Decision Time On Social Security?

President Bush has made Social Security reform the number one domestic policy initiative of his second term. In doing so the President deserves credit for bringing this issue to the front and center of American political life and touching off a spirited national debate. Anyone who has read even a small sampling of the massive amount of information currently circulating about Social Security has undoubtedly learned new facts and insights about the system. That’s all to the good.

Still, Social Security remains political dynamite—the third rail of American politics. That’s the primary reason that President Bush…aside from his proposal for private accounts…has said precious little, and made no specific proposals to Congress, about the difficult choices required to shore up Social Security’s finances. The Administration has instead decided to rely on Congress, various think tanks, and other influencers to send up trial balloons for various reform ideas.

Of course, the Administration is not pursuing this strategy because it lacks ideas. Over the last decade, two separate presidential commissions, one under Clinton and the other under Bush, have analyzed innumerable fixes to Social Security. What’s been lacking is a bipartisan political consensus for how to proceed that provides appropriate political cover to implement seemingly painful solutions. Douglas Holtz-Eakin, the director of the nonpartisan Congressional Budget Office, has characterized current law as the “wait and reform strategy.” The public policy question is: “Would we like to proactively reform Social Security in a different way?” At least since the early 1980’s, we have taken a pass on that opportunity. Will this time be different? We hope so.

Societal Choice

The reason Social Security policy is so complicated and resistant to easy consensus-building is that far more than just dollars and economics is at stake. Value judgments about the role of government, income inequality and redistribution, corporate governance, consumer sovereignty, and ownership, to name a few, are deeply embedded in the various reform proposals. As the Baby Boom generation begins to enter retirement later this decade, the larger question of how much of society’s resources we want to devote to an aging population will become increasingly urgent.

The just released report of the Social Security trustees projects that under current law the combined expenditure for Social Security and Medicare, including the new prescription drug benefit, will rise from 6.9% of Gross Domestic Product (GDP) today to 20% of GDP at the end of the 75-year projection period used by the Social Security administration! Notably, growth in Medicare expenditures accounts for approximately 84% of that increase, underscoring another point made by the Trustees: Medicare is a far more pressing fiscal problem, today and in the future, than is Social Security. But that’s an article for another Commentary.

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