Marc Goldwein: Five Social Security Plans That Really Would Help Make America Great Again
Marc Goldwein is the senior vice president and senior policy director of the Committee for a Responsible Federal Budget. He recently wrote a guest post that appeared in Forbes. It is reposted here.
Last week the Social Security program turned 81. But according to its own Trustees, it isn’t on course to make it to 100–not without a 21% across-the-board cut in benefits for its 90 million beneficiaries. Just as millions of baby boomers are turning toward retirement, Social Security’s trust funds are running out of money.
Given the short time until the program’s insolvency–expected in 2034, according to the program’s Trustees–the next President will need to act quickly to stabilize Social Security’s finances. A well-designed reform plan would not only secure the program’s future and avoid deep cuts; it would also reduce senior poverty, improve retirement security, promote economic growth, reduce the nation’s long-term fiscal gap, and help restore the public’s trust that their elected officials have their best interests at heart.
But achieving this will require creativity and compromise. There is no room for zealotry on either side. History has shown that Social Security reform must be bipartisan to succeed, and it must be seen as balanced and fair.
Four plans already have the potential to meet these criteria and could be the basis for viable legislation: the Simpson-Bowles plan (the Fiscal Commission); the Conrad-Lockhart plan (a product of the Bipartisan Policy Center); the Save Our Social Security (SOS) plan (sponsored by Rep. Reed Ribble and others); and the American Enterprise Institute (AEI) plan (by Andrew Biggs, James Capretta, Robert Doar, Ron Haskins, and Yuval Levin).
What Do These Four Plans Have in Common?
In addition to making Social Security solvent for 75 years and beyond, these four plans share some common elements.
First, they all reject broad-based benefit expansions in favor of targeted increases for those who actually need help.
Promising every American–regardless of income–a bigger retirement check might be good election politics, but it’s unnecessary and unaffordable. Unnecessary because for most Americans, there is no evidence of a widespread retirement crisis (when asked, by the way, 79% of current retirees say they are doing just fine; and benefits are projected to grow relative to today’s levels). And unaffordable because today’s 60 million Social Security beneficiaries will expand to 90 million in just two decades. Even a $100 increase in everyone’s monthly benefits would cost $1.2 trillion over ten years–nearly the cost of Hillary Clinton’s entire spending agenda. A $200 per month benefit hike would double Social Security’s 75-year shortfall.
Instead of increasing everyone’s benefits, these four plans target those who truly need help. The Simpson-Bowles and SOS plans establish a minimum benefit for low-wage workers. The Conrad-Lockhart plan combines its own take on a minimum benefit with a significant increase in the way benefits are calculated for the bottom third of the income ladder. And the AEI plan moves to a flat benefit that guarantees everyone a poverty-level Social Security check which grows with wages.
All four plans pay for their expansions and improve solvency by slowing the growth of benefits for higher earners. Social Security is on track to grow for all income groups; those with higher lifetime earnings and more opportunities to save for retirement can handle their benefits growing a little bit slower. The Bill Gates and Donald Trumps of the world certainly don’t need $2 million in lifetime Social Security benefits.
All the plans also adopt a more accurate measure of inflation known as the chained CPI to calculate cost of living adjustments for some or all recipients. And they all aim to improve incentives to continue working by increasing Social Security’s retirement ages. The SOS and Conrad-Lockhart plans increase the normal retirement age; the AEI plan increases the early retirement age; and Simpson-Bowles increases both.
How Do The Plans Differ?
While these plans have many similarities, they are hardly carbon copies.
The Simpson-Bowles, SOS and Conrad-Lockhart plans increase the amount of income subject to the payroll tax; the AEI plan does not. Simpson-Bowles, Conrad-Lockhart and AEI all generate more savings from the benefits of high earners than the SOS plan, which raises the retirement age much more rapidly than the other plans. Only the AEI plan moves to a fully flat benefit over time, and only Conrad-Lockhart increases the payroll tax rate. Conrad-Lockhart also adopts an innovative way to calculate annual benefits that increases work incentives and rewards more years of work.
Of course, none of these plans is perfect.
Simpson-Bowles does too little to improve benefits for low-income short-career workers. The SOS plan gets too much of its savings from across-the-board cuts. The AEI plan calls for benefits that may be too low overall. And Conrad-Lockhart relies on a hike in the payroll tax rate that may prove politically unpalatable.
But these concerns can all be fixed. The Simpson-Bowles plan could adopt a more robust minimum benefit. The SOS plan could incorporate a more progressive benefit formula with further enhancements for the bottom third of workers and stricter limitations for the top third. The AEI plan could increase income subject to the payroll tax to offer a flat benefit closer to today’s median benefit. And Conrad-Lockhart could replace its payroll tax hike with changes to broaden the payroll tax base and build on some of their existing tax and benefit changes.
Even without these modifications, any of these plans would be a major improvement over the status quo: the looming threat of an across-the-board benefit cut for tens of millions of Americans. Yet neither presidential candidate has suggested that Social Security reform is high on their agenda.
There Is Another Way: A Fifth Plan for Social Security Reform
While any of these four plans would all fix Social Security if enacted, they are probably not viable in the current political environment. But there is a fifth option and unlike the other four, it could be the basis for bipartisan agreement. The plan: Establish a commission.
A national Social Security commission would reduce the voltage in this third rail of American politics. Back in 1983, a bipartisan commission helped secure Social Security for half a century, and it represents the best hope of doing so again.
Bipartisan legislation to establish a commission, proposed last year by Rep. John Delaney (D- MD) and Rep. Tom Cole (R-OK), would be a great place to start.
No commission can replace political will and presidential leadership. But it could give the President, Congress and other important actors a space to negotiate without as much pressure from the various interest groups. And they can work out the necessary technical details and improvements to turn any of the four other plans I’ve described–or some combination of them–into one workable plan to fix Social Security for generations to come.
Impossible as it may seem right now, a bipartisan agreement to secure Social Security for three-quarters of a century is achievable. In fact, it’s the only viable way to ensure Social Security is able to provide adequate retirement security for our grandchildren, and children, and yes–for us.
But we need to act soon. 2034 is just around the corner.
"My Views" are works published by members or staff of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.