Failure to reform Social Security

Introduction

During the 2000 presidential campaign, George W. Bush referred to Social Security reform as the “test of presidential candidates” — a test he planned to pass by aggressively pushing his version of reform, without regard for the always touchy politics of Social Security’s finances. Experts agree the program demands changes to survive. “The baby boomers’ retirement, starting this year, ushers in a permanent shift to an older population — and a permanent rise in the cost of Social Security,” said the nonpartisan Concord Coalition. “Finding a cure for the challenges facing Social Security will require reduced benefits, increased revenues, or both.” The Government Accountability Office (GAO) has urged early action to ensure Social Security’s financial solvency and provide future generations with the same benefits as current retirees. The GAO has reported that trust funds supporting Social Security would be exhausted by 2042. In 2005, the president produced his plan, which would have partially “privatized” Social Security by allowing workers to invest a portion of their payroll taxes into private accounts. But Democrats were adamantly opposed to the privatization plan, so Bush managed only to form a study commission on Social Security that ultimately yielded no real solutions. The administration also spent $2.8 million to campaign for its unsuccessful privatization proposal. Congress seemed to have no appetite for seriously addressing Social Security’s finances, so no meaningful action has been forthcoming. Mark Lassiter, press officer for the Social Security Administration, told the Center “there is a need for reform and it must be done in a bipartisan manner.”

Follow-up:
Congressional Democrats, unwilling to negotiate with Bush on his reform proposal, have been banking on a Democrat in the White House to move ahead with Social Security reform. But the apparent choices aren’t getting any easier. President-Elect Obama’s choice to head the Office of Management and Budget, Peter Orszag, has been seen as a frank voice on the seriousness of Social Security’s problems and has written extensively on the subject. “The Social Security deficit can be eliminated only through different combinations of politically painful choices: tax increases and benefit reductions,” he wrote in 2005 with co-author Peter Diamond, in The Economists’ Voice, while serving as a Brookings Institution fellow.