Rumors Of Obama Social Security Reform Commission

Dean Baker writes at TPM Café that

Word has it that President Obama intends to appoint a task force the week after next which will be charged with "reforming" Social Security. According to inside gossip, the task force will be led entirely by economists who were not able to see the $8 trillion housing bubble, the collapse of which is giving the country its sharpest downturn since the Great Depression.

Dean, as some may know, is not a big fan of Social Security reform.

I have no independent knowledge of what an Obama administration task force on Social Security reform would do or look like. It might be modeled after the Clinton administration’s working group on Social Security, headed by Jeff Liebman who has returned to a post at OMB in the Obama administration. (This paper by Liebman, Doug Elmendorf and David Wilcox discusses some of that process.) If the task force is purely internal and aimed only at providing policy recommendations for President Obama, the Clinton administration model isn’t a bad one to follow, and the Obama administration staffers available to work on it – Liebman, Jason Furman, Peter Orszag and others – are clearly up to the job.

If, however, Obama wishes for a task force to build political momentum toward reform, he’ll want a broader group. Based on my experience on the staff of President Bush’s 2001 reform commission and work with the White House on reform in 1995, here are a few quick thoughts:

First, to build any political momentum a working group should represent the reasonable spectrum of views on Social Security. Something like the Diamond-Orszag reform proposal probably represents a reasonable bound on the left, as it retains the current program in pretty much its current form while making it sustainably solvent almost entirely through increased taxes. Something like the President’s Commission’s “Model Two” is a reasonable bound on the right, since it likewise makes the program sustainably solvent entirely by reducing benefits. There are folks on both the left and right whose views make it such that any reform compromise would be almost impossible – on the left, because many believe Social Security doesn’t even face a deficit, and on the right because they believe that simply borrowing a few trillion dollars and investing it in personal accounts will fix the whole problem. Neither view is correct. It may be possible to get some folks further left on board by proposing auto-correction policies that only come into effect to the degree the system faces deficits; I discuss one option in this paper. If they’re right that Social Security doesn’t face any shortfall, nothing will change.

One problem with President Bush’s 2001 Commission was that it didn’t represent the reasonable spectrum of beliefs on Social Security reform. This didn’t make it a dishonest commission; like President Roosevelt’s Committee on Economic Security, it was designed to put flesh on the bones laid out by the President. In this case, the Commission was tasked with designing a reform plan that included personal accounts and excluded tax increases. That said, a commission only builds political capital toward enacting reform if it’s seen as building a consensus through a process in which all views have been heard. In both the 2001 Commission and the later 2005 reform drive, Democrats didn’t feel they were part of the process. They clearly will be a central part of the process this time, but the goal will now be to include Republicans. Just as Republicans shouldn’t reflexively oppose any Obama administration reform plans for political reasons, so Democrats shouldn’t seek to exclude Republicans from the process.

Second, a reform task force should include a variety of different players, including members of government, both legislative and executive, representatives of outside interest groups, and experts who can provide technical advice and help ensure the integrity of the reforms decided upon. The 2001 Bush Commission didn’t include any sitting Members of Congress and only a small fraction of commissioners had the technical expertise needed to make the plans the best they could be. A broader group would be helpful.

Third, any task force or commission needs time. The 2001 Commission ran roughly from May through December of that year and had to conduct a number of public hearings. This was simply too much to do in too little time, and as a result the plans were fairly bare bones. There is plenty else on the policy agenda at the moment, so there’s no reason not to give a working group a year or more to put things together.

Finally, on a non-commission related topic, one comment by Dean is worth noting. He says,

“The vast majority of baby boomers will be approaching retirement with little other than their Social Security and Medicare to support them.”

While this is a pretty compelling talking point, it really just isn’t so and any reform plans should take the facts into account. The table below from this paper shows that Social Security accounts for around 39 percent of total income for new retirees in 2005. It may be a little higher now, but probably not that much. Moreover, to the degree we want people to have diversified sources of retirement income – and most Democrats at least talk the talk on that – raising taxes to pay higher Social Security benefits will only tend to squeeze out other forms of savings and make tomorrow’s seniors more reliant on Social Security. That can’t be a good thing.