- The Washington Times - Wednesday, August 22, 2001

As members of the President's Commission to Strengthen Social Security from opposite political parties, we believe Social Security needs a bipartisan solution. That will not be impossible unless we can agree there's a problem.
The interim report of the President's Commission to Strengthen Social Security prompted criticism that we were exaggerating Social Security's financial challenges. In truth, the report said practically nothing about Social Security we didn't already know that lower birth rates, longer life spans and surging baby boomer retirements will soon drive Social Security's costs skyward.
Such warnings have been a staple of America's political discourse for a number of years and, until recently, no one challenged them. But this time, the proponents of what former Democratic Sen. Bob Kerry calls the "do-nothing plan" for Social Security seized on the report's statement that the Social Security Trust Fund will not make it any easier for the federal government to pay promised benefits. This is not a controversial statement. It is supported by a number of nonpartisan government agencies. But the opponents of change have taken the unusual position of arguing that the nation can easily afford to make good on Social Security's promises until the distant year of 2038.
We wish that were true. But as former members of Congress, we are now at liberty to say what most sitting lawmakers dare not: The Social Security Trust Fund is gone. Spent. Used on all the other functions of government, everything from paperclips to battleships. When Social Security's payroll tax no longer brings in enough revenue to cover benefits starting in about 15 years, the federal government will redeem the bonds in the trust fund. But to do so, it will have only three options if it wants to avoid cutting benefits: raise taxes, cut other spending or borrow from the public. In other words, the challenge of financing Social Security benefits is bigger and comes sooner than many people thought.
The problem is demographics a declining number of workers paying Social Security taxes paired with an increasing number of retirees drawing Social Security benefits. In 1950 there were 16 workers for every beneficiary. Today there are about three. By 2030 there will be only two.
The first wave of the baby boomers will begin retiring in just seven years. By the time the youngest boomer retires in 2031, annual Social Security costs will have more than doubled. The point of a large trust fund was to make shouldering these costs easier. By "banking" the annual surpluses Social Security has run since reforms were enacted in 1983, we would amass real wealth and put off the tough choices of raising taxes, cutting spending or adding to the national debt. The question is whether it worked.
It didn't. The 1983 reforms produced the desired surpluses, but the rest of the federal government was in substantial deficit. Rather than save the surpluses, lawmakers used them to mask deficits in the rest of the budget.
As the head of the General Accounting Office(GAO), Charles A. Bowsher, the official auditor of the government's books, told Congress in 1990, the "luxury of these reserves has provided a convenient excuse for avoiding the tough choices needed to cut the general fund deficits."
Today, we have a budget surplus, and Social Security's excess revenues are being used to retire outstanding debt. Debt reduction is a good thing, but when the bonds in the Social Security Trust Fund come due, they will have to be repaid with real money.
The president's commission didn't point out this stubborn fact to alarm anyone. Our purpose was to explain that past ways of financing Social Security haven't worked as well as policy-makers hoped. The real issue is not trust fund insolvency dates but the nation's ability to produce the resources needed by tomorrow's retirees. Our challenge is to find new and better ways to save and invest for the future.
The "do-nothing plan" is an honest option, as long as its proponents admit that means raising payroll taxes by 50 percent, cutting benefits by more than 25 percent, cutting other spending or borrowing. A better option is to begin real saving now to reduce the burden of paying Social Security benefits in the future. Some want to do that by having the federal government invest in the stock market. Others want to let individuals invest in personal retirement accounts that they would own and control. We think that's a debate worth having. What's not is whether Social Security faces a problem in the first place.

Former Rep. Tim Penny, a Democrat, served in Congress from 1982 to 1994. Former Rep. William Frenzel, a Republican, served from 1971 to 1991.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide