Social Security: The Buzz Begins Anew

By October 5, 2006General

Few issues in our lifetime have been as demagogued as Social Security. Groups like the AFL-CIO and AARP had made it their raison d’etre to scare the bejesus out of seniors any time anyone is brave enough to mention that we desperately need reform. But in the last few days, we’ve heard from some influential commentators on the right, left and center on this topic, with voices not of hysteria but of reason:

– On Monday, the WaPo’s Sebastian Mallaby — a guy we assume doesn’t vote Republican — wrote this piece about the Dems entitled, “A Party Without Principles.” He spent a fair amount of time on Social Security, lamenting the Dem’s inaction, noting:

“If Democrats cared about poor women and minorities, they would be clamoring to reform Social Security. But instead they get a childish gratification out of stamping their feet and refusing to discuss the subject…[W]hen it comes to blocking entitlement reform, the Democrats ride out to battle.”

On Wednesday, the respected Bob Samuelson wrote an op-ed in the WaPo about the implications of our population growth, now hitting 300 million. Says Samuelson:

“Aging and immigration — the big population trends — are vexing. By 2030 the 65-and-over population will be about 20 percent of the total, up from about 12 percent in 2000, the Census Bureau says. That will involve staggering costs for Social Security and Medicare.” (Emphasis ours)

He concludes, “Paying the retirement benefits of baby boomers could easily require federal tax increases of 30 to 50 percent.”

Finally, Fed Chairman Ben Bernanke weighed in yesterday with a major speech to the Economic Club of Washington. In it, he highlighted the need for entitlement reform, accurately terming the current system “unsustainable.” Here’s Bernanke on the looming crisis:

“Although demographic change will affect many aspects of the government’s budget, the most dramatic effects will be seen in the Social Security and Medicare programs, which provide income support and medical care for retirees and which have until now been funded largely on a pay-as-you-go basis. Under current law, spending on these two programs alone will increase from about 7 percent of the U.S. gross domestic product (GDP) today to almost 13 percent of GDP by 2030 and to more than 15 percent of the nation’s output by 2050.”

Bernanke concluded with this:

“[T]he basic lesson is surely right–that the decisions that we make over the next few decades will matter greatly for the living standards of our children and grandchildren. If we don’t begin soon to provide for the coming demographic transition, the relative burden on future generations may be significantly greater than it otherwise could have been.”

The fact that three influential voices — from different points in the political spectrum — have weighed in on this momentous issue is a good sign. Maybe people will get serious about this issue in the next Congress, make some tough decisions and maybe even take some radical steps to ensure the long-term viability of Social Security.

Join the discussion 3 Comments

  • Feverishb says:

    Many thanks for noting the Bernanke speech and the Mallaby piece. Reasonable people can disagree about how best to fix Social Security, but it’s long past the point where we should be in denial about the problem. The data show very clearly that obstructing action on Social Security is the single worst thing that could be done to our kids and grandkids.

    The annual Trustees’ reports are publicly available and anyone who wishes can go to and read them. A few tidbits from the reports that show how severe the problem already is:

    The total shortfall in the program is now $13.4 T in present value. That’s up from $10.5 T since the Trustees began calculating it in 2003. The majority of the increase is attributable to the loss of three years.
    The Trustees project that we’ll hit the cash shortfall wall in 2017, with the annual deficits growing afterwards without bound. Play with the assumptions all you like, the problem doesn’t go away. In fact, the stochastic analysis in the report shows only a 2.5% chance that the deficits can be postponed even beyond 2022.
    Already, the problem over the next 75 years is bigger (even relative to our larger economy) than the one the Greenspan Commission addressed in 1981-83 in a crisis environment. In fact, it’s much bigger if you adjust for the fact that the methodology was changed in 1988. If we measured it the way the Greenspan Commission did, the problem would be nearly twice as big now as the one they saw then.
    It just so happens that the 1991 Trustees’ report also projected that we’d hit the cash crunch in 2017. Since that time the numbers have bounced around a bit, but overall, the date hasn’t moved, net. All that has happened is that we have lost 15 years of the 26 years of lead time we had then.

    The bottom line is that obstructing action ill serves the public. Public servants should bring to the table their diverse perspectives on how to fix Social Security, but at the very least, all sides should recognize that action is imperative, inaction is incredibly costly, and we should commit to solving it before it grows still worse.

  • Lea says:

    I’m glad you printed the quote of S. Mallaby from the Post. He’s right about women and minorities…the Urban Institute (definately NOT a right wing group) and specifically Eugene Steuerle has very interesting policy papers on it.

    Thanks too for quoting Samuelson and Bernanke. How many nonpartisan experts do we need to hear from — with pleas to fix Social Security soon–will it take to wake people up and stop the craziness going on?

  • Heidi says:

    Add to those voices former President Bill Clinton, who said of Social Security, “We all know a demographic crisis is looming. If we act now it will be easier and less painful than if we wait until later.” Even Brian McGuire, of long time reform opponent AARP, said that “Unfortunately, the way this is being discussed clouds the real issue.” And added that those who scream privatization are misleading voters since no one has proposed a complete privatization. That from the group that ran TV ads suggesting that Social Security’s problems were akin to a clogged sink and that Bush’s Social Security plan would “dismantle the program”. Maybe things are turning around. Thanks for spreading the word Pat.