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Politicians punting again on Social Security reform

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POSTED March 7, 2014 8:14 p.m.

As I write this, the president and Congress are once again playing games with Social Security. In the ongoing negotiations over the federal budget, Social Security is being used as a political football, with each side blaming the other for lack of progress in getting near the end zone of any kind of meaningful reform of the retirement program.

Before I come back to what they are arguing about, let’s establish (for about the 1,000th time in this column) some basic facts.

One: Social Security needs reform. As baby boomers are retiring at the rate of about 10,000 per day, we are approaching a point when there simply won’t be enough money flowing into the system to cover all future promised benefits.

Two: There are essentially two ways you can “fix” Social Security. You can pump more money into the system by slightly raising revenues through a variety of means. Or you can cut back on the amount of money flowing out of the system by slightly reducing benefits through a variety of means.

Three: Social Security reform is NOT a draconian issue. There are some very viable and relatively modest proposals for change on which most reasonable people should be able to agree.

Four: Because we live in a democracy where governance is based on compromise, any eventual solution must inevitably include a combination of revenue increases and benefit cuts.

And it’s that latter point where our current political system is breaking down. Neither side is willing to budge. Hard-core Republicans insist that they will not entertain a budget proposal that includes any kind of tax increases, including Social Security tax increases. And hard-core Democrats insist that they will not consider budget proposals that include any kind of cuts in Social Security benefits.

In the latest round of Social Security football, bipartisan negotiators had ironed out a deal that included two reforms: one from each side of the ledger. On the tax increase side, the reform called for increasing the Social Security wage base, meaning that wealthier people would pay higher Social Security taxes. I have read and heard different numbers, but the one I’d seen most often raised the amount of money subject to Social Security tax from the current $117,000 to $200,000.

On the benefit reduction side of the ledger, the reform proposal called for a change to the way Social Security’s annual cost-of-living increases would be calculated. The idea, called the chained consumer price index, is too complicated to explain in this short space. But it would have resulted in future cost-of-living adjustments being reduced by about 1 percent.

These reforms alone would not have entirely solved Social Security’s financial problems. But they would have made a significant dent in the program’s long range deficit.

The Republicans punted first. Their leadership, under intense pressure from the tea party wing, took any kind of Social Security tax increase off the table. And frankly, that left President Obama, with pressure from the left wing of his party, with little choice but to drop cost-of-living benefit reductions from his budget proposal.

So there we are. Back to square one, the square we’ve been standing on for decades now. Are the politicians to blame? Of course, they are. But as I’ve pointed out before in this column, we (the voters) also share a large part of the blame for intransigence on this issue. Here is why.

I am sure that most politicians on both sides of the aisle realize that Social Security reform is necessary, and that any reasonable solution must include a combination of tax increases and benefit cuts. But if you are a Republican, from Texas let’s say, and you vote, as part of a larger package of reforms, for a small increase in payroll taxes that would impact only a tiny percentage of wealthy wage earners, the far right wing of your party will find someone to run against you in the primaries. And they will produce attack ads that say something like — “Did you know that Congressman Joe Shmoe voted to increase your taxes?” And guess what? Congressman Joe Shmoe would go down in an easy defeat.

Likewise, if you are a Democrat, from New Jersey let’s say, and that as part of a larger package of reforms, you vote for a small cut in future Social Security increases, the far left wing of your party will find someone to run against you and they will sponsor attack ads that say something like — “Did you know that Congresswoman Jane Doe voted to cut grandma’s Social Security check?” And guess what? Congresswomen Jane Doe would go down in an easy defeat.

So what can we do about this? Well, I’d like to say we should eliminate attack ads. But that’s not going to happen. I’d like to say that Americans should stop gullibly believing those ads and research the issues before voting. But that’s not going to happen. So I suggest we just take Social Security out of the budget process. Don’t try to reform the system on a piecemeal basis with each yearly fight over the budget process. We should establish a bipartisan commission on Social Security reform to hammer out meaningful solutions and then have Congress vote for the reforms as an entire package.

If you want to see a list of proposals for reform, with each proposal weighted as to its impact on Social Security’s long-range deficit, send me an email at thomas.margenau@comcast.net. (This is part of a fact sheet on Social Security financing I’ve offered many times in the past. So if I sent it to you before, you don’t need it again.)

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