Congratulations to Peter Diamond!
All of us here at CRFB would like to congratulate Peter Diamond, an MIT economist, on winning the Nobel Prize for Economics this year. Diamond, along with fellow American Dale Mortensen and British economist Christopher Pissarides, was awarded the prize for his work on search markets, tracking why unemployed workers fail to find work when there are jobs in the market.
In addition to the work that made him a Nobel laureate, Diamond has also contributed specific ideas to strengthen Social Security. In conjunction with former OMB Director Peter Orszag, he wrote a book a few years ago detailing a plan for reforming Social Security, entitled Saving Social Security: A Balanced Approach. Diamond and Orszag propose many of the reforms that should be on the table today, in a combination of revenue increases and benefit reductions. Their plan addressed what they saw as the three main sources of Social Security's long-term insolvency: increased life expectancy, increased income inequality, and the program's legacy debt. To address these issues, they propose proportionally decreasing benefits in accordance with increased life expectancies (and thus longer amounts of time receiving benefits), increasing the maximum taxable earnings base and imposing a legacy tax on earnings over the maximum, while offsetting this with making Social Security coverage universal (read a summary of the plan here). Diamond showed the vision and gumption to advance specific fiscal reforms that we need now for a sustainable budget path in the future.
Thanks, Peter, for getting specific!