Restoring balance to Social Security

Sunday, March 6, 2011; 8:02 PM

In her profile of Jacob J. Lew, director of the Office of Management and Budget ["Jacob Lew returns to work on fixing nation's finances, again," Feb. 25], Lori Montgomery described the 1983 negotiations between President Ronald Reagan and House Speaker Tip O'Neill (D-Mass.) to fix Social Security. She was correct in describing their agreement as including a provision to tax benefits but wrong in describing it as "a key piece of a complex deal that also included a gradual increase in the retirement age."

Reagan and O'Neill did not agree to an increase in the retirement age. That change was added later by Congress, in the 1983 amendments to the Social Security Act.

Why does this matter? The package agreed to by Reagan and O'Neill was balanced - that is, about equally divided between revenue increases and reduced outlays for benefits. But the added-on increase in the retirement age is a benefit cut.

As a result of that provision, Social Security's finances have been skewed since 1983, relying more on benefit cuts than on revenue increases to remain solvent. To rectify that, Congress should be focusing on revenue-raising strategies such as lifting the cap on wages taxed for Social Security. That would restore the balanced approach to Social Security's financing that Jack Lew helped negotiate in 1983.

Thomas N. Bethell, Washington

The writer is a visiting scholar at the National Academy of Social Insurance.

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