(cross posted at freeforall)
Bob Pozen writes that reform of Social Security is the route to a deal to avoid the looming ‘fiscal cliff.’ I wrote something similar in March, 2011, and followed up with more on my view of the benefits of moving sooner rather than later on Social Security reform, a theme that is echoed in my book. Several quick points about Social Security and the myriad policy problems we face.
- Social Security is not as big a problem as is Medicare (nowhere close), for example, but there is a fiscal shortfall that would result in a 20-25% benefit cut in about 25 years with no action, so something needs to be done. And because Social Security is a simple program (it mails people checks), any fix that was agreed to would work roughly as planned. It truly could be taken off the table by fixing it, allowing for focus on health reform (that will never be finished).
- There are only so many ways to close the fiscal shortfall in Social Security (increase taxes and/or reduce benefits; CBO w options), and none of these options are made better by delay. One reason to go ahead with Social Security is that it can actually be done.
- Health reform is many times more difficult than is Social Security reform. Whether it is implementing the ACA, or the mysterious Republican “step by step” approach that will be unveiled, well someday, there will be many mid course corrections and things that don’t work well under any health reform approach. That is because it is much more complicated than simply mailing checks.
- Progressive reforms such as increasing the minimum benefit, and raising the payroll tax cap could be argued for more forcefully in the context of moving ahead to address Social Security’s fiscal shortfall. Any changes and offsetting benefit reductions for upper income retirees can also be done more gradually the sooner we start.
There is not likely to be much deficit reduction gotten from Social Security over the long run, nor should there be; most of that should come from an increase in taxes collected as a percent of GDP over time, and health care reform efforts that attempt to slow the rate of health care cost inflation. However, a deal on Social Security could be the beginning steps to a more comprehensive deal that paves the way for a long term sustainable budget. And I continue to believe that taking credible steps to address some of our long term problems would help make the case for more short term efforts to boost the economy.We need to walk and chew gum at the same time, but now appear unable to do either.
For me anyway, there would also be a large intangible benefit that would come from seeing our political system practically address some of the problems we face.