"Social Security Shell Game"
By Bob Kerrey and Warren Rudman
The Washington Post
August 11, 2002
Wall Street's slump and the disappearing budget surplus are shaping this year's campaign rhetoric on Social Security reform. It's easy to see why. These events have taken two cherished free-lunch options off the table. Politicians can no longer claim that investment returns from a never-ending bull market or general revenue transfers from perpetual budget surpluses will save them from making hard choices.
This development should spark a more realistic debate on genuine reform options. But the clear danger is that without a free lunch to promise, politicians will fall back on an equally bad option: the Do Nothing Plan. Voters shouldn't let that happen.
In just six years the baby boomers will begin receiving Social Security checks. Then, the number of workers whose wages are taxed, relative to the number of beneficiaries who receive the proceeds of the tax, will begin to decline sharply. Before Tiger Woods turns 50, the number of beneficiaries will grow by at least two-thirds, while the number of workers will barely budge. Doing nothing means deep benefit cuts or steep payroll tax increases for future generations, which is why the Social Security trustees warn that prompt action is essential.
Suppose that a member of Congress introduced legislation called "the Social Security Do Nothing Act." Under this bill, promised retirement benefits would be cut by 16 percent for today's 30-year-olds, by 29 percent for today's 20-year olds and by 35 percent for today's newborns. Alternatively, payroll taxes would go up by roughly 40 percent in 2041. How many politicians would rush to endorse this bill? And yet these are the choices under the Do Nothing Plan.
Today's political heat is primarily aimed at three reform plans produced by the president's Commission to Strengthen Social Security. Critics argue that the commission's plans would result in deep benefit cuts, fiscally irresponsible general revenue transfers and undue risk, when compared with the current system in a hypothetically solvent condition.
It is certainly fair to criticize reform plans on policy grounds. But it is fundamentally unfair to judge them against a standard that assumes the current system can deliver everything it promises. It can't. Today's Social Security system promises far more in future benefits than it can possibly deliver. The relevant comparison for any reform plan is with what current law can deliver, not what it promises.
No realistic reform plan looks good when compared with the false hypothetical of a perfectly solvent system. Reformers have the burden of saying what changes they would make to a system that is popular but unsustainable. Critics can sit back and take pot shots at politically painful options without having to say what they would do instead.
We have a simple suggestion to improve the dialogue. Critics of the commission's proposals should come up with their own plans for shoring up Social Security. They should be specific about the benefit cuts and tax increases they recommend and the amount of general revenues that would be required. A real debate then could take place -- not one between the commission's plans and an impossible ideal but between the commission's plans and the plans of its critics.
The public should ask: How does each plan affect total benefits, total taxes and different beneficiaries -- the retired, disabled and survivors? How will each plan affect national savings? What are the risks? Do the plans provide the resources to pay for promised benefits, or do they just balance the fund on paper? Do they make Social Security permanently sustainable?
We should stop playing political shell games with this issue. If we do not have the political will to solve the Social Security problem now, we can't hope to do so when the baby boomers start collecting benefits -- not just for Social Security but for Medicare and Medicaid as well. The problems facing our health care programs are much more daunting than Social Security. These three programs together are expected to double as a share of the economy within 30 years, putting unthinkable pressure on tax rates, the economy and the budget.
Not acting is itself a choice -- one that has grim consequences for today's midlife adults and even bigger ones for their children. Politicians of both parties should get behind specific reform plans or be held accountable for supporting the consequences of the Do Nothing Plan.
Bob Kerrey, a former Democratic senator from Nebraska, and Warren B. Rudman, a former Republican senator from New Hampshire, are co-chairs of the Concord Coalition.
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-- Marta Russell Los Angeles, CA http://www.disweb.org