CIAO DATE: 10/2008
June 2008
Efforts by President George W. Bush to promote major reforms in the Social Security retirement program have not led to policy change, but rather to increased polarization between the two parties. And the longer we wait to address Social Security’s long-term funding problem, the bigger and more painful the changes will need to be.
But despite the current political stalemate, Social Security is a solvable problem. To be financially and politically stable, a future Social Security system will likely need several components, including a version of the current Social Security-defined benefit that becomes somewhat less generous over time; and a new universal, mandatory retirement savings component in low-cost individual accounts that is financed by Social Security payroll tax increases; and a reasonable minimum benefit for those with low lifetime earnings. Diversification of trust fund investments and new legislative mechanisms to facilitate early action as trust fund problems emerge would also be useful components of a Social Security reform package. Lessons from other countries point to common-sense ways to address these issues.
A new approach to Social Security reform also requires a different process of policy formulation and adoption. As a first step, the president and congressional leaders should agree on an overall mandate for a commission named through a bipartisan nominating process designed to generate a group that is likely to focus on practical, consensus-building solutions. Special procedures in each house of Congress would provide expedited consideration of the commission’s reform package and alternatives, while providing incentives for constructive congressional engagement in the reform process.
Resource link: Bridging the Social Security Divide: Lessons From Abroad [PDF] - 80K