Social (in)Security: Now's the time to act
Social Security is not just for the elderly.
Consider, for example, that it’s the country’s largest anti-poverty program for Black children: One in 10 rely on its survivor benefits because parents have died, and an even greater number has a parent who receives disability payouts.
That sobering aspect of Social Security — and its importance for households across America — was highlighted by William Spriggs, the chief economist at the AFL-CIO, during the SIEPR Spring Policy Forum. The event, held annually by the Stanford Institute for Economic Policy Research (SIEPR), focused this year on Social Security — the country’s largest entitlement program and one that supports more than 65 million people, or nearly one in every five Americans.
Spriggs described ways the Social Security safety net supports families, but how it can also undermine Black Americans and other vulnerable groups. Program reforms made in 1983, for instance, adversely impacted families’ funding for college education, he said.
“Social Security is really designed as a family program,” said Spriggs, who is also an economics professor at Howard University. “It isn’t just an old-age program for low earners.”
But the future of Social Security is in doubt because it’s paying out more money than it is bringing in. Over the course of the daylong April 21 event, Spriggs and other top Social Security experts from business, government and academia put the federal program under the microscope — exploring how the system’s financial crisis came about and how it can be fixed. Their knowledge and diverse perspectives brought to light, in moments both somber and spirited, key aspects of Social Security that are often missed or even misunderstood.
“We are losing the ability to solve this the longer we wait.”
— Jason Fichtner, Bipartisan Policy Center
The Spring Policy Forum, titled “Safe and Secure? The Future of Social Security,” took place one day after the 40th anniversary of the last time significant changes were made to Social Security — reforms that at the time saved the program from insolvency, noted Mark Duggan, The Trione Director at SIEPR, in his opening remarks.
“Today’s event arguably couldn’t be more timely,” said Duggan, who is also The Wayne and Jodi Cooperman Professor of Economics in Stanford’s School of Humanities and Sciences.
Social Security, he added, is also “very much within the strike zone” of SIEPR’s mission to catalyze research that leads to better economic policies. Many of SIEPR’s 120-plus scholars focus on Social Security issues in their research. This includes Gopi Shah Goda, a SIEPR senior fellow and former senior economist at the Council of Economic Advisers who organized the Policy Forum. Goda and Andrew Biggs, a senior fellow at the American Enterprise Institute and a Tad and Dianne Taube Policy Fellow at SIEPR, recently co-authored a SIEPR policy brief analyzing Social Security and how to strengthen it.
“The research we support,” Duggan said, “helps policymakers identify trade-offs so they can make the best possible decisions.” His own latest study of the program — co-authored with Gina Li, a SIEPR graduate fellowship recipient, and others — is due to be published in the Journal of Public Economics. It partially explains why people now claim Social Security later than they did 40 years ago, when the incentives to wait were lower.
View recordings of the sessions here or from the list below.
Living longer, unequally
The timing of the Policy Forum was auspicious for another critical reason.
As the second largest driver of long-term deficits (after Medicare), Social Security has once again become weaponized in debates over the country’s debts and other risks to the economy. Official projections released in March show that in about 10 years, the program is on track to deplete the reserves it now uses to pay monthly benefits because payroll tax revenues are no longer enough to cover its costs. Unless Congress steps in before then to shore up Social Security’s finances, beneficiaries could see their payouts cut by more than 20 percent once those reserves run out. That’s not all: Once those reserves are gone, Social Security itself will no longer have a safety net to weather an economic shock.
As Goda and Biggs noted in their policy brief, it’s been 40 years since lawmakers last made big changes to Social Security. Then, as now, the financial outlook for the program looked grim. But as speakers discussed throughout the Policy Forum, a lot has changed since the early 1980s. And it’s not only that political gridlock has gotten a lot worse.
For one thing, Americans in general are living longer — with wealthy whites experiencing the biggest gains in longevity and in income that falls outside of Social Security.
“We have increasing wealth inequality; we have increasing wage inequality; and we have increasing longevity inequality,” said Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities and a former Social Security Administration official. “This is not something that the policymakers of 1983 expected.”
Nor are the trends likely to reverse. With fertility rates also falling, the American population will be permanently older, predicted Louise Sheiner, a senior fellow at the Brookings Institution. “We don’t think aging is a temporary phenomenon,” she said. “The imbalances are going to stay high.”
Change is necessary, but how?
The system’s financial deficits will persist unless Congress manages to prop up Social Security — an undertaking the speakers agreed isn’t likely in the near term given the low odds of finding bipartisan consensus.
“We are losing the ability to solve this the longer we wait,” warned Jason Fichtner, a former top official at the Social Security Administration who is now the chief economist at the Bipartisan Policy Center.
John Shoven, a SIEPR senior fellow emeritus who studies Social Security, said many workers already are paying a price as they make decisions about their retirement not knowing what’s in store for Social Security.
“I do think there’s an additional cost of the uncertainty,” he said. “If Congress decided what they’re going to do [to fix Social Security] and announced it now, people would be better off.”
What might those solutions look like? Speakers delved into the obvious and the not-so obvious. Congress could, for example, extend the full retirement age, require workers to pay more into the system, or cut benefits for all or some recipients. They could also tap into general tax revenues to make up for shortfalls, cap lifetime benefits, set a flat payment for all newly eligible beneficiaries, or tax non-wage income like health insurance plans or financial transactions and direct those monies into Social Security.
“This isn’t that hard if you’re willing to think outside of the box — and not very far outside of the box either,” said Biggs, the SIEPR policy fellow.
And when the time comes, make the changes count, Peter Orszag said in delivering the Policy Forum keynote.
“There are very few windows in which we have the political consensus to do anything,” said Orszag, a former director of the Office of Management and Budget and the Congressional Budget Office who is now the CEO of Lazard Freres & Co. “But in those periods of time when there’s an alignment, you want to really look to the long term and not just solve the immediate problem.”
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Other featured speakers at the event were Jae Song, an economist at the Office of Disability Adjudication and Review at the Social Security Administration, and Karen Smith, a senior fellow in the Income and Benefits Policy Center at the Urban Institute. Li, Shoven and Goda were session moderators along with Molly Dahl of the Congressional Budget Office and David Molitor, an associate professor of finance and economics at the University of Illinois and visiting associate professor at SIEPR.
*All photos by Ryan Zhang