- While Social Security reform wouldn’t fix today’s deficits, it would make a deficit deal easier to reach.
- Many say Social Security reform should not be part of the budget negotiations. That isn’t so.
- Reforms to reduce benefits for high earners and prolong work lives could restore solvency while improving the safety net.
Editor's note: The following article originally appeared in The New York Times' Room for Debate in response to the question: "Does Social Security need to be dealt with in the current fiscal negotiations?"
Many say Social Security reform should not be part of the budget negotiations, arguing that Social Security contributes “not a penny” to the budget deficit. That isn’t so.
The growing gap between Social Security’s dedicated tax income and expenditures will contribute to both the unified budget deficit and the publicly held national debt, the most common and economically meaningful budget measures.
We shouldn’t fix the budget deficit simply by cutting Social Security – and we won’t. Even using the “chained” measure of inflation reduces outlays by only 2.5 percent over 10 years. Major reforms, like raising the retirement age, take effect only over decades, with the savings credited back to prolong Social Security’s solvency.
While Social Security reform wouldn’t fix today’s deficits, it would make a deficit deal easier to reach. Conservatives are concerned that tax increases today won’t be followed by promised spending cuts.
But cuts to entitlements like Social Security would automatically be enacted unless Congress intervened. If you want Republicans to agree to higher revenues, the spending cuts need to be credible.
Finally, why wouldn’t you want to fix Social Security? It’s the largest tax most workers pay, the largest income source for most retirees and the largest domestic spending program, with costs rising by 25 percent relative to its tax base over the next two decades.
Over the next decade Social Security costs will rise more than Medicare’s, and when the trust fund is exhausted in early the 2030s, retirement benefits would be cut 25 percent. The disability program is in even worse shape, with insolvency projected for 2016.
Targeted reforms to reduce benefits for high earners and prolong work lives could restore solvency while improving the safety net.
Raising the retirement age to track rising lifespans would reduce the growth of Social Security costs and encourage Americans to delay retirement, helping both their own retirement preparations and boosting economic growth.
The Bowles-Simpson commission proposed gradually raising the retirement age to 69 by 2075.
Many of those arguing to separate Social Security from budget talks seem to want to push reform off the table altogether. But while the Social Security shortfall is smaller than Medicare’s, it’s large compared to pretty much anything else in the budget. It deserves to be fixed.
Andrew G. Biggs is a resident scholar at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration.