White House Fiscal Responsibility Summit Material on Social Security Reform

This is a bit out of date, but a friend points out that the White House released (to little fanfare, apparently) summaries of the discussion of various budget issues at their February Fiscal Responsibility Summit. The whole document is available here, but I've excerpted the Social Security portion below:

Summary of Social Security Session

Executive Summary

◆ There was a consensus among several of the participants, including Senators Durbin and Graham and Representatives Hoyer and Boehner, that there was a moment of opportunity to make bipartisan headway on shoring up Social Security's long term finances.

◆ Several concrete ideas were put on the table to shore up long-term solvency. While there was disagreement among participants on the merits of these specific ideas, several participants emphasized the importance of creating the political space necessary to consider these ideas in a good-faith process.

◆ There was an emphasis on viewing Social Security reform through the larger prism of retirement security. Several participants expressed support for taking additional steps to encourage retirement savings outside of Social Security.

◆ Participants stressed the importance of strengthening Social Security's provisions for the most vulnerable populations, including disabled Americans and elderly unmarried women. Given the economic downturn, some participants suggested that Social Security benefits may need to be increased for these and other groups to ensure the program continues to provide elderly and disabled Americans a base of support to live above the poverty line.

◆ Attendees:

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The session moderators were Chair of the National Economic Council, Lawrence Summers, and Counselor to the Treasury Secretary, Gene Sperling.

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Members of Congress who attended: Senator Durbin, Representative Boehner, Representative Hoyer, Representative Cantor, Senator Klobuchar, Senator Graham, Representative Tanner, Representative Boyd, and Representative Grijalva.

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The outside attendees were: Doug Elmendorf (CBO), David Walker (Peterson Institute), Pete Peterson (Peterson Institute), Heidi Hartmann, (Institute for Women's Policy Research), John Sweeney (AFL-CIO), Roger Ferguson (TIAA-CREF), Randi Weingarten (American Federation of Teachers), Barbara Kennellyi (National Committee to Preserve Social Security and Medicare), Marty Ford (Consortium for Citizens with Disabilities), Susan Eckerly (NFIB), Ed Coyle (Alliance 20 for Retired Americans), Kevin Hassett (American Enterprise Institute), Maya Rockeymoore (CBCF), Fernando Torres Gilii (UCLA), Don Danner (National Association of Independent Businesses), Laura Murphy (National Urban League), and Joe Salmonese (Human Rights Campaign).

Detailed Summary

Overarching Issue: Political context of Social Security reform this year?

◆ Both Lawrence Summers and Gene Sperling emphasized that the goal of the session was not to achieve consensus on particular reforms, but to initiate a dialogue about how to approach the issue during the coming year. Both suggested that the public may be more receptive to the government making the hard decisions necessary to shore up Social Security's long-term finances in an environment where people are anxious about their private retirement savings and the value of their single largest asset—their house.

◆ There was a consensus among several of the participants, including Senators Durbin and Graham and Representatives Hoyer and Boehner, that there was a moment of opportunity to make bipartisan headway on shoring up Social Security's long-term finances.

◆ Senator Graham pledged his full support to the Obama Administration to make a Social Security reform push a success if the Administration was committed to the process. He asked everyone involved to work to ensure that "demagoguery does not succeed."

◆ Representative Cantor suggested that part of a strategy around Social Security should be to send a clear signal to the millions of Americans who currently rely on the program's benefits that their benefits will be protected and that we will stand by them. If we deliver a firm commitment to those who really need support, and who rely on that support now, it could free up space to consider amendments to the program for today's current young workers.

Overarching Issue: Status of Social Security and the Need for Reform?

◆ Lawrence Summers explained the Administration's view that the rising cost of health care is the single largest threat to our long-term fiscal health. He also explained that Social Security is our nation's most important government program, and crucial to our long-term fiscal health. Both Summers and Sperling stated that the Administration intends to move on health care reform before Social Security, but places a priority on creating a process to address Social Security.

◆ Some participants emphasized the urgency of acting quickly on Social Security because of the looming fiscal challenges on the horizon. Pete Peterson presented the view that the Social Security system will begin running out of money in 2017, and that we cannot rely on the concept of a "Trust Fund" because the money has been spent.

◆ Others disagreed with this view. Barbara Kennelly argued that health care was the single most important threat to our fiscal health and was a more urgent priority than Social Security reform. Others 21

pointed out that the Social Security system will continue to pay full benefits through 2041, and will continue paying more than 70 percent of benefits after that even if changes are not made.

◆ Representative Hoyer emphasized that the economic crisis should compel everyone to look past their differences and work toward a near-term solution. The sooner we act, the easier it will be both politically and fiscally to get a satisfactory solution.

◆ Representative Boyd made the point that all of the tools and ideas available need to be on the table in order to achieve bipartisan support for long lasting solvency changes to this critical program. He encouraged the President to continue to organize forums like this first Fiscal Summit in order to keep the dialogue open. Addressing the solvency of the Social Security program is vital to the long-term financial stability of the nation and its citizens.

Overarching Issue: Potential changes to Social Security?

◆ Participants discussed challenges and options on both the revenue and benefit sides. Senator Durbin advocated for modest changes on both sides now, to avoid big burden-some changes down the road. He put forward one such suggestion on the revenue side: returning the maximum taxable income to a level that applies the current Social Security tax to 90 percent of all payroll earnings by modestly increasing the cap on income subject to Social Security taxes is one such proposal on the revenue side.

◆ Lawrence Summers suggested that the downturn in the financial markets had diminished the appetite for Social Security privatization, and that there was a heightened sense that the government needs to take a core public responsibility for Social Security.

◆ David Walker argued that an increase in the retirement age could be justified as part of a bipartisan reform to create certainty and security around the program. The reform could provide security to current retirees that their benefits are protected, and certainty to future generations that their defined benefit will be there. Thus, increasing the retirement age would encourage people to work longer but strengthen the safety net.

◆ Others opposed changes to the retirement age, and noted that we need to be careful when drawing blanket assumptions about life expectancy because not all demographics are actually living longer. Moreover, still others pointed out that the increase in the full retirement age currently phasing in represents a substantial cut in benefits already and disproportionately affects those who must retire early.

◆ Representative Boehner expressed openness to changes on the revenue and benefit sides. He said the government should consider cutting or eliminating Social Security benefits for older Americans with high retirement incomes. As he explained, "I don't have any problem looking people in the eye and saying, 'Thank you for your contributions, but for the good of the country, your benefits are gone.'" Boehner also supported pegging Social Security benefit increases to the Consumer Price Index rather than wage inflation.

◆ Senator Graham supported a balanced approach of revenue and benefit changes. However, he cautioned against making changes that would undermine Social Security's broad appeal as a middle-class safety-net program.22

◆ Participants also highlighted potential proposals to modify Social Security's benefit structure to increase the program's protection for certain vulnerable groups. Heidi Hartmann underscored that, in the current economic environment, poverty among Social Security recipients could increase and that support for unmarried women in the program should be reexamined, with a view to increasing the benefits available to them outside marriage.

◆ John Sweeney agreed on the need for modest reforms to the program but opposed any changes that would jeopardize Social Security benefits.

◆ Susan Eckerly suggested that the NFIB and small business owners are willing to consider modest changes to Social Security to strengthen the program over the long term. Among the changes she discussed were adjusting the income cap and amending benefits for higher income earners.

◆ Marty Ford reinforced that one-third of current Social Security recipients are not retirees, including approximately eight million people with disabilities who are disabled workers, disabled widow(er)s, and disabled dependents of disabled, retired, or deceased workers. There are several reforms that would strengthen the program for this constituency, including changing income and asset tests to allow people with disabilities to save and work without risking losing their benefits. She also cautioned that any change to benefit formulas would affect all disabled beneficiaries and that the definition of disability should not be revised.

Overarching Issue: Social Security within the larger retirement security prism?

◆ Several participants emphasized the importance of viewing the Social Security challenge within the larger prism of retirement security and savings.

◆ Senator Klobuchar and Roger Ferguson advocated including efforts to help Americans save for retirement as part of a broader "Retirement Security" package that would also include changes to Social Security. Ferguson discussed steps to make savings more automatic, as well as to consider some form of guaranteed income for life.

◆ Randi Weingarten highlighted the growing challenge for the baby boomer generation of facing higher costs to care for both their children (e.g., rising college costs) and their parents (e.g. long-term care) at the same time. A retirement savings framework going forward needs to take into account the new burdens facing these families.

◆ Gene Sperling raised the idea of including some form of universal pension account that would encourage private retirement savings. These accounts would not be part of a Social Security reform plan itself, but could be part of a broader retirement savings package.

◆ Fernando Torres Gil discussed what he viewed as a "redefinition" of what it means to retire among today's aging population. People are changing how they live in their old age, including working more and engaging in more lifelong education. This reality should inform our efforts at promoting retirement security.