Whatever the deniers say, Social Security needs reform soon
THIS YEAR, for the first time since 1983, Social Security will pay out more in benefits than it receives from payroll taxes -- $41 billion. This development is not an emergency, but it is a warning sign. Too soon, this year's anomaly will become the norm. By 2037, all the Social Security reserves will have been drained and the income flowing into the program will only be enough to pay 75 percent of scheduled benefits. If that sounds tolerable, consider that two-thirds of seniors rely on Social Security as their main source of income. The average annual benefit is $14,000. Those who care most about avoiding such painful cuts ought to be working on ways to bolster the program's finances -- and soon, when the necessary changes will be less drastic than if action is postponed. Instead, they continue to pursue a maddening strategy of minimizing the existence of any problem and accusing those who seek solutions of trying to destroy Social Security. "Social Security is on sound financial footing for years to come despite the retirement of the Baby Boomers and the worst economic downturn since the Great Depression," the Economic Policy Institute wrote in a report last week. The current focus of the Social Security denialists' ire is President Obama's National Commission on Fiscal Responsibility and Reform, which they view as a stalking horse for gutting Social Security. A new group, the Strengthen Social Security Coalition, which includes the AFL-CIO, the NAACP and the National Committee to Preserve Social Security and Medicare, asserts that the president's two choices to chair the panel, Democrat Erskine Bowles and Republican Alan Simpson, "sent a clear message. Social Security is on the chopping block." The groups' list of what changes are unacceptable is longer than what it would consider: no increase in retirement age; no reduction in benefits; no "means testing." Rather, they say, the adjustments should come from the revenue side. Though the possibilities are not specified, they include raising the payroll tax rate, raising the ceiling for income on which benefits are paid or finding a new revenue source, such as the estate tax or a new financial transactions tax.
We would prefer a more balanced solution, one that relies on a combination of revenue increases and benefit adjustments. On the revenue side, it's essential that the funding source come from within the Social Security system itself. The coalition is correct that Social Security should not be used to deal with deficit problems outside the program, but the converse is also true: Getting Social Security on a sustainable footing should not add to the deficit. Raising the payroll tax ceiling to cover the same share of wages that it did in 1983 would make sense, but that would only solve about one-third of the long-term problem. Some adjustments on the benefits side, particularly making benefits less generous for the highest-income recipients, would also make sense.
What does not make sense is preemptively bashing the debt commission. Social Security is not a cause of the current or future debt, but putting it on a sustainable footing is essential to getting the nation's fiscal house in order. Doing so quickly is a condition for making the changes as painless as possible for those who rely on Social Security the most. The debt commission would perform an important service by ignoring the denialists and tackling this topic.