Alice Rivlin of the Brookings Institution and John Kingdon, professor emeritus at the University of Michigan, write that Social Security reform should be a top priority for the next president.
The next president and new Congress face a daunting set of challenges come January 2009: Iraq war, troubled economy, global climate change, looming government debt, taxes, health care reform and rebuilding infrastructure, all vying for immediate attention. Such a long "to do" list presents two possible tactics: tackle the hardest problem first or get the easy ones out of the way. We prefer the latter and would start with Social Security.
With the large baby boom generation retiring and Americans living longer, the ratio of workers to Social Security beneficiaries is falling fast. Quite soon the payroll taxes coming into the Social Security system will be inadequate to pay all the benefits promised to retirees. Restoring the system's solvency is crucial to almost everyone's retirement security. The longer we put off setting Social Security on a firm footing, the more expensive the fix will be - indeed, we have waited too long already.
Fixing the Social Security program is relatively simple - far less complex than reforming health care. It requires choosing a combination of revenue increases and benefit reductions, but relatively small changes will do the trick. Emotions run high on which combination is best, but the list of options is short, and political compromise is clearly within reach.
Dealing with Social Security would build rebuild confidence in our elected leaders and give both Democrats and Republicans a legitimate chance to take credit for solving a major national problem. The new president would achieve a major objective, and congressional leaders would score a win as well. That accomplishment would build the momentum and relationships needed for tackling more difficult national problems that require pragmatic cooperation across party and ideological lines.
Of course, everyone has to compromise to accomplish a comprehensive Social Security reform. Republicans have to give up diverting existing revenues into private accounts. But they can preserve private accounts on top of Social Security and strengthen incentives for individual retirement savings without going to "privatization."
Democrats have to accept future benefit cuts, but they need not be drastic and can spare current retirees and lower-income beneficiaries. The package could include future gradual increases in the retirement age and concentrate benefit cuts on higher income people.
As part of the compromise, both parties must agree to revenue increases, but they, too, can be modest and can spare low-income individuals. For example, the cap on income subject to social security tax can be raised in gradual steps.
We know that nothing as politically charged as Social Security can be fixed easily. But saving Social Security is crucial and requires bipartisan agreement. It must be done sometime, and the sooner the better. Let's show that government can function, by solving the Social Security problem early in 2009.
Alice M. Rivlin has directed both the Congressional Budget Office and the Office of Management and Budget, and has served as vice chair of the Federal Reserve. John W. Kingdon is professor emeritus of political science at the University of Michigan.