Reforming Social Security
May Be (Relatively) Easy After All
National Policy Analysis paper
# 157 published January 1997 by The National Center for Public
When the 13 members of President Clinton's
Social Security Advisory Council failed to agree to one or even
two sets of recommendations about how the nation can best keep
Social Security solvent, most analysts considered the divided
verdict as evidence that the issue of Social Security is fraught
with political peril.
But does reforming Social Security have
to be difficult? Probably not. Here's why:
- While the 13-member Social Security
Advisory Committee could agree only to make three separate recommendations,
evidence indicates that public sentiment is not so divided. A
November 1996 poll sponsored by the non-partisan Generation X
group Third Millennium and carried out by a joint Republican-Democrat
team of pollsters and consultants found that the public leans
heavily toward one of the three major reform options: That of
keeping benefits for current retirees while permitting workers
to invest part of their Social Security taxes in private investment
The three plans proposed by the President's
Advisory Council, and their degree of public support in the poll,
- A) Partially privatize Social Security
by preserving present benefits for those currently 55 and older,
diverting 40% of the 12.4% payroll tax to mandatory personal
retirement accounts, providing a floor benefit to future retirees
of $410 or more per month, raising the retirement age to 67 in
2011 and adjusting with life expectancy, and raising the payroll
tax by 1.52 percentage points beginning in 1998. This concept
was supported by five members of the President's commission and
supported by the public 69% in favor to 22% against. Americans
over 65 supported it 50% to 32%.
B) Study investing 40% of Social Security assets in stocks, increase
the payroll tax in 2045 by 1.6 percentage points and decrease
benefits slightly. This concept was supported by six members
of the President's commission and opposed by the public 24%-67%.
Seniors opposed it 29% to 54%.
C) Increase workers' share of payroll taxes by 1.6 percentage
points in 1998 to finance government-run individual accounts,
lift the retirement age to 67 in 2011 and adjust with life expectancy,
and reduce Social Security benefits for some middle- and upper-income
recipients. This concept was supported by two of the 13 members
of the Social Security Advisory Council and opposed by the public
in the poll by 34% in favor to 58% opposed. Seniors opposed it
29% to 50%.
- Senior citizens, often cited by pundits
as the voting block that won't permit politicians to meddle with
Social Security, actually are far from unanimous in their confidence
in the current system. A September 1996 survey done by The Polling
Company found that only 62% seniors feel "extremely"
or "very" confident that Social Security and Medicare
benefits will remain for them throughout their retirement. Among
pre-retirees -- those American older than baby boomers who have
not yet retired -- this number plummets to 24%.
- Support for structural change among
Baby Boomers and Generation Xers is high; their confidence in
the status quo is low. In the Third Millennium poll 71% of Baby
Boomers and 81% of Generation Xers supported the partial privatization
plan. In The Polling Company survey, only 6% of Baby Boomers
and 5% of Generation Xers were "extremely" or "very"
confident about the future of Social Security and Medicare.
- Support for some kind of change in the
Social Security system transcends partisan differences among
the general public. According to The Polling Company survey,
only 21% of Democrats, 17% of independents, and 21% of Republicans
in all age groups are either "extremely" or "very"
confident that Social Security and Medicare will be there for
them throughout their retirement.
- The alternative to structural change
is politically unpalatable. In 1955, there were 8.6 workers for
every Social Security recipient. In 1995, there were 3.3. By
2040, there will be no more than two. With two paying in for
every one taking out tax increases and/or benefit decreases will
be mandatory if there is no structural reform. Yet politicians
will be forced to vote for one or both if the system is to avoid
- Public support for some Social Security
reform is likely to increase as the public realizes during the
course of an extended Social Security reform debate that reform
could mean more money for their retirement. As analyst Gordon
Jones of the Seniors Coalition notes, the average retiree receives
a monthly Social Security check of approximately $800. Had they
invested their Social Security taxes in the stock market, and
had the stock market performed only half as well as it has, the
average retiree would get more than three times their current
benefits. In fact, says Jones, for high income workers the monthly
benefit would have reached $11,000 per month.
Will Social Security reform be as politically
safe as legislation commemorating the Fourth of July? No, but
it will be no where near as perilous as most pundits insist.
--Amy Moritz Ridenour, president of
The National Center for Public Policy Research
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