“Kicking the Can” Would Lead to a Missed Opportunity for Social Security Modernization - Barrons.com
Social Security’s trajectory toward insolvency has been a known fact for decades. Since the 1990s, the program trustees’ annual report to Congress has cited the impending depletion of program reserves, with each report projecting the expected year of full depletion and the resulting across-the-board benefits cut that would result. Now, as explained in the most recent trustee’s report, we’re within a decade of facing this catastrophe.
Although current legislative and political priorities may have moved Social Security’s problems further back on the congressional burner, many are aware that the calendar pages continue to turn. In the meantime, proposals are surfacing from time to time as some lawmakers continue to explore approaches to deal with the solvency issue, as evidenced by the re-introduction earlier this week of Rep. John Larson’s “Social Security 2100” bill (see post). And other approaches to resolving the long-term solvency issue are expected to surface in the 118th Congress.
While many sources work on “fixes” to ward off the projected benefits cut, there is one school of thought emerging that suggests the solvency crisis presents an opportunity to “reimagine Social Security” by recognizing the degree to which America’s demographic picture has evolved since the program was designed in the 1930s. In a post today on Barrons.com, senior writer Elizabeth O’Brien offers an extensive analysis of viewpoints on what is to be done with Social Security as its point of insolvency looms, examining three separate pathways that would address the long-term funding problem via varying philosophies. Read the full post here.
In summary, the pathways Ms. O’Brien discusses address the fundamental question, in the words of American Enterprise Institute senior fellow Andrew Biggs, of “What do we want this program to accomplish?” Competing approaches are explored, from maintaining the status quo via traditional approaches–raising tax revenue, cutting benefits, or a combination of both–to extending the full retirement age, to instituting additional means testing (remember that the program already has de facto means testing embedded in its benefit calculation formula), to mandated savings programs. Overall, Ms. O’Brien’s article presents a thought-provoking view of what outside-the-box thinking could accomplish relative to Social Security’s long-term design.
While we’re on the topic, it’s worthwhile to note that one organization has developed a plan embracing the thought that the solvency problem presents an opportunity for innovation. The Association of Mature American Citizens (AMAC) believes Social Security must be preserved and modernized. This can be achieved without tax increases by slight modifications to cost-of-living adjustments and payments to the highest income beneficiaries plus gradually increasing the full (but not early) retirement age. AMAC’s plan also increases the threshold where benefits are taxed and then indexes them for inflation, and the plan eliminates reducing people’s benefits for those choosing to work before full retirement age. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with a great many congressional offices and their staffs over the past decade. See it here.