Is Social Security Reform Too Much to Hope For?

Most mature observers of American government know that the United States is facing a looming entitlement crisis. Social Security and Medicare account for nearly 60% of the federal budget and the cost of each is spiraling out of control. The cost of Medicare escalates with the rising cost of health care in general and the recently passed health insurance reform, while expanding coverage, does not address health care costs in any meaningful way. Both programs face a demographic crisis. Baby boomers are retiring and there is a dwindling number of workers paying in to the system to cover the new retirees. The dirty little secret in Washington is that the current system is unsustainable.

In a previous post (http://freemarkets-freeminds-freesociety.blogspot.com/2010/04/end-it-dont-mend-it.html), I outlined a case for eliminating Social Security, on both moral and economic grounds. Although no plan for the elimination of the program should affect current retirees or those nearing retirement who have planned on Social Security, I understand that the argument I presented is not politically practical. Current retirees will always fear that the changes will affect them; demagoguery about individuals losing their retirement nest egg in private, stock-based, accounts is too easy; and a straight retirement welfare program for the working poor, which is what I think should replace Social Security, is unpopular because people who have been paying in to the program want their money back. For these reasons, Social Security has long been known as the "third rail," of American politics. Touch it, and you die. Barry Goldwater campaigned on Social Security reform in 1964 and lost. Paul Tsongas suffered a similar fate in the 1992 Democratic Presidential primary, losing to Bill Clinton when he raised issues of Social Security solvency and declared, "there is no Santa Claus." President Reagan had to appoint a commission to give elected officials political coverage to make some necessary changes in the 1980's that bought the last couple of decades of solvency.

However, an increasing number of Americans, having watched the Greek welfare state collapse, seem to have noticed the writing on the wall and there are signs that maybe the old political rules about Social Security are changing. Although President Bush did not accomplish Social Security reform and faced bitter opposition and demagoguery, he did win two elections (2000 and 2004) despite campaigning on the issue. Congressman Paul Ryan (R-WI), the ranking member on the House Budget committee, has been at the forefront of discussing the looming entitlement crisis and has proposed a road map for reform (http://www.roadmap.republicans.budget.house.gov/). Despite the predictable demagogic attacks on this plan, Congressman Ryan's reelection in 2010 is considered safe. More interestingly, at least three candidates for Senate - Marco Rubio (R-FL), Rand Paul (R-KY), and Pat Toomey (R-PA) - have endorsed specific reforms to Social Security on the campaign trail. All have addressed the question on Fox News Sunday. On March 28, 2010, Speaker Rubio endorsed Congressman Ryan's road map, including the possibility that retirement ages may need to be raised or cost-of-living adjustments decreased to keep the program solvent. On October 3, 2010, Dr. Paul similarly endorsed the notion that retirement ages may need to be raised. Earlier today (October 24, 2010), Mr. Toomey discussed the demographic challenges to Social Security and allowing younger workers to opt out and in to private or partially private retirement accounts, with regulations about the amount of risk (ratio of stocks to less volatile investments) the portfolio can have based on the proximity of the account holder to retirement. All three of these candidates are currently leading in their races. In the latest polls, Mr. Toomey leads Democrat Congressman Joe Sestak 46% to 43%. Dr. Paul leads over Kentucky Attorney General Jack Conway (D) 48% to 43%. Stunningly, in Florida (a state full of retirees), Speaker Rubio has opened up a commanding lead in the three way race with former Governor Charlie Crist (I) and Congressman Kendrick Meek (D): Rubio 41%, Crist 26%, and Meek 20%! (see Real Clear Politics for the latest polls: http://www.realclearpolitics.com/epolls/latest_polls/senate/)

The election of Congressmen and Senators who are unafraid to at least discuss Social Security reform and willing to go on record advocating specific changes in the midst of an election campaign (and in the case of Dr. Paul and Mr. Toomey, in tight races) would represent a huge step forward for the possibility of desperately needed entitlement reform. The only questions that remain are: 1) can these brave souls stand up to the demagoguery and the organized special-interest attacks to bring the rest of their party (and the President) along? and 2) can Republicans, who created new entitlements and doubled the national debt under George W. Bush really be trusted to do this?