More Evidence Both Parties Not Far Apart on Fixing Social Security

As I wrote yesterday, when President Obama stated in last week's debate that there was not much difference between his views and Governor Romney's on how to address Social Security's long term funding problems, the Governor's "non-response" effectively agreed with the President.  They turned instead to a sharp exchange of different views over how to fix Medicare.  Why?  Because it is a much bigger problem to deal with.

Dean Baker, writing in the Huffington Post today, effectively makes the same observation while drawing a starkly different interpretation.  He raises concerns about those aspects of a potential fix that will weigh most heavily on beneficiaries, such as adjusting the cost of living formula, raising the Full Retirement Age, and adjusting (lowering) benefits for higher income seniors.  Obama has already acknowledged that some or all of these options may be on the table.  I am certain some writer on the right would make the same observation with the opposite interpretation: Romney will betray taxpayers by raising the tax rate or the tax cap.  In fact, a judicious mix of all of these fixes probably needs to be incorporated in any eventual solution. 

Sure, there will be much screaming and gnashing of teeth on both sides of the political aisle.  The point is that there is effective agreement among serious politicians on how to get a deal done.  And for all the moaning, none of the fixes will fall catastrophically on any group.  Once this is resolved, the changes - likely to implemented gradually over a long period of time - will hardly be noticed.  In 1983 they raised the Full Retirement Age from 65 to 67.  Three decades later the Full Retirement Age has moved all the way to 66 and won't get to 67 for another ten years.  Who do you ever hear complain about the fact that their retirement age is 67 while it was 65 for their parents?

Most importantly, once they do agree on the fix and implement it, Social Security will be a stable and reliable source of retirement funding as far as the actuaries can see.  Now, if we can just educate those approaching their sixties on how to make better Social Security claiming decisions...

Obama and Romney Agree on Social Security?

Wednesday's debate may have made the biggest news because of the general perception that former Governor Romney won.  However, lost in this coverage was reporting on how they clarified their differences on what to do about Social Security which - to hear politicians and pundits talk about it - is heading over a cliff.  So how did they respond when Jim Lehrer asked to start off segment three on entitlements: "First — first answer goes to you, two minutes, Mr. President. Do you see a major difference between the two of you on Social Security?"

President Obama's response:

"You know, I suspect that, on Social Security, we've got a somewhat similar position. Social Security is structurally sound. It's going to have to be tweaked the way it was by Ronald Reagan and Speaker — Democratic Speaker Tip O'Neill. But it is — the basic structure is sound."

For the rest of his comments, the President drilled down on significant differences over Medicare.  Moreover, in former Governor Romney's response he didn't mention Social Security in any substantive way, basically providing tacit agreement with the President's assertion that some tweaking needs to be done.  Of course, on the subject of Medicare there was plenty of rebuttal and counter-rebuttal.

This provides considerable support to my ongoing assertion that the problems Social Security faces over the long term can be fixed and both parties understand quite well the alternatives that will get us there - the "tweaking" to borrow from the President's words.  Sure the solutions will be bitterly argued  - isn't everything in Washington nowadays? - and some toes will be stepped on.  Still, the fact that it wasn't worth 30 seconds of time in a ninety minute debate tells us volumes about how shallow the gulf is between the parties on this subject.  Will the tax rate or tax cap be moved higher on current workers?  Will the retirement age be raised?  Will the cost of living adjustment be lowered?  All these will pinch workers and/or retirees.  However, a pinch here and there is far less painful than the massive cuts or tax hikes needed to solve our other fiscal problems like Medicare, Medicaid, and the debt.  Compared to those, the Social Security problem is worth about 30 seconds of the candidates' time.

Scarey Numbers? Social Security, meet Fiscal Cliff!

Bruce Krasting makes quite a bit out of the fact that Social Security will pay out over $65 billion in benefits this month.  Writing in Business Insider yesterday, he makes the inevitable comparison to the GDPs of various countries and combinations of states. I found this comparison particularly interesting:

"The 2012 bill for SS will exceed the cost of the military, that’s the first time this has happened."

Like that's a bad thing?  To spend more on seniors, the disabled and survivors than on the military?

Now, it is a lot of money by any measure, and his larger point is to underscore the shortfall of income to cover the spending: while the shortfall last October was $6.7 billion, it rises this October to about $8 billion.  And, it will continue to rise as more and more Baby Boomers claim their benefits.  He characterizes this as a slow and steady erosion of the program, like sand from a beach. 

Although the "erosion" is gradual, it is well understood by the actuaries at the Social Security Administration who understand with considerable precision how the funds will flow over the coming decades.  Most importantly, the fixes are well understood, can be implemented gradually and we have two decades to work with.  Not so scarey really. 

Contrast this with the fiscal cliff arriving in three months when the Bush tax cuts and the payroll tax holiday will expire raising everyone's taxes as much as $536 billion according to this article at CNN.com.  Couple this with the $1 trillion over 10 years of automatic cuts negotiated in the debt ceiling bill last year and you have a formula for sucking what little energy there is out of an economy that is barely limping along.  Pretty scarey!  Of course, there's nothing like a fiscal cliff to focus the mind, whether Republican or Democrat.  Hopefully they will reach a compromise that all the politicians hate.  This is usually good news for the middle of the roaders.