Misremebered Reforms

Former White House Social Security guru and current Hudson Institute senior fellow Chuck Blahous has a new paper on the lessons that should be learned from the 1983 Social Security reforms, and some lessons that were learned that probably shouldn't have been. Here's the abstract:

The 1983 Social Security amendments are today often invoked as a process model for conducting politically difficult entitlement reforms. Success in reforming entitlements now depends not only on whether negotiators can summon a similar bipartisan spirit, but also on whether they are willing to define the problem as transparently as negotiators did in 1983, and on whether they avoid analytical shortcomings that have set back subsequent reform efforts.

Social Security reform will always require difficult compromises between individuals with strongly-held opposing views. Today, negotiators face a daunting additional barrier: fierce disputes about the nature, size and immediacy of the problem to be solved.

There is today a significant danger of misremembering and misapplying the lessons of 1983. The 1983 effort succeeded in large part because participants from across the political spectrum had a shared understanding of Social Security's financing shortfall. Analytical methods were employed that prevented issues such as Trust Fund accounting from injecting confusion and discord into the discussion.

Ironically, the 1983 amendments themselves, and subsequent accounting changes, have inadvertently destroyed this shared understanding, giving rise to pervasive misimpressions about Social Security's current finances – and about the intended effects of the 1983 reforms themselves. Specifically, negotiators in 1983 did not intend to run decades of surpluses to amass a large Social Security Trust Fund, nor would they have believed that doing so would effectively pre-fund benefits in deficit years now projected for 2017 and beyond.

Click here to read the whole paper.