Pensions & Investments magazine features a roundtable discussion on Social Security reform including: Check it out here.
Tuesday, July 13, 2010
Roundtable discussion: Should we act now or later to fix Social Security?
Monday, July 12, 2010
Video of AEI Budget Panel with Rep. Paul Ryan
On July 1st I took part in a panel discussion on Capitol Hill that started with remarks from Rep. Paul Ryan (R-WI), the ranking Republican on the House Budget Committee, followed by a panel consisting of me, Bill Gale from the Brookings Institution and Norm Ornstein from AEI. AEI's Kevin Hassett moderated. The video is now available from C-SPAN here.
Sunday, July 11, 2010
A payroll tax cut to stimulate the economy?
In the New York Times, former Senate Finance Committee staffer Donald Susswein writes that policymakers should enact a temporary reduction in the Social Security payroll tax to help stimulate the economy. To stimulate the economy now with no long-term increase in government debt, Congress should therefore temporarily exempt a portion of wages from the Social Security taxes imposed on workers; at the same time, those exempted wages would not be credited in computing that worker's future retirement benefits. For example, a 40-year-old earning $50,000 and paying annual Social Security taxes of about $3,000 could see those taxes cut to about $2,000. The added $1,000 in his paycheck, along with similar amounts for other workers, could be a huge stimulus to the economy. In the future, of course, there would be a price to pay: the growth in that worker's retirement benefits would be slightly reduced — much as if he had taken off four months without pay. I've been skeptical of payroll tax cuts as economic stimulus in the past, though I'd certainly favor them over the $800 billion or so of stimulus we did pass, which hasn't exactly seemed to jump start the economy. (Yes, I know there's a counterfactual – things could have been worse.) To the degree a payroll tax cut is "paid for," as Susswein's would be, I don't think it would be a huge problem to try it. That said, things that start out "paid for" often end up significantly less so once Congress gets their hands on them.
NY Times: Conflict Between SSA Commissioner, Chief Actuary
The New York Times Robert Pear reports – very elliptically, I think – on a conflict between the Commissioner of Social Security Michael Astrue and SSA's chief actuary, Steve Goss. A rift has developed between the Social Security commissioner and the agency's chief actuary, causing members of Congress to worry about possible interference with the work of the actuary's office just as lawmakers begin hearings on the future of Social Security. In interviews and in letters to the administration, lawmakers said they relied on the actuary, Stephen C. Goss, for objective analysis of proposals to change Social Security. And they made clear that he should not be reassigned or demoted as Congress prepared for a re-examination of the program, now celebrating its 75th anniversary. It's a bit of an odd article because it's never really very clear what exactly the conflict is over. Maybe a personality clash, maybe differences over Goss's willingness to talk about Social Security reform (albeit always from an actuarial perspective, not in terms of pushing solutions of his own). The reporting is hamstrung by the fact that SSA won't say much about personnel matters, so we're left with Members of Congress writing letters to support Steve Goss yet it's not clear what the conflict is really about. Having been at SSA and worked with Commissioner Astrue and Steve Goss for a number of years, I have some vague ideas about the possibilities, but not enough that may opinion is worth much on an obviously sensitive matter. My general take, though, is that the actuaries should be as independent as possible, given the importance of their work and the temptations for elected officials to pressure them to produce given results. (I have not heard that any such pressure was brought to bear by Commissioner Astrue, and in any case I'm reasonably confident that this conflict doesn't really hinge on Social Security reform issues.) That said, the actuary's office should also be as transparent and responsive as possible. The Commissioner or elected officials can't and shouldn't tell the actuaries how to produce their estimates, but there should be as much clarity as possible in terms of how the estimates were arrived at.
Friday, July 9, 2010
Department of Selective Charts: Social Security Tax Cap Division
Over at AEI' Enterprise Blog… 
Friday, July 2, 2010
Should we lift the payroll-tax ceiling to fix Social Security?
I have an article on lifting the Social Security payroll tax ceiling over at The American, AEI's online magazine: Over at ThinkProgress, Matt Yglesias argues that a sensible solution to Social Security's long-term funding shortfalls would be to eliminate the so-called "tax max," the $106,800 maximum earnings on which Social Security's 12.4 percent tax is levied and upon which benefits are calculated. In other words, individuals would pay taxes and earn benefits based on their total earnings, no matter how high. According to the Social Security Administration's (SSA's) Office of the Actuary, this step—if implemented immediately—would eliminate around 95 percent of the long-term "actuarial deficit." Yglesias calls eliminating the tax max "a very reasonable response to the fact that over the past thirty years the share of national income accruing to very high income individuals has gone up dramatically." Click here to read the whole article.
New CBO Analysis of Options to Strengthen Social Security Financing
The Congressional Budget Office released a new analysis of a number of options to improve Social Security's long-term financing. What's really helpful about the new paper is that it shows how policy options affect both the program's solvency and the level and distribution of taxes paid and benefits received by different types of individuals. Without knowing both the financing end and the effect on participants it's hard to put together a plan that reflects your priorities for the program. It's definitely worth checking out for anyone interested in reform, particularly in light of the possibility that President Obama's fiscal commission may recommend changes to Social Security. 
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