Social Security has long been referred to as the ‘3rd rail of politics’ because touching the issue has proved fatal for most politicians. On April 1st, House Budget Committee Chairman Paul Ryan released a proposed budget for FY 2015, Path to Prosperity, in which he provides for a section on Social Security. Unfortunately, the proposal seems to be more about the politics of who touches the 3rd rail rather than making that rail any less dangerous.
While this proposal initially makes a strong case for reform of Social Security, it does not include any structural changes to Social Security. There are no new taxes or benefit cuts. In fact, the proposal suggests that Social Security “should provide more help to those who fall below the poverty line after retirement” when increasing benefits will only make the problem worse. This is strange conclusion for a proposal which opens by discussing the people who are in “denial that a problem exists”.
Ryan’s proposal isn’t about the math of Social Security. It is about the politics of the debate. If enacted, this law would require President Obama to present a proposal within six months that would make Social Security solvent for 75 years. And Congress is only under the obligation to consider these changes. So President Obama absorbs all of the risk, without any assurance that the system will actually be repaired.
The requirement to consider the financial stability of Social Security is not new. In the event that the Social Security program is unsustainable, current law requires the President to submit a plan to restore the fund’s viability. The definition of sustainability serves as a trigger. Ryan’s proposal would alter that definition from conditions that the Trustees believe are unlikely to happen over the next decade to conditions that date back to the 1980s.
The new trigger is not unreasonable. The problem put before President Obama is enormous in part because the current trigger has allowed the question of the sustainability of Social Security to grow quietly into a $10 trillion dollar problem. This question should have been raised as soon as the 1983 reforms failed to provide for a sustainable system in 1987.
27 years later, whatever President Obama proposes will be highly unpopular. It will be the combination of higher taxes and lower benefits that politicians have avoided for three decades. Last year, President Obama indicated that he was willing to consider a proposal to change the way in which Social Security benefits are calculated. This modest change dealt with about 20% of the shortfall. Critics from both parties emerged to attack the President for what is comparatively a small change compared to the package he would have to produce in response to Ryan’s plan.
Ryan’s proposal ignores the one thing that hurts Social Security the most, Time. Simply moving the clock forward from 2012 to 2013 made the Social Security system roughly $500 billion less sustainable. The Trustees explain that every year the window of solvency changes, introducing larger shortfalls. Separately, the way that the Trustees express the unfunded obligations tends to grow like interest on a bond. Ryan’s proposal is just one more example of the politics of delay that cost Social Security more than $500 billion in 2013.
It is impossible to criticize any effort to promote awareness of the financial problems in Social Security. At the same time, Ryan’s effort is a little like a family talking about the wisdom of fire insurance while their house burns down around them.