Discussion with CBO Director Elmendorf on the Costs of Waiting to Address Fiscal Challenges
At the House Budget Committee hearing on CBO's Long-Term Outlook, Rep. Reid Ribble (R-WI), who last week sent a letter calling for action on Social Security, asked CBO director Doug Elmendorf about the cost of waiting for solutions on Social Security. Elmendorf's response couldn't have been closer to what we said in our paper on the subject: that delaying changes would only necessitate that adjustments be larger and more abrupt. Here's how the exchange went:
RIBBLE: It seems in the three years I've been here it keeps -- that window keeps getting shorter and shorter. Some would say we should wait till we get to 2031 and then address it, because Congress seems to react better to crises than fiscal management. Is it more expensive to address it then or more expensive to address it now? I mean, is there a cost to waiting?
ELMENDORF: There is certainly a cost to waiting, Congressman.
RIBBLE: In what regard?
ELMENDORF: So the longer one waits to make changes, the larger the changes need to be and the more abruptly they would need to take effect. For Social Security right now, the age for full retirement benefits is working its way up as part of an agreement the Congress and president reached in the early 1980s. And that agreement was to do various things including phasing an increase in retirement age over a long period. But, the longer one waits to address the imbalance of Social Security and the federal budget as a whole, the less time one would have to phase in any changes that you and your colleagues agreed to.
Elmendorf went on to explain that Social Security's solvency problems, largely brought on by the retirement en masse of the baby boom generation, have been well known for a long time:
"This aging of the U.S. population is -- has been predicted for decades now. I recall Alice Rivlin, the first director of CBO, giving a talk that I saw in the 1990s, talking about how it wasn't really that far away. And - but nonetheless, a number of years have now passed with no changes."
You can see a video of Ribble's exchange with Director Elmendorf below.