Event Recap: "Can Simpson-Bowles Save Social Security?"
On August 15, PublicSquare.net hosted a debate on Social Security featuring CRFB's very own Ed Lorenzen. The event, titled "Can Simpson-Bowles Save Social Security?" involved Benjamin Veghte, Research Director at Social Security Works, and Lorenzen, a Senior Advisor at CRFB who served on the National Commission on Fiscal Responsibility and Reform that was chaired by Erskine Bowles and Al Simpson. The debate was moderated by Taylor Kinzler.
Lorenzen opened up the debate by summarizing Social Security's funding problem and what the Simpson-Bowles plan would do to reform the program. He noted the 2033 projected insolvency date for the Social Security trust fund, at which point benefits would be cut by 23 percent. Simpson-Bowles wanted to act soon to fix the program's shortfall because the longer policymakers wait, the harder the choices become. The plan slowed the growth of benefits for middle- and high-earners while strengthening poverty protections for low-income beneficiaries and the very elderly and increasing payroll taxes for higher-income earners. Despite the benefit "reductions," real benefits would continue to grow for all income groups.
Veghte argued that Social Security's shortfall is somewhat modest, with the program being able to pay 94 percent of scheduled benefits on average over the next 25 years. He also said that Social Security does not contribute to the deficit because of the nature of the program and said that the primary goal of Social Security reform is to ensure retirement security rather than to close the shortfall. With defined benefit pensions shrinking and 401(k) plans mostly benefiting higher earners, he contended that Social Security would need to play a bigger role. He said that while Simpson-Bowles included benefit reductions for people who would rely on the program, policymakers should instead look to expand the program.
Lorenzen responded by saying that Social Security's funding issue was a budget issue since the program could not meet its promised benefits. He also pointed out that the benefit levels that Veghte claimed the Simpson-Bowles plan only reduced benefits from the scheduled benefits that the program did not have the resources to fund under current law. He also explained the plan intended to increase benefits above current law for low and middle-income earners and did not rely on revenue increases more because the plan looked at the whole budget and recognized needs for additional revenue to fund programs other than Social Security.
The two participants went back and forth on what would represent a good bipartisan approach to reform. Veghte noted that clear majorities of Americans supported increasing payroll taxes to fund Social Security and criticized the Commission's make-up, including the inclusion of members who were not elected officials. Lorenzen pointed to the Fiscal Commission's bipartisan make-up and bipartisan support for Simpson-Bowles, a tremendous accomplishment given the wide differences in positions from some members.
In talking about approaches to reform, Veghte argued that by flattening the benefit structure, Simpson-Bowles would undercut support for the program. Lorenzen responded that the Social Security Works' plan, which included broad-based benefit increases and eliminated the payroll tax cap, would increase lifetime benefits for millionaires by as much as $1.7 million, which he argued was not the best use of limited resources. While he did not support ending the link between benefits and earnings, he made the case for a more balanced trade-off between that principle and targeting spending wisely.
Towards the end, the participants were able to ask questions of each other. In response to a question about how to ensure retirement security, Lorenzen once again noted that Social Security benefits under Simpson-Bowles would still be growing in inflation-adjusted terms so beneficiaries would be getting more from the system. In addition, he said that restructuring retirement saving tax incentives so they don't primarily benefit the well-off and provide greater incentives for the lower and middle class would help. After being asked a question about whether the size of the tax increases in the SSW plan to fund both current and increased benefits left room for revenue to be raised elsewhere in the budget, Veghte responded that the U.S. had a low tax burden by international standards, that raising revenue through Social Security was more akin to making a 401(k) contribution rather than increasing taxes, and that the top 1 percent had plenty of room to pay higher taxes given unequal growth in incomes.
The debate ended with each participant stating ways in which they agreed with the other person. Veighte stated that they agreed on the importance of acting sooner rather than later on Social Security and the need to maintain at least some link between contributions and benefits. Lorenzen also mentioned an agreement on the need to raise taxes from the wealthy (although they disagreed on the extent).
The debate was certainly an interesting clash of perspectives, showing both the disagreements and areas of consensus among the two views. You can watch the full debate below or at PublicSquare.net's event page.