WASHINGTON -- The Concord Coalition said today that President Bush's suggestion to reduce Social Security's long-term cost by modifying the benefit formula is a positive step in the debate over how to shore up the system's finances.
“Cost saving measures are an essential part of any Social Security reform plan -- with or without personal accounts. The President deserves credit for recognizing this fact by proposing a change in the benefit formula that would substantially improve the system's fiscal sustainability while preserving all promised benefits for those who rely on them most. This change alone would not be enough to close the system's financing gap but Congress should give it serious consideration as part of an overall reform plan,” said Concord Coalition executive director Robert L. Bixby.
“The idea deserves consideration because Social Security currently promises far more than it can afford to pay. One of the main reasons for this is that future benefit levels are automatically scheduled to rise not only nominally, but in real value. In other words, they will be worth more because they will rise faster than inflation. Benefits can therefore be reduced from projected levels and still grow relative to the value of today's benefits. Some will insist, however, that this would result in deep ‘benefit cuts' when compared to the current system. But it is fundamentally unfair to judge any reform plan against the false hypothetical that the current system is solvent and can deliver everything it promises. It can't. The relevant comparison for any reform plan is with what current law can deliver, not what it promises,” Bixby said.
“There are only two options for addressing the gap in Social Security's finances: reduce promised benefits or raise taxes to pay for them. It is easy to demagogue either option because they require everyone to accept the notion that there is no free lunch. However, if current efforts to restructure Social Security are to be effective, these hard choices must be part of the solution. While there is plenty of room for discussion about the proper mix of any reform package, the President's proposal for changing the benefit formula should help shift the debate toward these fundamental questions. It is a positive step,” said Bixby.