There had been speculation as to what the White House would offer in today’s budget address with respect to Social Security reform. The President chose neither to offer nor to embrace any specific Social Security proposals. Following is a quick textual analysis of the President’s Social Security language.
From the speech:
While Social Security is not the cause of our deficit. . .
From the Fact Sheet:
The President does not believe that Social Security is in crisis nor is a driver of our near-term deficit problems.
The Fact Sheet also states a generic willingness to negotiate over Social Security, but only --
. . . in parallel to deficit negotiations. . .
This language reflects a common line that some have taken with respect to Social Security’s relationship with the larger federal budget. Substantively, however, Social Security is the single largest federal spending program, is currently running a sizable cash deficit, and is also projected to grow more rapidly over the next decade than any other program, including Medicare.
(Social Security) faces real long-term challenges in a country that is growing older. As I said in the State of the Union, both parties should work together now to strengthen Social Security for future generations.
This is boilerplate recognition that Social Security faces a shortfall, but does not commit the White House to accomplishing any particular specifics within any particular timeframe.
But we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.
The “stock market” reference here is aimed at personal accounts. Few Republicans are actually now offering personal account proposals; these generally don’t require stock investments nor do they allow the defined-benefit portion of the system to be so invested. Proposals to invest the Trust Fund in stocks generally come from the Democratic side. President Bush, for example, opposed investing the Trust Fund in the stock market as one of his reform principles.
Social Security proposals from across the political spectrum also generally protect benefits for current retirees and for low-income workers, which the President also supports.
Language such as “putting at risk” and “slashing” is ambiguous; we are not told whether these refer to cuts from current benefit levels, or whether they refer to cuts from projected-but-unaffordable future benefit levels, as any credible, responsible reform proposal must include.
This is key because the language thus fails to disclose whether the President is aligning himself with those who define any reduction in scheduled benefits as “slashing” benefits, or whether he is aligning himself instead with the authors of reform proposals (many of them Republican) who recognize that benefit levels can yet climb from current levels but not at the unaffordable rate that would result under current formulas. Until the White House choice is made clear on this vital point, it will be difficult for substantive discussions to begin.
But, in the context of an aging population and a Social Security wage base that is declining as a share of overall earnings, Social Security faces long-term challenges that are better addressed sooner than later. . .
Social Security’s unsustainable cost growth is driven principally by the growth of the aged population, the decline in the worker-beneficiary ratio, and the rise in per-capita benefit levels under the current benefit formula. The reference here to “a Social Security wage base that is declining as a share of overall earnings” implies that the White House might support raising the cap on taxable wages. Such a provision would both increase Social Security taxes as well as its obligations of expenditures. This is probably the closest lean to a policy response in the various White House materials released today.
(photo credit: Elias Bizannes)