This week on Facing the Future we touched the “third rail” of American politics, Social Security, and lived to tell about it. Of course, none of us is running for public office. Our guest was Andrew Biggs, senior fellow at the American Enterprise Institute (AEI). Biggs has extensive experience with Social Security reform, having served on the staff of the President’s Commission to Strengthen Social Security in 2001, and as an associate director of the White House National Economic Council in 2005. He has also served as the principal deputy commissioner of the Social Security Administration (SSA).
Concord Coalition policy director Tori Gorman and chief economist Steve Robinson joined me for the conversation with Biggs. Later in the program, Robinson explained his new issue brief, “Social Security’s Debt Limit Escape Clause.”
Social Security reform is back in the news as the Congressional Budget Office (CBO) now projects that the program’s trust fund insolvency date (2033) has moved within the 10-year budget outlook.
Sadly, there is little consensus on reform options, let alone the urgency of taking any action at all. Biggs suggested that we may need to look back in time to find a way forward. Last week, he co-authored a Washington Post op-ed with his AEI colleague Jim Capretta titled, “How Biden helped Congress cut Social Security 40 years ago.”
That intriguing premise goes back to 1983 and a package of reforms Congress, including then Senator Joe Biden, and President Reagan enacted that has kept Social Security solvent since then.
“What we have today aren’t plans for fixing Social Security. They are really promises or pledges. President Biden has said he will not cut any Social Security benefits. He said he will not raise taxes on anyone earning under $400,000. That makes it almost mathematically impossible to fix Social Security. Former President Trump is kind of playing the same card. He doesn’t have any plan for actually fixing the system. So we have to go back to 1983 almost 40 years ago to find how Congress actually came together on a bipartisan basis to make the program solvent for the future and they really did accomplish a lot,” Biggs said.
As described by Biggs, “The real action [of the 1983 reforms] was speeding up a payroll tax increase that was already on the books, raising the retirement age and imposing a means-test on retirement benefits. So it was more of a benefit cut heavy plan than a tax increase heavy plan.”
“One of the people who voted for that was then-Senator Joe Biden,” Biggs observed. “Unfortunately, he has put himself in a bit of a corner today by ruling out almost everything that was included and that he supported in that 1983 fix.”
Delaying needed reforms shifts more of the burden to young generations. Biggs pointed out that, “because Social Security is underfunded by somewhere north of $20 trillion, it means we need to have either $20 trillion of tax increases or $20 trillion of benefit cuts or some combination of them to keep the system solvent. The longer you wait, it means the more Americans are exempted from bearing any of that burden.”
Gorman asked whether voters have a responsibility for creating space to allow a fact-based discussion about reform options. “Absolutely, they have responsibility,” said Biggs. He noted, however, “it is human nature to procrastinate and kick the can down the road and not bear the cost of these difficult decisions. Voters don’t want to do it and so their elected officials don’t want to do it either. Both of them benefit; one financially, the other politically, forcing that burden onto future generations. It is morally wrong, but that in fact is what is happening.”
In our final segment, Steve Robinson explains what might happen with Social Security checks if the Treasury could no longer borrow to pay the government’s bills. This is no mere hypothetical, since the Treasury Secretary has warned that the statutory debt limit will affect the government’s ability to pay all of its bills on time as early as this June. Robinson said that unlike previous debt limit crises in the 1980s and ‘90s, “there is now an explicit provision of law that says to the Treasury Secretary ‘if you can’t pay benefits any other way you are permitted to disinvest the trust fund to make sure those benefits are paid.’”
But there is a catch to the escape clause, says Robinson. Because Social Security payments are spread throughout the month and because the Treasury says it does not have the ability to prioritize payments to guarantee benefit checks didn’t bounce, the Treasury would have to make sure that its general fund account is never overdrawn by having other checks clear ahead of Social security checks. “It might mean that some of the [trust fund] money might get spent on other things, which is clearly not what Congress intended,” Robinson said.
Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join our guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
