Sense and Social Security

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Friday, July 2, 2010

LAST WEEK House Majority Leader Steny H. Hoyer (D-Md.) bravely suggested that Congress should consider a higher retirement age for Social Security and more careful targeting of benefits to the neediest, as part of a plan to get the country's long-term finances in order. Now House Minority Leader John A. Boehner (R-Ohio) has had a common-sense outburst of his own on the issue. On Monday, he told the Pittsburgh Tribune-Review that he would favor raising the Social Security retirement age to 70, tying cost-of-living increases to the consumer price index rather than wage inflation and trimming benefits for retirees with substantial non-Social Security income. "We need to look at the American people and explain to them that we're broke," Mr. Boehner said. So there you have it: agreement in principle between leaders of the two parties in the House of Representatives on a key debt-reduction reform that was thought to be politically untouchable. Who says Washington is hopelessly polarized?

To be sure, Mr. Boehner leavened this comment with another, which Democrats are rightly ridiculing, to the effect that pending financial reform legislation amounts to a nuclear attack on an "ant." But that flap should not be allowed to detract from the wisdom of his statement on entitlements. Social Security is not as great a threat to the country's long-term solvency as it was before the last major reform in 1983, nor is it as great a threat as health-care costs. But it's not chopped liver, either. According to the Congressional Budget Office's latest projections, published Wednesday, Social Security costs are on course to increase by 1.4 percentage points of gross domestic product by 2035 -- largely due to the growth in the elderly population relative to the working-age population. The Social Security Trust Fund would be exhausted soon thereafter, the CBO reckons.

Total savings from raising the retirement age would depend on how Congress does it. Under current law, the retirement age is 65 for workers born before 1938, rises in two-month increments until hitting 66 for workers born in 1943, holds at 66 for workers born between 1944 and 1954 -- then rises again in two-month increments up to 67 for workers born in or after 1960. But suppose the age rose gradually to 67 for workers born between 1948 and 1953, and then continued increasing by two months per year until reaching 70 for workers born in 1971. The phase-in would avoid short-term harm to the economic recovery, give people plenty of time to adjust -- and shrink Social Security outlays by nearly 1 percentage point of GDP by 2035, according to the CBO. Tweaking the cost-of-living adjustment formula, as Mr. Boehner suggests, would take care of most of the rest of the program's projected growth.

In short, Mr. Boehner and Mr. Hoyer are talking about sensible adjustments that would achieve significant debt reduction at modest social cost. Needless to say, some were quick to exploit their comments for political purposes. Some Republicans, Mr. Boehner included, took aim at a separate part of Mr. Hoyer's speech in which Mr. Hoyer realistically discussed the need to raise revenue. For his part, House Democratic Whip James E. Clyburn (D-S.C.) accused Mr. Boehner of wanting to slash Social Security to "pay for George Bush's war and their failed policies of the past." The truth is that the course Mr. Boehner and Mr. Hoyer courageously support would not only help reduce the country's long-term debt but would also put Social Security on a sound financial footing for generations. Here's hoping they can work together to make it happen, against the inevitable pushback from within their respective caucuses.


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