On Tuesday, the Senate Finance Committee gathered to ask whether changes to Social Security should be part of Congress’s debate over deficit reduction. The short answer? No.
The reasons are plentiful. Perhaps most importantly, Social Security’s financing challenge isn’t contributing directly to the deficit right now, and won’t for decades. Second, the changes needed to move the program to long-term solvency are relatively marginal. And third, the specter of political disaster hangs over too-ambitious efforts to reform the program.
But most tantalizing of all is the idea that, of all major entitlement programs, the framework of a deal is clearly visible, making members interested in reform reluctant to insert the program into fractious negotiations around a potential budget deal.
“Most members of Congress agree that it’s probably not appropriate to deal with Social Security when Congress is dealing with debt and deficit reduction,” Finance Chairman Max Baucus, D-Mont., said after the hearing.
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That’s not to say there is no connection between the program, the national debt, and the budget deficit. Finance ranking member Orrin Hatch, R-Utah, pointed out that Social Security is currently being financed by Treasury debt held in the program’s trust fund. Those bonds will run out in 2037, at which point the government will either need to raise taxes or cut benefits by nearly a quarter. But changing the program now won’t affect deficits in the near-term.
However, many experts—including those on the Bowles-Simpson fiscal commission—believe the program can be made solvent over time with relatively marginal changes based on increases in revenue collected by the program and reductions in future benefits that exempt the neediest, along with technical adjustments that would more accurately reflect inflation’s effects on the program’s benefits.
“Congress should simply take a first step, pursue incremental options for Social Security, and begin now,” witness Alex Brill, an economist from the American Enterprise Institute, told the committee.
Republicans are also reluctant to take up an ambitious reform effort following the 2005 failure of President George W. Bush’s Social Security privatization initiative, especially in the wake of a financial crisis that laid waste to many retirement plans and could have done the same to private Social Security accounts.
Though House Budget Committee Chairman Paul Ryan, R-Wis., proposed private accounts in his fiscal year 2010 budget proposal, the budget he authored this year only included a framework for a solvency deal that doesn’t mention privatization, much like President Obama’s proposal. Contrast that with the two parties’ clashes on Medicare, and it seems there should be room for accord.
“[On] health care, we know where the Democrats and the president want to go.…. We fundamentally disagree,” Ryan said when he unveiled his fiscal 2012 budget. “Social Security is the area in which I hope we still have room for bipartisan agreement.”
Yet the same fundamental divisions that define broader fiscal discussions also apply to Social Security, with Republicans unwilling to support any kind of revenue increases that Democrats say are necessary to soften any benefit reductions.
“A group of thoughtful, non-ideological experts in a room could come up with a sensible plan, and even there we can’t do it, because you have one side saying, ‘We can’t have revenues on the table,’ ” Jim Horney, a budget expert at the Center on Budget and Policy Priorities, said. “It’s exactly the same thing that’s making sensible, real discussion of deficits difficult.”
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