If WaPo mentions are any indication of an issue’s vibrancy, then it would appear that Social Security is creeping back on the Nation’s agenda.
There was an article on the front page of the Business section by Lori Montgomery last week entitled, “Social Security Up For Discussion,” citing Treasury Secretary Paulson’s remarks to that effect. Today’s WaPo has a lead editorial, “Up From the Depths,” noting that yes, indeed, Social Security reform may indeed be back on the agenda. Accompanying the WaPo editorial is an op-ed by Sebastian Mallaby on the topic (he may have written the editorial, too, not sure), posing a middle way on personal accounts.
We don’t necessarily agree with all elements of all three pieces, but we think it’s an encouraging sign that one of the most nettlesome issues we face may be finding its way back on the agenda. As today’s editorial rightly points out, “A worker who is 30 can’t entrust her retirement to a program that will run short of money as she turns 70.” Decisions that will impact the long-term solvency of this key program must be made now.
Oh, and don’t forget to ask your Senators and Representative to sign the pledge.
UPDATE (By Carter Wood): The political buzz builds in D.C. newspapers. Today …at least. The Examiner carried an op-ed by Cato’s Michael Tanner arguing that reform is inherent in private accounts.
November 30th, 2006 on 1:36 am
Reuters today printed another story about how Sec Paulson is trying to start bipartisan talks.
See http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2006-11-28T154137Z_01_N28233940_RTRIDST_0_USA-SOCIALSECURITY-PAULSON.XML
November 29th, 2006 on 6:46 am
One of the interesting things about this article is how it reflects some pervasive public confusion about who would be affected by raising the cap on taxable wages.
The article says that the revenue would come exclusively from the top 6%. That’s not true. Approximately 22% of workers have income above the cap at some point in their working lives, and would thus see their taxes raised by an increase in the cap.
The confusion arises because of the distinction between annual wage levels and lifetime wage levels. Some of you may remember that when the President last year proposed progressive indexing of the benefit formula, he was subjected to attacks such as this: “Workers earning $58,000 a year would be hit with a 42 percent benefit cut for survivors and retirees. Middle- class Americans making more than $58,000 would receive an even larger benefit cut.” (from a statement by Leader Pelosi.)
That statement is inaccurate in several different ways, but the main point here is that this “middle-class” worker is actually in the top 15% of wage earners. The earnings figure that SSA keeps for people is much lower than many people realize, because it averages in early, low-earnings years, zero earnings years, and also it doesn’t count any earnings above the cap.
The reality is that the average person who would be hit by the tax base increase has *lower* income than the so-called $58 K worker in this example.
What happens in the Soc Sec debate is that some analysts tilt the playing field between tax and outlay changes, by using SSA’s lifetime average wage figures when talking about benefit affects, but switching to annual figures when talking about tax increases. Very few in the press get this, unfortunately, and it really tilts the discussion in the direction of tax increases.
This isn’t to suggest that all options shouldn’t be on the table, but there needs to be better public education about who would be affected by a tax max increase.
November 29th, 2006 on 6:29 am
The press coverage of Social Security in recent weeks has been very constructive in noting the need to fix Social Security as well as highlighting some of the ideas that various participants are putting on the table.
As Tim Penny correctly says, the Social Security debate will serve us best if everything is left on the table. Secretary Paulson has implicitly expressed his agreement with this view by saying repeatedly that he and the Administration wish to engage in discussions “without preconditions.” It would be a bad thing for the country if some were to use others’ advocacy of ideas they oppose as an excuse for failing to participate in a Social Security solution. People with different views need to come together and to fix Social Security permanently for our children and grandchildren.
November 28th, 2006 on 3:32 pm
Commenter Hank Cox is right on. I would add, however, that the crunch starts after 2008. 2009 is when the Social Security actuaries estimate the surplus Social Security money, that Congress spends each year on other programs, begins to recede. Thus, in 2009, the Congress will have to start what will be an annual and growing quest for more money or to reduce benefits. YIKES!
November 27th, 2006 on 7:54 pm
Letââ¬â¢s hope Social Security gets back on the nationââ¬â¢s agenda. New Majority Leader Steny Hoyerââ¬â¢s Saturday radio address suggests he recognizes that Social Securityââ¬â¢s finances are a pressing issue:
ââ¬ÅWe will allow the government to negotiate lower drug prices for Medicare patients; rollback taxpayer subsidies for the oil industry, and fight to free America from its dependence on foreign oil; and work to strengthen and guarantee Social Security.
Furthermore, we will restore fiscal discipline ââ¬â because it is immoral for this generation of Americans to force our children and grandchildren to pay our bills.ââ¬Â
November 27th, 2006 on 11:37 am
I am glad to see several articles and columns in recent days suggesting that Social Seceurity reform could and should be on the action list inthe coming Congress. Some of these accounts, however, seem to focus on what has to come off the table for engotiations to proceed. That is the wrong focus. Naturally, as he has often said, President Bush prefers not to raise taxes as part of a Social Security fix. And many Democratic congressional leaders continue to be loudly critical of personal accounts, pejoratively and inaccurately labeling them a ââ¬Åprivatization scheme.ââ¬Â But if taxes and personal accounts are ââ¬Åoff the table,ââ¬Â then all that is left is benefit cuts and borrowing. No one would suggest that those two options represent any kind of solution to the serious demographic, generational and budgetary challenges facing Social Security.
Like a Thanksgiving feast, the Social Security reform debate will serve us best if everything is left on the table. Taxes, benefit cuts and personal accounts must all be discussed ââ¬â and then ââ¬â drawing from those elements ââ¬â a comprehensive solution must be crafted. I am pleased by recent press stories that suggest that it is time for President Bush and the Democratic Congress to address this issue – but the discussion must allow all options to be expolored.
November 27th, 2006 on 8:40 am
An excellent blog, but the blogster missed a fascinating addition to the Social Security language. In both the lead editorial and in Mallaby’s separate commentary, we are told about “notional assets in the Social Security Trust Fund” and “the notional Social Security Trust Fund.” I have not run across that term “notion” before, but I believe it is Mallaby’s way of acknowledging that there are no assets in the so-called Trust Fund, only federal bonds. In this sense, “notional” must mean “nonexistent.”The Trust Fund is a liability, not an asset. Where Mallaby lets his readers down is in not sayng this up front and sharing the obvious conclusion, namely that the crisis will begin in 2015 when Social Security begins to pay out more than it takes in. The idea that the nonexistent Trust Fund will sustain the system until 2042 is simply ludicrous.