The situation was dire, according to the experts. In 1981, the Social Security Trustees published their annual report, and the warning was stark: Unless there was a solution to Social Security's financial condition, the program would not be able to pay benefits on time, beginning in 1982. President Reagan appointed a commission chaired by Alan Greenspan, the Ayn Rand follower and economist who made no secret of his dislike for Social Security. Reagan would later appoint Greenspan to chair the Federal Reserve, but before he did, the Greenspan Commission issued a report on Social Security in 1983 after 18 months of study. And then the legends began to be written.
According to Beltway received wisdom, President Reagan and Speaker Tip O'Neill put aside their differences, told Irish jokes, and cut a deal that worked out for everyone. It was bipartisanship at its finest, we are told. It is the sort of thing Americans love, more than anything else, when people come together across the real and proverbial aisles. And when bipartisanship happens, good things happen. Thus is the wonderful story of the Social Security deal of 1983. The program's financial soundness was declared and trumpets blared, with drinks and smiles all around.
The reforms enacted under the 1983 act worked well if one was only concerned with Social Security's finances. The number of people mandated to participate was expanded, creating a larger pool of participants. Revenues increased faster than expenses after the deal was made, creating a huge surplus to raid for other purposes. But make no mistake, this wasn't a good deal if you're someone who planned on retirement in relative comfort.
The regressive payroll tax was increased, which hits lower-income people especially hard. The retirement age was raised by two years, to 67. Let there be no doubt, raising the retirement age is cutting benefits. The "windfall" of collecting both a pension and Social Security was curbed. The new law introduced taxation on Social Security benefits for "windfall" earners. While Social Security may have looked great from 50,000 feet after these reforms, on the ground the situation was nothing more than a tax increase and a benefit cut.
So where exactly did the good deal for people coming in? In hindsight, it now appears that all that Tip O'Neill agreed to do is mostly cut benefits and raise taxes on regular folks. I can give Tip O'Neill a break: the program was facing serious problems. Tip O'Neill not only had a strong Republican President and Senate, but 63 members of his caucus in almost full rebellion, frequently voting with Reagan. There was no way he could have gotten a modest tax increase to fix the problem. He made the best out of a bad situation, but this was certainly no major victory for people or for Social Security. And it certainly shouldn't be a model for bipartisanship if you're a Democrat.
The good financial health of Social Security then as well is now, could be achieved by relatively modest increases in taxation, mainly on the wealthy. There need not be any cuts in benefits. Furthermore, it seems even more preposterous that a "grand bargain" is needed to cut benefits considering that President Obama is NOT in the same position of Tip O'Neill. The program is not even close to insolvent as it was purported to be in 1983. He's a President and not a Speaker. He has a Democratic Senate. He could do nothing and the program would be just fine for another 25 years.
It is John Boehner who should be cajoled into swallowing tax increases on the wealthy. That is what would make Obama fit the Reagan analogy. If the President wants a grand bargain on Social Security, it should tilt very heavily towards the tax side of the argument. Otherwise, he wont be Reagan, dominating the agenda and getting one step closer to his goal. He'll be Tip O'Neill, boxed in and getting rolled.
No comments:
Post a Comment