The Concord Coalition has released the sixth in its series of reports on Social Security - Tackling Social Security: There's No Free Lunch.
The Coalition feels that the political left and the political right are wrong on this issue because both sides think that a solution can be had without sacrifice.
From the political right, the message is “if we just adopt personal accounts everyone comes out ahead.” From the political left, it is “if we just make a few minor adjustments the program can pay all promised benefits indefinitely.”
Part of the problem, in the Coalition's view is that policymakers look at Social Security in isolation.
Perhaps if viewed in isolation, Social Security’s long-term cost growth might be bearable. But Social Security is not a “hardened silo,” and its long-term outlook must be assessed in a broader context. What matters fiscally and economically is the rising total cost burden of government entitlements in our aging society. Focusing on one program’s future shortfalls ignores this context.
The Coalition does not see diversification of assets as a solution.
The problem with (proposals to diversify trust fund assets) is that they typically do not require people to pay more to acquire these financial assets. Instead, they would use current taxes. But if current taxes are used, the government would have to borrow to make up for the revenue loss. The government is already running large budget deficits even with excess Social Security taxes that are now being collected.
Indeed, any analysis of the effect of shifting Social Security Trust Fund (OASDI) assets away from government bonds and into equities - and thereby increasing returns on investment - shows that such a shift would help reduce unfunded liabilities, but not enough to really address the fundamental problem.
In the Coalition's view,
Real reform will only come from understanding and accepting that it is the rising cost of entitlements that will impair economic growth. It is not the program’s projected deficits but why the deficits will emerge in the first place. Thus, the key issue in reform is not whether the Social Security trust funds or personal retirement accounts have assets posted to them. It is the economy’s ability to pay off whatever future claims are created.
I look forward to substantive proposals from the Concord Coalition as to how these issues will be addressed.
See this prior post.
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