Neither Senator McCain nor Obama has yet published a comprehensive Social Security reform plan. Sen. Obama, to his credit, has offered greater detail than Sen. McCain. However, it may be worth taking a look back at a sense of the Senate resolution passed in 2005 that both Obama and McCain – along with the other 98 Members of the Senate – voted to support. The full text of the resolution is available at the link above, but here are the operative parts for reform. First, consider the basic standard for reform: (1) the President, the Congress, and the American people including seniors, workers, women, minorities, and disabled persons should work together at the earliest opportunity to enact legislation to achieve a solvent and permanently sustainable Social Security system; The references to permanent sustainability is currently more a problem for Sen. Obama than McCain, if only because Sen. McCain has not revealed sufficient details to make judgment possible. Sen. Obama's plan would fix less than a third of the 75-year Social Security deficit and not get particularly close to "sustainable solvency." His campaign's pledge to extend the trust fund's solvency to a half century seems to acknowledge that they may not reach this standard. McCain has offered fewer details, so it is hard to say how he would satisfy this criterion. Section 2 outlines some more specific criteria for reform: 2) Social Security reform-- (A) must protect current and near retirees from any changes to Social Security benefits; (B) must reduce the pressure on future taxpayers and on other budgetary priorities; (C) must provide benefit levels that adequately reflect individual contributions to the Social Security system; and (D) must preserve and strengthen the safety net for vulnerable populations including the disabled and survivors; and For what it's worth, I'm reading part A as simply taking benefit cuts for current/near retirees off the table, though it doesn't say anything about tax increases on those age groups. Part B seems to imply lower future benefits, although Sen. Obama could argue that his tax plan hits such a small portion of the population that it effectively satisfies this criterion. Part C, I believe, would impact progressivity; the system should not be made so progressive, either on the tax or the benefit end, that an individual's benefits are not reasonably representative of his/her taxes. This is an issue both for Sen. Obama and for Republicans who support benefit changes such as "progressive indexing." Part D acknowledges the non-retirement portions of the program, though it's not always clear what "strengthen" is taken to mean in this context.
Monday, June 16, 2008
What have McCain and Obama both voted for on Social Security?
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2 comments:
Looks to me like one of those self-contradictory Congressional wish lists:
2) Social Security reform--
(A) must protect current and near retirees from any changes to Social Security benefits;
Meaning the older are (once more, as after the '83 reform) going to get benefit levels that are more generous for their contributions than the young, who aren't protected from such (downward) changes to benefits. This contradicts (C) below.
(B) must reduce the pressure on future taxpayers and on other budgetary priorities;
By arithmetic, with a paygo system, this means reduce benefits to reduce tax collections and "pressure on future taxpayers". (And leave those trust fund bonds collecting dust unused?) But how are benefits to be reduced...?
(C) must provide benefit levels that adequately reflect individual contributions to the Social Security system; and
See (A) above and (D) below.
and (D) must preserve and strengthen the safety net for vulnerable populations including the disabled and survivors;
Referring back to (B), benefits must be cut in the future.
If following (D) we prioritize preserving the "safety net", the "social insurance" function, that means avoiding regressive benefits cuts that affect persons who rely heavily on Social Security benefits relative to other kinds of retirement income. Those are across-the-board benefit cuts such as delayed retirement age or a flat percentage reduction of all benefits, which are felt the most by people who need their SS benefits.
That leaves means testing high income folk out of benefits -- if you don't reduce benefits paid to low-income folk, and do reduce taxes and total benefits, who's left with benefits that can be cut? But this contradicts (C).
My guess is we'll just keep going down the road started in 1983. The older will be protected, the young and relatively well off will take cuts and lose money outright to the system. So for the young SS will be nothing like it was for their grandparents.
That is, A, B, & D will be followed, while C will go overboard -- or be interperted so that "benefit levels that adequately reflect individual contributions" continually become smaller and smaller for the younger and the more well off.
Warren Buffett's lucky he got his already!
jg seems to have the bases covered.
Let me just point out that (A) is a purely political consideration. It seemed to be the consensus of the Cato convened Conference that followed the 1983 Reform (papers published in the Fall 1983 issue of the Cato Journal under the title Social Security: Continuing Crisis or Real Reform) that cutting benefits for current retirees or workers approaching retirement was a recipe for political failure for any reform proposal, a point made specifically in Butler and Germanis. And President Bush was quick to emphasize the same point in Nov. 2004.
So (A) is just a hedge against electoral backlash.
(B) is rather interesting and reflects a fundamental divide between supporters of traditional Social Security and reformers. As a supporter I am moderately concerned about the impact of future benefit cuts at depletion, but given the numbers not too so, moreover from my perspective any 'reform' that starts from a position of benefit cuts is no 'reform' at all. Whereas reformers seem mostly focused on Social Security as a cost to be limited, and more specifically as a cost that translates into future General Fund obligations. Which is to privilege future income tax payers (i.e. wealthy people) to poorer retirees with both the burden and the bill stuck to middle income wage workers. LMS is only one example of a 'reform' plan whose focus is simply on reducing future general fund obligations.
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