Friday, April 8, 2011

Does Ryan Budget “Fast-Track Social Security Cuts”?

Over at the Huffington Post, Daniel Marans of Social Security Works argues that Rep. Paul Ryan's budget plan – which it could be argued effectively ducks Social Security reform – is actually a fast track to benefit cuts. Marans says that

  • "Under Ryan's plan, any year Social Security is not in 75-year balance, the president and Congress would have to legislate changes that bring it to solvency through an "expedited process.'"
  • "In effect, Ryan would free up Social Security for fast-track cuts by turning it into a regular line budget item. Since Social Security is not part of the general budget, has its own revenue stream, and is forbidden by law from borrowing, it has always been dealt with separately from the rest of the budget. In fact, Ryan had to create a new fast-track process to trigger cuts for Social Security alone, because by law, it is excluded from fast-track reconciliation procedures for the general budget."
  • "Further, projections of Social Security's solvency change every year, which means that Ryan's plan could force big changes to Social Security based on very short-term variations in the program's finances."

This, I think, is representative of the general lack of confidence liberals have in their own position, in that they view pretty much any attempts to reform Social Security as tantamount to cuts in Social Security. Now, I think that Social Security will involve benefit cuts, given that a) people aren't keen on paying more into a program which they regard as insecure and not such a great deal; b) middle and high earning households can make up for future benefit cuts by saving more today; and c) it's much harder for individuals to make up for cuts in future Medicare benefits with additional saving, given the structure of that program.

In effect, all the Ryan budget does is amp up a provision that's already on the books. Under current law, if the trust fund balance falls below 20 percent of annual outgoes, the program's Trustees are required to submit a plan to increase Social Security taxes or reduce benefits in order to maintain the trust fund's solvency. Obviously, once the trust fund balance has gotten that low, the changes necessary to keep the system on track will be severe. Ryan's plan effectively would require the Trustees to issue their recommendations for solvency anytime the program is insolvent over the long-term, meaning a 75-year horizon. This is a very different bar for action by the Trustees, but it serves to involve them – and the administration – in the process of getting Social Security reform moving.

My question is why the Left assumes that a provision requiring the Trustees – all but one of whom are appointed by the President, and most of whom are actual members of the administration – would necessarily mean benefit cuts rather than tax increases? Wouldn't this approach favor the tax-increase approach, given who's in power these days? My gut is that, despite their rhetoric that Americans strongly favor tax increases (usually on other people) over benefit cuts, the Left isn't quite sure that political process will play out that way. And if it won't play out that way even with Democrats in power, I think that undermines their general narrative on where Americans stand on Social Security reform in the context of the other fiscal and budgetary issues we face.


Bruce Webb said...

Why not compromise on the Trustees test of Short Term Acturial Balance? Which works out to 10 years before a projected TF ratio of less than 100? Why swing from near term 20 to 75 year 100 when we have an accepted mid- term measure? Which realistically builds in a. 12-13 year action timeline to plan ad implement a fix?

Per the Trustees the DI program failed the Short Term Test back around 2005. Which would have been a good time to forward some fix to Congress for that program as opposed to OAS which was and is passing that test with a significant margin. Too bad we didn't have rational voices like yours at top staff levels at the time.

Oops!! Read your CV. My mistake.

Bruce Webb said...

All six Trustees are nominated by the President. Who can apply as much or as little deference to Democratc suggestions as to the non Republican Trustee as they want. Which is why the Public Trustee slots remained vacant after Bush tried to reappoint Savings and Palmer without visible input from Democratic Leadership.

Gosh did you know that even Democrat Pozen advocated Privatization? What more proof of bi-partisanship did Bush need to give? A Rivlin and a Sawhill?

Andrew G. Biggs said...

I have no problem with a shorter time frame for requiring the Trustees to propose changes, although it's generally better to make small changes well ahead of time than larger changes on shorter notice.

Under the Bush proposal, implicitly the retirement part of Social Security would have subsidized the DI portion, on the argument that it's easier to make up for lower retirement benefits than lower DI benefits. So there was a plan, of sorts, though something more explicit would have been better.