Peter Orszag Says It's Time for Social Security Reform
Before Republicans start talking about private accounts again
Turns out, Americans don't care that much about the deficit. And they really, really don't want anyone to touch their Social Security. But President Obama's deficit commission is recommending rather large tweaks to the program, and Peter Orszag, Obama's former budget director, is arguing that progressives had better get on board. But many are not so eager to tackle the "third rail" of American politics.
The Simpson-Bowles plan recommends four key reforms to Social Security: a more progressive payroll tax, raising the retirement age, giving poorer people a bigger share of benefits, and using a better measure of inflation for cost-of-living adjustments. However, the long-term health of Social Security is not exactly the most pressing problem--right now, payments to old folks add up to 5 percent of the economy, and by 2037 they'll add up to 6 percent--with a deficit amounting to about 0.7 percent of the economy. But, Orszag says in The New York Times, acting now would show the administration is serious about the federal deficit. And lefties should embrace this plan, he says, because the distribution of benefits would be more progressive--not to mention the fact that "the plan would not create private accounts within Social Security — the most controversial issue that came up when reform was last debated in 2005. Why not lock in a reform when private accounts are off the table?"
- One Big Flaw in the Plan, Think Progress's Matt Yglesias writes--and Orszag agrees--is “the idea of increasing the retirement age. To spell this out a bit, on the one hand poorer people tend to work in more physically taxing jobs. So this is a higher burden on them. But what’s more, poorer people have a shorter life expectancy than richer people and this gap appears to be widening. So if you let the retirement age increase according to some metric indexed to the overall growth of life expectancy you’re talking about an extremely regressive measure that cuts benefits most sharply to the most vulnerable. This should really be avoided."
- Progressives Should Sign On, Mother Jones's Kevin Drum. Echoing Yglesias on the retirement age issue, Drum says that fix is "fairly easily done. Bottom line: liberals should be giving the Social Security reform section of the Simpson-Bowles plan a little more love than they have so far."
- A Positive Sign for Conservatives, Daniel Foster argues at The National Review. “We’re at about 14:05 in the 1st quarter on entitlement reform, but this is certainly a good start for Republicans. This is a panel whose recommendations President Obama ominously warned would serve as a test of Republicans’ seriousness on deficit reduction. Its chairs preempt its elected members by going public with a proposal conservatives more or less like and liberals more or less hate, and now it has the qualified backing of Obama’s budget guru."
- Orszag Has to Be Kidding, Digby scoffs at Hullabaloo. "Who knew that Peter Orszag was such a comedian. He tells us that the social security shortfall years from now has nothing to do with the federal deficit but says it should be cut anyway. Evidently, it is necessary to solve a problem that doesn't exist in order to establish 'credibility,'" which could facilitate passing another stimulus later. No way, Digby says: "The idea that social security cuts could buy the administration a chance for more stimulus is delusional. The Republicans have shown that they have absolutely no intention of dealing realistically with health care costs, defense and tax hikes are off the table and the rest is chump change. Any 'deal' will only go toward the destruction of social programs. That's the Grand Bargain, period."
- Why Is Social Security on the Chopping Block? The Huffington Post's Robert Kuttner asks. It "does not belong here at all. America needs more retirement security, not less," Kuttner says. "If you want to get Social Security well into the black for the indefinite future, the easiest way is to restore wage growth -- since Social Security is financed by taxes on wages (which are capped so that the wealthy pay a pittance.) What pushed Social Security (very slightly) into the red is the fact that all the income gains have gone to the top. The chairmen's draft report, with its rhetoric of equal sacrifice, gets 92% of proposed Social Security savings from cutting benefits, and just 8 percent from increasing the income ceiling on payroll taxes. Some sharing. These people do live on another planet -- Planet Wall Street. Erskine Bowles, the Democratic co-chair, has spent most of his life as an investment banker. He began at Morgan Stanley, and now serves on its board, where he collects a fee of $335,000 a year for attending a few annual meetings. That's more than 99 percent of Americans earn for working full time. No wonder the man is so glib about tightening other people's belts. And that's the Democratic chair.”
- Let's Hope Orszag Isn't Reflecting the White House, Joan McCarter cautions at Daily Kos. "Social Security faces an actuarial deficit in 2037. A quarter of a century from now. He says it right there. Maybe that's one of many reasons why progressives have reacted so negatively to the recommendations coming from Simpson and Bowles--that and Social Security has never contributed to the deficit that the commission is nominally dealing with ... The problem right now is jobs. Perhaps Orszag should be spending less time telling progressives what they should believe and more time helping is former coworkers with a plan for boosting the economy."