Wednesday, February 16, 2011

A Liberal Case for Social Security Reform

I raised this subject two months ago after the President's Debt Commission released its report. The nashing-of-teeth that's greeted the release of the President's 2012 budget over entitlements seems a good enough reason to raise again.

The most common liberal objection as I can tell is that reforms now won't guarantee conservatives won't come back three or six years from now demanding privatization or further cuts. And that's true. But the conservative case for post-reform privatization will be much weaker if the program has been put on the path to sustainable fiscal solvency. In such a case, conservatives won't have a basis for claiming there's a "crisis" if the program's annual reports begin to establish in the public mind that the program is indeed projected to be solvent for the next 75+ years. I'll return to this point later.

Broadly speaking, a liberal case for Social Security reform now is primarily one of political risk (combined with the economics and demographics affecting the program). Simply put, doing something now is better than waiting till later when the problem (long term actuarial imbalance) is worse. Beyond economics, the state of American politics might be worse later, too. If so, the "Overton Window" might have shifted towards a full dismantling of the program.

An additional factor worth mentioning is that for every year for the past two decades or so, Social Security's annual reports have projected the program to reach a point of insolvency at some time in the future. Many liberals tend to be dismissive of these projections in the sense that the year of projected insolvency is always said to be many years, usually several decades in the future. Why give in to pressure to reduce benefits now when the problem is many years away?

Well, one of the reasons is that because the program's funding gaps are reported every year, the public is made aware of them and legitimately or not, has cause to think the program's fiscal health is shaky. Hence the frequent mentions among polling respondents and radio call in shows that the system won't be there for "them" and will in fact be bankrupt. I have reason to attest that some version of this belief is common even among otherwise well-educated, politically involved, progressive people. Kevin Drumm recently made reference to a member of the political class' holding such an opinion.

It's tempting to castigate the media for its failure to properly educate the public or to blame members of the public, especially those who we think should know better, for this state of affairs. But the fact remains, these concerns and beliefs, while not totally accurate, do reflect information grounded in official publications and projections. And one way to help alleviate these concerns is to put the program back on solid footing for the long term.

The Social Security program, and its rich history for helping lift many of the aged out of poverty, will be the better for it. Let's not wait for 2028 or some other later year when the program's circumstances, and the public mood, could more than likely be considerably worse than today and supporters of the program have less room to maneuver. I'm not suggesting reform today will suddenly strengthen and improve everyone's perception of the program. But it would be a start.

On a related note, I largely buy in to the case made by Andrew Sprung and others that the best way for the President to lead on matters such as entitlements is through the Congress and negotiations with leaders from both parties, and not necessarily through the yearly budget requests or even for now, through public appeals. So I'm not necessarily looking for the President to be up front and vocal about this right now. But I do hope he and other progressives in and out of Congress begin to consider the matter of Social Security reform for the reasons discussed here.


ruth said...

Right on Bulworth! Very interesting post. I agree with you and hope that some under the radar negotiations between the President and Congress lead to some good Social Security/Entitlement reforms this year! Perhaps the one West Wing episode where they pulled this off can be an example for how it might get done.

PurpleGirl said...

Saying reform is needed is one thing, actually stating what shape that reform should take is something else. What are your ideas of what should be done to make SS more secure for the future?

Bulworth said...

I'm pretty open minded about how we close the funding gap. There are a variety of ways to get there. The most efficient and relatively equitable routes are to raise the payroll tax rate or reduce benefits across the board.

My preference would be a combination of payroll tax increase (increasing the rate or the taxable maximum limit, or both) while changing the indexing of initial benefit amounts from the current "wage" indexing method to "price" indexing.