Opportunism Knocks II

To prove that this post on Andrew Olmstead isn't just bad faith, let me once again reiterate that I really do think there are reasonable changes to be made to Social Security and put a few ideas on the table. My basic approach is guided by the belief that, contrary to media myth, there's nothing wrong with "punting" the problem down the road to some degree. This is for two reasons. The first is the inherent uncertainty of the sort of economic forecasts we're dealing with. It's silly to overreact to merely hypothetical problems that can be dealt with later when we know more. The second is that there's something inherently silly in believing that lawmakers in 2005 can actually determine policy in 2045. There will be many elections and new people in office decades from now. The idea of a "permanent fix" is a bit of an illusion. We don't need to entirely close the projected gap. One thing we should constantly be doing is looking for ways to improve economic growth (real tax reform would be a good place to start) which would do a great deal -- or maybe everything -- to solve our problems. But we should look on ways to mitigate them if we can. The priority should be acting quickly on the least-painful solutions.

Thus, the number one change we should make is to truly universalize Social Security by adding to the program the small number of workers (currently mostly employees of state and local governments, unless I'm mistaken) who aren't currently covered. This helps the program's finances and it helps them more the faster it's done. There's no reason for Republicans to object to the change except for the minor fact that they actually want Social Security to go bankrupt, since it provides an excuse for eliminating the program. The next thing is to improve our immigration policy. The president has been hazy on the details here, but he says he wants a program that will increase the number of immigrants who are working in this country legally. The reasons to do something along these lines are legion, and the benefits to Social Security are among them. The current SSA projections are based on the absurd notion that there will be an absolute decline in the number of immigrants to the USA. A better policy would both avoid that consequence and increase the number of immigrants who are actually paying taxes (because they're legal), both of which would improve the financial situation.

For now, I think those two fixes would suffice. They would push the Trust Fund depletion date to over fifty years in the future. That's plenty of time to work on pro-growth reforms to the tax code and the health care system that could ensure Social Security never goes bankrupt. But since the media dogmatically demands "painful" changes be made in the form of tax hikes and benefit cuts, I'll come out in favor of some tax hikes and benefit cuts.

The first piece of "pain" would be uncapping the payroll tax. Since I don't really believe in pain, I would ideally combine with with a small lowering in the FICA rate (such that it would still be revenue-positive) but doomsaying masochists can leave the rate the same if they prefer.

Now for benefit cuts. The most popular solution is raising the retirement age beyond the already scheduled lift to 67. I think this is a mistake. Life expectancy at 65 isn't actually rising all that quickly, and some workers really do need to retire in their sixties. Higher retirement ages are a kind of regressive in a sense that's pretty morally depraved -- altering a retirement program to make it less useful to the people most in need of a retirement program. There is, I think, a better way. Social Security provides an option to retire "early" at a reduce benefit rate. This is useful because, as I say, human needs with regard to their social insurance vary according to life history and occupation. But we have a bit of a problem. Over time, the proportion of people retiring early has been steadily rising, and it's now at 70 percent. That indicates that something's gone wrong with the formula. The reduction in benefits is supposed to be actuarially fair (i.e., you get the same aggregate sum over the course of a lifetime, just spread out longer) but it appears based on the extaordinarily lage number of people retiring "early (in light of the fact that most people retire early, we should say that the others are retiring "late) that it is not.

A commission relatively isolated from political pressures should be established and empowered to revise the early retirement cut formula downward so as to make it actuarially fairer and preserve this fairness in light of whatever demographic trends may occur. Further, this commission should be empowered to eliminate the concept of a "normal" retirement age. They ought to devise an actuarially fair formula by which workers may delay the date at which they begin drawing benefits as far back as they choose. These two changes will both reduce the growth in expenditures, and improve the worker-retiree ratio by eliminating disincentives for people inclined to keep working longer to do so.

Last but by no means least, we should take a good hard look at the issue of age discrimination in the workforce. As we move to a society with an increasingly-large proportion of old people in it, it's important that senior citizens (and younger people in their 50s who are often victims of age discrimination) be empowered to contribute to society commensurately with their abilities. This, too, will improve the worker-retiree ratio and, therefore, Social Security's finances.

Private investment accounts are another matter. Helping more people own equities is a reasonable goal. Boosting the savings rate is also a worthwhile goal, but probably better tackled on the debt-side by reforming the credit card industry and predatory lending. These are things we should look at along with tax reform and health care reform, ideally after my "pain free" reforms and before we start looking at the "painful" ones. Their relationship to Social Security, however, is tangential at best, and better savings policy is not a replacement for better social insurance policy.