Recent government agency reports say the program isn't as likely to come up short of funds as soon as previously believed. However, there is still plenty of room for concern.
A hearing of the Senate Special Committee on Aging focused specifically on the use of personal retirement accounts as a means of stabilizing the contested downfall of the Social Security system in the next several decades. Although the approaches for reform differed among the experts present, all agreed that some reform was needed.
Committee Chairman Larry Craig, R-Idaho, stressed that these reforms are not meant for the immediate future.
"I want to emphasize that the topic of this hearing is really about America's youth. Those currently on Social Security and about to retire will not be affected by any reforms discussed here today," he said.
A General Accounting Office report released at the hearing analyzed the effects of various reform proposals and their distributional consequences. Simulations were conducted involving Model 2 of the President's Commission to Strengthen Social Security from 2001, a plan that proposes establishing voluntary personal retirement accounts for workers.
The study found that the combined effect of the commission's Model 2 and certain benefit reductions "could result in lower earners receiving a greater relative share of all benefits than under the current system." In other words, as U.S. Comptroller General David Walker testified, "The distribution of benefits under (the plan) would be better than the current Social Security system."
In response to the increased amount of funding needed, Walker continued, "It is about how the pie is divided up, not how big the pie is."
Other reforms were examined in the GAO study as well, including a proposal offered by Peter Ferrara, director of the Social Security Project Club for Growth and a witness at Tuesday's hearing. His proposal also involved what he called "Progressive Personal Accounts." Ferrara said that the larger personal accounts proposed by his "Progressive Personal Retirement Account Plan" are more progressive than the smaller accounts of Model 2.
Jeffrey Brown, assistant professor of finance at the University of Illinois at Urbana-Champaign's College of Business, also supported personal retirement accounts. "It is possible to create a system of personal accounts within Social Security that leaves the system as progressive, or even more progressive, than it is today," Brown said.
While the plans of the CSSS and the Club for Growth emphasize the need for privatization, Christian E. Weller, senior economist at the Center for American Progress, took a different view.
Weller argued that changes to the current system need to improve the benefits for all workers and protect the level of future benefits. He testified that privatization of Social Security does not correspond with these goals.
"Privatization constitutes an erosion of benefits since it exposes individuals to greater risks that can only be partially compensated for by incurring substantial costs," Weller said.
In addition to the GAO study, the recent Congressional Budget Office study on the future of Social Security was also a source of debate. The study, released Monday, suggests that there is a healthier future to the current program of Social Security than had been predicted. Social Security was expected to have trouble meeting its obligations as the baby boom generation retires and begins to draw benefits in concert with a decline in the projected number of workers paying into the system's funds. However, that projected downfall, expected as soon as 2042, may be pushed back 10 years.
"The problem of insolvency is still there, though we have a little more breathing room on that front," Craig said.
Costs of healthcare in relation to costs of Social Security were also compared. Walker believes that the problems posed by Social Security are easier to deal with than the problems of programs like Medicare. Both systems, however, are at risk and untenable. "Their long-term impact on the federal budget and the economy will be dramatic," Walker said.
Healthcare was also a concern of the CBO in its study, which stated, "Spending for government health programs will grow even faster than spending for Social Security because of rising healthcare costs."
The GAO and the CBO reports together presented data necessary for an informed debate about Social Security reforms. Jeff Lemieux, executive director of Centrists.Org, a Washington think tank, said, "The reports are leading to a higher level of analysis of the situation."
Lemieux said that acceptance of the data and increased bipartisan efforts to resolve the situation are necessary.
Craig agreed and stated that the reports are "trying to build a base of information in which all of us can look at the situation objectively."
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