Serious doubts surround President Obama’s National Commission on Fiscal Responsibility and Reform, which has been tasked to make recommendations to Congress to reduce the federal deficit. Many fear that the commission will recommend the creation of a value-added tax (VAT) or similar tax increases to pay for Washington’s reckless spending. Then there is the possibility that the commission will produce nothing, succeeding only at prolonging any real action to put the nation’s fiscal house back in order.
But as The Weekly Standard’s executive editor Fred Barnes points out in the Wall Street Journal, “there’s another possibility, one that would redound to the commission’s credit.” The commission could propose cost-containing reforms to unaffordable government programs. Barnes suggests that the likelihood of the commission exploring bipartisan solutions to Social Security spending in particular is not zilch.
Social Security reform is desperately needed if the program is to exist intact for future generations. This year Social Security is running its first deficits since 1983, and though economic recovery is expected to raise revenues higher and put it back into the black for a just few years, the program will be running permanent deficits from 2016 on.
According to Barnes, the odds of cementing bipartisan support for Social Security reform are promising. He writes that, “One reform that could win bipartisan support would, over time, raise the Social Security retirement age to 70. … A second reform, bolder and more controversial, would means-test Social Security, gradually slowing the growth of benefits for the more affluent but sparing those with lower incomes.”
The second of these ideas is exemplified by the Pozen plan, which would apply “progressive indexing” to Social Security such that benefits would gradually shift to provide more aid to those who need them.
Heritage expert David John writes: “Progressive indexation preserves the principle of social insurance for workers of every income level. All workers who are currently in Social Security would continue to pay in and continue to receive traditional retirement benefits. … But while the wealthy would continue to receive traditional benefits—a minor supplement, no doubt, to their investment income—in return for their taxes, their monthly benefits would not grow as fast as under current law. These savings on checks to affluent retirees would enable Social Security to pay better benefits to lower-income retirees whose need is greater.”
Barnes reiterates, “No one, not even those with high wages in the years on which their Social Security benefits are calculated, would face an actual reduction. Under the Pozen plan, higher income workers would have increases in their benefits based on inflation, while those with low incomes would continue to have theirs based on the more generous index of wages. The great attraction of the Pozen plan is that it would erase more than two-thirds of Social Security’s long-term shortfall of $4 trillion.”
Proposals such as these would put federal programs on sustainable footing without tax hikes that would hurt the economy and do nothing to permanently address out-of-control federal spending. The commission would do well to follow Barnes’s logic.