Social Security Reform, Back in the Spotlight

A recent op-ed by Mark Duggan, an economist who directs the Stanford Institute for Economic Policy Research (SIEPR), and a podcast by Charles Blahous, a former public trustee of Social Security, highlight the programs projected shortfalls on the occasion of its 88th birthday. Both give appropriate updates on the financial condition of the program.

Social Security was one of the topics featured regularly on my original blog, VoxBaby, from 2004 - 2008. A guide to those posts is available here. Social Security, and its possible reform to include personal accounts that would build up assets outside of the trust fund, has been a topic of interest and research since the mid-1990s. At the time, we had the Baby Boom generation in the workforce in some of its most productive years. Had we started reform then, we might have tapped the resources of this generation to help close the projected fiscal gap. With all Baby Boomers now "at or near retirement," the phrase that seems to trigger political immunity from having to contribute via benefit reductions or tax increases to provide more financing, that window has closed. There is now no longer an opportunity to meaningfully prefund future liabilities. Those future liabilities will soon be current liabilities. Failure to act sooner has increased the burden on all subsequent generations.

I would call your attention to this post, What Social Security Reform Should Democrats Propose?, written on the eve of the 2004 Presidential election in which President Bush's plans for reform were relevant. It refers to the book written originally in 2003, Saving Social Security: A Balanced Approach, by Peter Diamond and Peter Orszag. My expectation is that as the date of trust fund insolvency approaches, policy makers will eventually implement most of the changes described in their approach. Those immediate tax increases and phased-in benefit reductions will have to be updated to the present -- larger in all cases -- since we wasted two decades not acting to solve a crisis whose arrival was completely predictable.