Thursday, February 28, 2008

Gene Sperling on Bob Ball

Former Clinton national economic adviser Gene Sperling dedicates his Bloomberg column to former Social Security Commissioner Bob Ball, who passed away recently at the age of 93. Ball served as Social Security Commissioner from 1962 to 1973, under both Democratic and Republican administrations. Sperling discusses Ball's influence on the Clinton administration's discussions of Social Security reform and the role Ball played in the debate over personal retirement accounts.

In addition to his career at SSA, Ball was also a member of the so-called Greenspan Social Security commission in 1983, which drafted the most recent major reforms to the program.

Ball remained active in the Social Security debate, including a Washington Post op-ed outlining his own plan to keep the program solvent. Ball proposed several steps to improve the program's finances (an actuarial memorandum from SSA is available here). These include:

  • Increase the taxable maximum wage (currently around $100,000);
  • Invest part of the trust fund in stocks; and
  • Dedicate part of the estate tax to Social Security.
These three steps would address about three-quarters of the 75-year actuarial deficit, assuming stock returns were as projected.

To address the remaining 75-year deficit the plan would:
  • Reduce annual COLA payments by around 0.22 percentage points by switching from the CPI-W to the chain-weighted CPI;
  • Include all state and local workers in the Social Security program.
To achieve "sustainable solvency" -- defined as maintaining a stable trust fund balance relative to annual benefit payments -- the Ball plan would automatically enact a balancing tax rate increase of 1 percentage point at the time at which the Social Security trust fund ratio was projected to begin declining. Under current Trustees projections, this would take place in the year 2023. This tax rate could be adjusted in future years if needed.

More details on Bob Ball's long career are available at this page maintained by the SSA historian.

No comments: