has always afforded a vital measure of security. Democrats are its most ardent defenders, a nice political advantage. (Bush seized that chance, but found that people were too smart for a bait-and-switch). And the hair-trigger response of Democrats is always to slam Republican plans -- any Republican plans -- as a bid to dismantle the system.
If you accept that the program is popular and won't be dismantled (the Republican concession) but accept that changes are necessary (the Democratic concession) then maybe you can get something done. Any takers?
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