US economy

Can Social Security Be Fixed Forever?

In 1983, the main Social Security trust fund came within months of being exhausted. That year a national commission chaired by the economist Alan Greenspan presented Congress with a plan to fix Social Security’s finances, but it couldn’t reach agreement on a solution that was projected to last 75 years. Congress tried to reach the 75-year target with a schedule for raising the normal retirement age incrementally to 67 from 65, but the fix ended up not lasting for 75 years (which would have been 2058). Still, the attempt was made.

Is 75 years still the right distance down the road to kick the can? Max Richtman, the president and chief executive of the National Committee to Preserve Social Security and Medicare, told me he thinks it’s too long. “You don’t know anything that far ahead,” he said. “It’s a nice goal, but to me this isn’t the Ten Commandments.” He said he’d be happy if Congress came up with a fix that delayed the main trust fund’s exhaustion by perhaps 20 years, during which time efforts could be made to repair the system.

Laurence Kotlikoff, an economist at Boston University whom I’ve quoted frequently in this newsletter, took the opposite stance. He wrote in a recent Substack post that even 75 years isn’t long enough to look ahead. He pointed me to a table in Appendix F of the trustees’ annual report that gives the “infinite horizon” projections for the trust funds. In the 2023 appendix, the trustees said there’s a $65.9 trillion gap in today’s dollars between projected revenues and costs in perpetuity. That’s three times the size of the gap in today’s dollars when projecting ahead 75 years.

I asked Kotlikoff whether maybe infinity was a bit much to think about. Not at all, he said. Making Social Security safe for only 75 years effectively assumes that all beneficiaries will “conveniently expire” at the end of the 75th year and so won’t need checks, he said. He acknowledged that long-run forecasts are uncertain but said: “When there’s uncertainty you don’t want to have blinders. You have to be more concerned about the unknown. That’s why we buy catastrophe insurance.”

Steve Laffey, a former mayor of Cranston, R.I., who is seeking the Republican presidential nomination, and whom Kotlikoff is advising on economic matters, told me that voters he speaks with aren’t staggered by the sorts of changes to Social Security that might be needed for an “infinite-horizon” fix. (I’m not getting into the details of those fixes because this newsletter is already getting long.) “Older people nod,” Laffey said. “They know they screwed the younger generation.”

The last person I spoke with was Laura Haltzel, a senior fellow at the Century Foundation. She said that securing Social Security out to infinity is unrealistic. “There are too many factors that could change. Covid, inflation, recessions. Trying to do anything on an infinite horizon is going to overshoot the mark or undershoot the mark.” But she also disagreed with Richtman’s idea of seeking a fix that would last less than 75 years. “If you start changing what the goal is you’ll end up with something less than everyone agreed on. If you start aiming at 40 or 50 years you might get 20.”

For Congress, “keeping their eye on 75 years is good,” Haltzel said. “Whether they can reach that is a different question.”


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