Question: How do you know whether politicians are serious about tackling the national debt?
Answer: They will support reform of the Social Security system.
There is just no way of getting around it. Social Security benefits dwarf all non-defense discretionary program spending put together. There needs to be greater discipline in all government outlays, but we are kidding ourselves if we think that cutting back on food stamps or foreign aid or eliminating particular government agencies will do the job. We must deal with Social Security if we want to pull back our plunge into the debt hole.
How did Social Security get to where we are today, and what needs to be done?
By the end of the 1970s, it was clear that the Social Security program was not going to be able to cope with the upcoming retirement of the baby-boomer generation. In 1981, President Ronald Reagan convened a bipartisan commission to consider all the options and recommend reforms. Its unanimous recommendations resulted in the 1983 passage of a major reform of Social Security. The Social Security trust fund was greatly expanded by increasing the payroll tax 6.2% for both workers and employers. At the same time, the retirement age was gradually increased from 65 to 67, additional workers (including federal civil servants) were brought into the program, and up to 50% of Social Security benefits were taxed (in 1993 this was raised to 85%). None of these were popular measures, but the 1983 reform has proven remarkably successful over the past 40 years and stands as a testament to what can be accomplished with genuine bipartisan cooperation.
But as resilient as the 1983 reform of Social Security has proven to be, it is soon to run its course.
The biggest challenge to the Social Security program is the aging of American society. While the average worker in the 1930s did not live long enough to receive any Social Security benefits, today the typical worker can expect to collect full retirement benefits for 12 years (retiring at age 67 and dying at the average age of 79). Moreover, the population 65 and older is increasing faster than the working age population (15-64 years old), even with the boost we get from immigration. Just 20 years ago, there were 5.4 workers to pay into Social Security for every one person receiving Social Security benefits. Today, there are only 3.8 workers contributing for each beneficiary.
We need an updated Social Security program for today’s reality.
There are a number of ways that the program could be adjusted to continue to function as it has until now. For example:
- Raise or eliminate the ceiling on income subject to payroll tax.
- Gradually raise the age for eligibility.
- Increase the payroll tax rate and/or the tax on benefits.
- Reduce the cost-of-living adjustments or benefit levels.
- Introduce means testing (limit benefits for those with other large sources of income).
Or, as was the case in 1983, some combination of these and other measures.
Importantly, many of the reform measures would kick in over time, meaning that benefits for current recipients, who structured their retirement under the current program, need not be reduced. Future retirees would have time to restructure their retirement under the updated expectations.
We can do this. Prudent and fair social security reform can be accomplished if, as under Reagan, a committee is formed with all sides participating to put forth the needed recommendations. If politicians are too timid to tackle Social Security reform, current benefit levels could only be maintained by vastly increasing the national debt.
We should laud those who take on Social Security reform, not those who refuse to engage for short-term political advantage.
Robert Griffiths is an adjunct professor in the Department of Political Science at Brigham Young University.