Social Security reform has been a hot topic surrounding the 2012 election debates. At a time of skyrocketing debt and record-setting deficits, presidential candidates warn that our nation’s largest social program is close to collapse.
Many economists and politicians agree Social Security is in dire need of reform sooner or later, but little is said about what a politically palatable reform might actually look like. Resident scholar of the American Enterprise Institute, Andrew Biggs, discusses what a fully reformed Social Security program might look like in Social Security: The Story of Its Past and a Vision for Its Future.
To fix Social Security, Biggs explains that we must first understand why we have a Social Security system. He retraces the history of the program created in 1935 in response to the Great Depression as a safety net to keep the elderly from falling into poverty. Original intentions of a federal mandatory savings program does have benefits since:
To fix Social Security, Biggs explains that we must first understand why we have a Social Security system. He retraces the history of the program created in 1935 in response to the Great Depression as a safety net to keep the elderly from falling into poverty. Original intentions of a federal mandatory savings program does have benefits since:
“…some individuals will fail to save adequately, and society will be forced to either let them suffer or to bail them out using public funds.”But our nation has fallen into the “Samaritan’s dilemma,” as Nobel Prize-winning economist James Buchanan referred to Social Security, since relieving poverty likewise encourages individuals to depend on and take advantage of government programs, creating a slew of unintended consequences. Biggs explains in simple terms how the complex safety net works and what kinds of problems are imbedded in its design. Changing demographics, such as declining fertility rates and increasing life expectancies, the debt legacy, and the costs of complexity create the unsustainability factor at current levels, but the way the system is designed has also created a false sense of security. Biggs explains why the lack of any guaranteed value creates a vicious cycle that misleads the public and discourages reform:
“…It is neither fair to participants in Social Security nor helpful to citizens making policy decisions to have a ‘trust fund’ that doesn’t service as a true store of wealth, as this gives a misleading view of Social Security’s financial health and causes some to become unconcerned regarding the need to fix the system’s problems.”What may be an even more fundamental problem with Social Security is that is compromises individual freedom of choice to prevent negative financial outcomes. Biggs says:
“…if we take away all important decisions in the name of preventing all negative financial outcomes, we also take away individuals’ free choice, the exercise of which is a distinguishing characteristic of being human.”Biggs wraps up by suggesting politically palatable ways in which policy makers should go about restoring Social Security and what a reformed program might look like. He argues the system is in need of extreme simplification, decentralization and reliability.
“…fixing these financial problems isn’t just a matter of raising taxes or reducing benefits. Rather, we need to reassess what we wish the program to accomplish and craft policies that can do so in light of twenty-first-century realities.”Biggs’s assessment of the government’s largest and most threatened safety net is a must-read for policy writers and the average American citizen alike. Social Security: The Story of Its Past and a Vision for Its Future is instrumental in understanding how the benevolent values of Social Security are disconnected with the execution of these values. Biggs challenges the public towards immediate Social Security reform at a time when our nation needs it most.
