As a public trustee for Social Security, I try to stay scrupulously neutral with respect to electoral contests. That said I believe it’s important to keep a steady eye on how the issue plays out on the campaign trail. Election season is always a high-stakes time for Social Security policy, because how well the issue can be addressed in legislation is partly a function of developments during campaign season. Important variables include but are not limited to:
- How accurately the relevant facts are presented by aspiring candidates and by the press;
- The policy positions taken by the candidates who receive the support of voters;
- The flexibility retained by victorious candidates to participate constructively in negotiations over Social Security’s future without betraying their election mandates.
A hypothetical presidential election in which the winner had denied the very existence of Social Security’s financing challenges – and had firmly pledged never to change the retirement age, the benefit formula or the program’s tax income – would be an unmitigated disaster for Social Security. This outcome would virtually guarantee that program finances would continue to worsen to the point where they could not be repaired without inflicting sudden, disruptive consequences upon vulnerable beneficiaries and/or taxpaying workers.
By contrast, a presidential campaign in which the winner had accurately described the need to address Social Security’s growing financing shortfall, had articulated a credible approach to doing so, and had left himself/herself with enough flexibility to make the tactical adjustments required during negotiations over a legislated solution, would be a promising outcome for Social Security.
My book “Social Security: The Unfinished Work” presents some of these challenges as they have played out historically. Here I reproduce one paragraph from it that is equally applicable today:
Crafting policy principles in a presidential campaign is a delicate art. The candidate and the electorate have a mutual interest in revealing the candidate’s philosophy of governance. Policy specificity serves that mutual interest. On the other hand, a responsible candidate must preserve his or her policy options, to allow for later maneuvering through congressional concerns or other changes of circumstance. Of course, the candidate must also take care not to unnecessarily undermine his own election prospects.
In this context, how is the Social Security issue surviving the 2012 Republican presidential contest so far? In the main, pretty well. Below I’ll describe the good, the truly impressive, the bad, and the ugly from the current election season.
First, the good. As a group the candidates have generally recognized Social Security’s challenges and have left open most policy options for dealing with them. One could quibble with the tone of some of the individual pronouncements about Social Security’s finances; some specific statements have been too dismissive of the current system’s viability, while others have erred too much on the side of downplaying its problems. But if a president does emerge from this group, it’s likely that he or she would be eligible to lead a bipartisan repair effort without being accused of a bait-and-switch. This is one of the most important things the campaigns have done right so far.
The group has also generally left their most important policy options open. Some have ruled out any benefit cuts for those in or near retirement, but this principle can be fully upheld if action is taken within the next few years – plus, there’s no significant support on either side of the aisle for such cuts anyway. This pledge embodies a technical policy constraint, but the constraint was already present from a practical standpoint anyway.
The campaigns have generally left the potential array of benefit and eligibility age changes in play. Maintaining this flexibility is important for any realistic Social Security solution. As for tax increases, at least one campaign declares that they “cannot be on the table.” My personal policy views are in accord with that, and indeed it is possible for a few more years to fully resolve the Social Security shortfall without raising taxes or affecting benefits for those in or near retirement. The sticking point here is not mathematical but rather political; that is, whether a bipartisan agreement can be negotiated based on benefit changes alone.
The truly impressive: Perhaps the most impressive thing that has emerged from the campaigns so far is that more than one has put forward specific proposals that would actually solve the shortfall. Specifically, these proposals would gradually change eligibility ages and slow the growth of benefits on the higher-income end. These policies could in fact do the job if sufficient numbers of future beneficiaries were at least somewhat affected. Indeed, many credible existing legislative proposals rely heavily on these two policy levers.
So far the press has taken little notice of how impressive this is. Most previous presidential campaigns have been very specific with respect to things that they wouldn’t do to solve the Social Security shortfall, while being extremely vague with respect to what they would do. Probably the most forward-looking previous campaigns were those of George W. Bush in 2000 and 2004, and even those campaigns put forward only general principles, not specific policies that could achieve solvency.
The bad: Not everything has been perfectly handled. Some promising reform proposals have been combined with other suggestions that would make repairing the shortfall more difficult. Others of the campaigns have focused too narrowly on personal accounts (invocations of both Chile and Galveston are rampant) as the sole or primary answer to Social Security’s problems. I have supported many past personal account proposals, but it’s important to remember that personal accounts only change the relationship between future contributions and future benefits. They don’t speak to benefits already accrued, of which the entirety of the structural Social Security shortfall consists. Moreover, personal accounts are much less likely to be enacted now in the form proposed in 2005, owing in part to broader fears of financial market volatility and in part to the hard reality of a federal government that is in far worse financial shape to finance any such transition.
The candidates have also missed opportunities to criticize an obvious policy target: the current misguided policy of temporarily cutting payroll taxes as a stimulus measure, while financing Social Security instead with general revenues (income taxes). As I wrote in September of this year:
Conservatives should vigorously oppose this policy because it essentially requires that income taxes (rather than payroll taxes) must be raised in the future, to redeem Social Security Trust Fund debt and to pay benefits. This would convert Social Security into something more like welfare, for which the funding is provided – not by contributions from all covered workers – but preferentially from those subject to the income tax.
At a recent CBNC-sponsored debate, however, most of the candidates remained silent when the moderator asked them if anyone disagreed with the current payroll tax policy (and some even expressed agreement with it). Only one candidate stepped forward to state that “I opposed it when it was first proposed” and to correctly note that the policy would “blow a hole of $111 billion in the Social Security trust fund” – a hole now being filled only by funneling general revenues into the program.
The ugly: In every campaign season some statements miss the mark entirely, such as this one from a recent debate:
The key is there is $2.4 trillion in Social Security which should be off budget, and no president of the United States should ever again say because of some political fight in Washington, I may not be able to send you your check. That money is sitting there. That money is available. And the country ought to pay the debt it owes the people who put the money in there.
This answer is particularly bad because it implies that the only problem with Social Security is that politicians are reluctant to repay what has been deposited by workers into its Trust Fund. The statement is wrong in several different ways; Social Security is already off-budget, a sizable portion of that Trust Fund balance has nothing to do with any contributions made by workers, and Social Security faces a substantial shortfall even assuming that all of the bonds in the Trust Fund are fully honored. Presidential leadership requires leveling with the public on the reality that benefit promises and tax collections are simply out of balance, and that it’s not just a matter of politicians sitting on a mountain of cash.
Overall, though, the Social Security issue is holding up quite well during the Republican primary season. The candidates have generally acknowledged the problem in a realistic way, some have even put forward specific credible solutions, and most relevant policy options have remained on the table. None of this guarantees that the positions taken by the candidates in the primary season will hold up equally well in the general election. But at least through November 2011, the prospect of responsible Social Security policy remains alive.
Charles Blahous is a research fellow with the Hoover Institution, a senior research fellow with the Mercatus Center, and the author of Social Security: The Unfinished Work.