At a forum last week on Capitol Hill hosted by The Concord Coalition and the Bipartisan Policy Center (BPC), experts from across the political spectrum shared their thoughts about retirement security in America. While several different policy proposals were discussed, one area of broad consensus was that Social Security is a critical component of retirement security — and that lawmakers must act to strengthen the program.
At a forum last week on Capitol Hill hosted by The Concord Coalition and the Bipartisan Policy Center (BPC), experts from across the political spectrum shared their thoughts about retirement security in America. While several different policy proposals were discussed, one area of broad consensus was that Social Security is a critical component of retirement security — and that lawmakers must act to strengthen the program.
Sen. Kent Conrad, who co-chairs the BPC’s Commission on Retirement Security and Personal Savings, kicked off the event by pointing out that “ultimately, almost all of us will rely on Social Security for the base of our retirement income needs.”
“Social Security has serious financing problems,” Conrad also said. “We’ve not really grappled with these issues, and the longer we wait, the more draconian the solutions will have to be.”
However, he suggested an even broader reform agenda: “While fixing Social Security will involve tough decisions on revenues and benefits, we shouldn’t just be looking at this through the lens of making the program solvent. Social Security, many of us believe, also needs to be modernized.”
Jason Furman, chairman of the President’s Council of Economic Advisers, said in his prepared remarks: “The key question is what improves the national welfare and ensures opportunity and security for all Americans. Ensuring that our fiscal future is sustainable is necessary to achieving that goal, but it is not sufficient and it is not an end unto itself. Instead, our goal should be strengthening Social Security and improving its ability to deliver retirement security for Americans, which, to be sure, includes extending its solvency to prevent abrupt and dramatic benefit reductions.”
A panel of experts who spoke about Social Security between Conrad and Furman voiced similar sentiments, as did a later panel that focused on private savings.
“We should ask: What’s the basic purpose of the system? It’s to provide adequacy in old age,” said Gene Steuerle, co-founder of the Urban-Brookings Tax Policy Center. He suggested that Social Security reforms should be paired with private pension reforms to boost personal savings and put a greater focus on equity. He said this could be accomplished by modernizing the benefit structure and increasing taxes, though he was also “reluctant to go too far on the tax side.”
“I’m in favor of raising taxes,” Steuerle said, “but…in a system where all the growth in government is going to those of us who are older, I’m reluctant to raise taxes just to support more old age systems. I want to raise taxes to support infrastructure, investments in children, and a lot of other things.”
Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, countered that fixing Social Security’s financial problems predominantly through benefit reductions would inevitably jeopardize vulnerable retirees. He pointed out that nearly two thirds of seniors rely on Social Security for over half their incomes and have limited alternatives to fall back on.
“I don’t mean to say that we should exclusively close the gap on the tax side,” said Bernstein. “There should be balance. But I’m here to warn everyone who can hear me: I don’t think there’s nearly enough [potential savings] on the benefit side without cutting to the bone for those who depend on this income.”
But no matter the specific solutions they advocated, all three panelists agreed that policies to address Social Security’s challenges should be adopted sooner rather than later.
“Before talking about what to do, I think we need to emphasize ‘Just do something’,” said Doug Holtz-Eakin, president of the American Action Forum. “The [default] is to keep Social Security solvent by cutting benefits 25 percent across the board in a little under 20 years — that is a disgraceful plan and is no way to run a pension system.”
He went on to note that with the vast majority of the Baby Boomer generation over 55, it has become increasingly difficult to exempt them from any changes to the program. “People tend to think this problem is 20 years away, and that’s just not true. There should be a greater sense of urgency that surrounds this whole issue,” he said.
In his prepared remarks, Senate Finance Committee Chairman Orrin Hatch of Utah also emphasized the importance of acting sooner rather than later:
“I believe, as do Social Security’s Trustees, that it would be a mistake to wait until around the early 2030s to address Social Security’s financial imbalances and modernize the program. And there is no reason to wait to discuss and analyze the available options. Moreover, in my view, the longer we wait, the more disservice we do to younger generations of workers who, with deferred action, will face worse options in terms of taxes paid and benefits received.”
Hatch and other pro-reform leaders could force such action next year, when legislation will need to be passed to prevent the exhaustion of Social Security’s Disability Insurance (DI) trust fund. Absent congressional action by the end of 2016, there would have to be an across-the-board cut in disability benefits 19 percent.
Some have advocated simply reallocating payroll tax revenue from Social Security’s retirement program to shore up DI. Conrad, however, called the need to address the solvency of the DI trust fund “an opportunity to address these broader retirement issues.”
Hopefully, today’s lawmakers will heed the former senator’s advice and take advantage of this opportunity to make comprehensive reforms that strengthen both Social Security and the private savings system. To do otherwise would simply be kicking the can down the road again, something which we clearly cannot afford.
