Stephen Ohlemacher discusses the changes needed to save Social Security. It would be an improvement on the conventional wisdom but it misses much. We should start by offering brickbats to FDR and his brain trust. Social Security has been a problem for most of its 80 years because it was poorly designed.
He quotes the acting Commissioner, Carolyn Colvin, on the need for change now,
“The more time that they take, the less acceptable the changes will be because there needs to be adequate time for the public to prepare and to adjust to whatever changes Congress will make,”
Well, that is partially true. More importantly, the trust fund is a best problematic. The federal government has borrowed $2.8 trillion from Social Security. Since it “owns” Social Security, when we consolidate the federal government there is no asset or liability for the consolidated entity. If you don’t like the accounting perspective, another way to think about it is that the government will need to redeem the bonds held by Social Security. How will it pay for them? It will borrow more, spend less on other programs, or tax more. None of these options, especially given our debt level, are enticing.
Change very soon is imperative for Social Security. Compare it to
Global Warming Climate Change. Folks have argued it is imperative to act now but the theories, outcomes, and alternative actions are all questionable for Climate Change. Social Security is just the opposite. Although Ohlemacher leaves out one obvious option, means testing, the options (higher taxes, increase retirement age, and COLA adjustment) and their outcomes are well known and listed in the article. Ohlemacher also leaves out his own reporting that Social Security overpaid disabilities by nearly half. It is a government program so there are are doubts that all the savings can be realized but we might do better.
We would also consider increasing benefits at the low end. The last part is a challenge to provide support without eliminating incentives. You cannot consider such action unless you solve the basic problem first.
How do you solve the basic problem? We support means testing (with the phase-in period starting now), increasing the retirement age, and COLA adjustment. We do not support increasing taxes because it is a drain on the economy and a bad deal for the individuals. Developing the means testing system requires some thought. Social Security involves difficult choices but we know the outcome of the choices. It should be part of every political debate. The only unacceptable answer is not provide a solution.