On Social Security, Obama Shirks Responsibility
Last week our sister organization, Americans for Prosperity Foundation, released a new paper by Social Security reform expert Peter Ferrara. The paper explains the crisis facing Social Security and the advantages of one potent alternative for reform: personal savings accounts. Ferrara points out that our current system for Social Security is unsustainable and needs to be changed. As evidence: the program currently represents the largest expenditure in the federal budget, costing over $730 billion in 2011, and projections show this spending will only continue to skyrocket.
Unfortunately, President Obama’s recent budget once again largely ignores this looming problem. Overall, the budget doles out approximately $11.7 billion to the Social Security Administration. These funds go to existing sets of beneficiaries and programs that are already in place, with no new proposals for reform. In fact, Obama’s central claim to change is a proposal to spend more on existing programs. The proposal asks taxpayers to enhance funding for “Continuing Disability Reviews” which are geared toward determining the eligibility of current beneficiaries. By choosing to increase funding even further for the program and offering no additional reforms, the President has shown his true belief about Social Security: that its $18 trillion in unfunded liabilities are someone else’s problem to deal with down the road.
Even the President’s Fiscal Commission, which was widely praised for its supposedly bold and sweeping proposals (that the President nevertheless entirely ignored), fails to offer anything but tweaks around the edges that are just benefit cuts and tax increases in disguise. One Commission proposal reduces the amount of benefits workers receive as they begin to make more money. Another explicitly focuses on taxing 90 percent of Americans’ wages by 2050. In other words, hard-working Americans are being taxed more for a promise of lower benefits in the future. To make matters worse, the Commission proposed bumping the age of retirement back two years for future beneficiaries. The rest of the Commission’s suggestions require additional funding for Social Security which most likely will result in higher taxes. If they followed such recommendations, the government would make an already bad deal even worse for workers.
In short, with few exceptions, federal policymakers have proven unwilling to tackle this pressing problem. Even Budget Committee Chairman Paul Ryan, widely hailed as the leading conservative budget guru, has been somewhat guilty of late. He proposed a strong plan for personal savings accounts in 2005 and again in his Roadmap for America, but then left those reforms out his budget last year and he will likely do the same with this year’s budget.
At least he has an excuse: he’s busy with the battle of his lifetime to make small but smart changes to another unsustainable federal program with his Ryan-Wyden Medicare reforms. Nevertheless, unless we act soon to make major structural changes to Social Security, tax increases or benefit cuts are coming in the not-so-distant future, and the bad deal for workers it currently offers will only get worse.