Elections and Social Security

With this year’s elections, accusations and policy statements have been flying about Social Security. Unfortunately, many of the points at issue have little to do with the real, long-term problems with our retirement programs. Instead of facing up to the staggering actuarial deficits in Social Security and Medicare, candidates make promises to maintain benefit levels that cannot be maintained at current tax rates. Too often, these candidates don’t know as much as they should about Social Security and are cynically hoping they can avoid this sensitive topic. They often say words that amount to “trust me.” The American people, however, deserve more.

Social Security cannot continue in its present form without massive tax increases and/or benefit cuts. Actuaries predict that benefit payments will begin to exceed tax revenues in 2018 and that the annual shortfall will grow larger and larger into the foreseeable future. With such an important program, candidates should be able to articulate a plan to deal with this problem, which makes up roughly a quarter of all government spending. If a candidate can’t or won’t explain how they’ll deal with this problem, they are implicitly endorsing the collapse of the current program or a huge tax increase.

For my twelve years in Congress, I have offered reforms featuring the addition of private accounts to traditional government-paid benefits. I’ve introduced bipartisan reform legislation that has been scored by the Social Security actuaries to restore the program’s solvency. I also chair the bipartisan Social Security Task Force that has produced bipartisan recommendations for averting insolvency.

There are many approaches to reforming Social Security, but all of them increase taxes, reduce benefits, or increase the returns to tax contributions paid by workers. Under the current system, the extra money not needed for benefits goes into the Social Security trust fund where it is spent on other government programs. The government will be hard-pressed to repay that money when it comes due, even at the low interest rates. We have to do a better job of investing that money, both to increase the security of retiree benefits and increase the rate of return. If we allow workers to invest that money (in limited and safe ways), we can give them the benefit of higher returns while also granting them ownership over some of their retirement benefits. That would also mean that, in the future, government couldn’t cut those benefits.

Some people attack reformers for “endangering” Social Security, even though we know the current program is failing and is now endangering everyone’s benefits. This wrongly implies that the program can be maintained. Right now, Social Security benefits depend entirely on the government living up to promises that it has no capacity to keep. We need to shift to a system where retirees can earn higher returns on their payroll taxes than the 1.7% average return they’re getting now.

The failure to give this problem a higher priority and hold a reasonable debate on Social Security vastly reduces the chances that anything will be done. After a partisan campaign, it will be difficult, if not impossible, to forge the bipartisan consensus that will be necessary to enact fundamental changes. That makes it more likely that we’ll procrastinate and eventually be forced into making bad choices when the inevitable crisis comes.