Durbin Voices His Support for Entitlement Reform
In a Wall Street Journal breakfast yesterday, Senate Majority Whip and former Fiscal Commission member Dick Durbin (D-IL) reiterated his support for entitlement reform in a comprehensive debt deal. We've said time and time again that the only way lawmakers are likely to resolve our long-term debt problem is by putting everything on the table, and we commend Durbin for his approach.
Many lawmakers often talk about health care as a driver of our long-term debt problem, and Durbin spoke of the importance of trying to slow the growth of health care, especially given our aging population. But Durbin also mentioned another entitlement program, Social Security and argued that it was also in need of reform, proposing a commission to come up with a plan to ensure solvency.
Well, first, it is a serious problem. And you know the numbers. Social Security untouched, unamended, will make its payments for 20 years. That’s pretty good by federal standards but not good enough, because a lot of people plan on being on Social Security 20 years from now.
When we talk about fixing Social Security, I’ve said before Social Security is simple math; Medicare is advanced calculus. We can figure a way through Social Security. I could give just, you know, off the top of my head some ideas that I think would move us toward additional solvency on Social Security.
I want to credit Mark Warner for giving what I think ought to be our standard for Social Security. And this came up in the Gang of Eight discussions. He said 75-year solvency reviewable every 10 years, which I think is a thoughtful approach, particularly in light of what I’m going through in the state of Illinois, which some of you know now, which is the worst possible shape, the lowest credit-rating in the United States because of our pension — unfunded pension liability. So yes, Social Security should be addressed, could be addressed, and I think under the right circumstances, we can come up with a good bipartisan approach.
Senator Durbin clarified that he did not believe that Social Security was a substantial contributor to our debt problem but said that ensuring long-term solvency for the program was greatly needed regardless. Making gradual changes now would give individuals time to plan and adjust while keeping the program paying full scheduled benefits.
But it is still our responsibility to make sure that it’s there. And I honestly believe, if you sit down with most people and said, for example, let’s extend the Social Security retirement age to age 68 – what we said in Simpson-Bowles, let’s do it over 40 years – 40 years. One year of eligibility over 40 years. That’s increasing the eligibility for Social Security by nine days a year. So next year, it’s 67 years and nine days you qualify for Social Security. And the following year, 18 days.
What I’m getting to is, there are things we can do if we do them early over a gradual period of time that will give this solvency to Social Security. But people are afraid to walk into this thicket. I think we can and we should. And I go back, again, to my Illinois illustration. We’ve ignored our pensions for 40 years, and now, we don’t know how to get out of this mess. I don’t want to see anything like that with Social Security.
Besides raising eligibility ages, Durbin also suggested another change that we talk about frequently on this blog, the chained CPI:
I think it’s – that chained CPI is a real possibility, and only if it is crafted in the right way. And let me tell you what I mean. Despite some of the projections on the impact of chained CPI, I would like to give you an illustration, which I’ve used over and over, maybe not convincingly, in my Democratic caucus elections. The average Social Security recipient receives about $12,000 a year. Assuming a three percent COLA is announced for the next year, and then you apply the chained CPI, it would reduce that COLA by .25 percent.
The cost, then, to the average recipient would be $3.50 a month reduction in the COLA payment that they were going to receive. At the end of the year, $42 in the reduction of the $360 COLA payment they were going to receive.
Now, you could play that number out, as my critics do, to thousands of dollars 20 years from now. And I’m sure they’re right in their calculations. But if you said to the average Social Security recipient, the cost is $3.50 a month, and the dividend is 50 more years of solvency – and I’m not saying doing this alone would reach that, but it’s an important part.
To get the process rolling, Durbin suggested proposing a Social Security commission to offer a proposal to achieve solvency. Here is how he described it.
Here’s what I’m working on, and it’s a Social Security commission like Simpson-Bowles. And it would basically say to a commission with a very limited timeframe — within a very limited timeframe to come up with a proposal for 75-year solvency of Social Security. And then — and this is important, it would be referred to both chambers and on an expedited procedure, allowing any members to offer substitutes to the commission proposal — substitute amendments as long as they meet the same test — 75-year solvency.
Social Security is often lost in the deficit reduction debate, given that it has its own revenue source. But Social Security is due to become insolvent by 2033, at which point benefits will be cut by 25 percent. Making changes to the program now should ease the transition, and Durbin should be commended for putting good ideas on the table.
To read a transcript of the full interview click here.