Advice On Social Security

Apparently, the political and economic teams in the White House are fighting about whether to do Social Security Reform now, or after the 2012 Election, and whether or not benefit cuts should be involved. Basically, everyone agrees reform has to get done, but there is debate about when and how. From the Hill:

Social Security became “cash negative” last year as it began paying out more in benefits than it received in revenues. Thus, the federal government has begun borrowing in capital markets to pay off its IOUs to the trust fund.

The trust fund itself has a theoretical $2.6 trillion surplus, but that money has been spent by the federal government like general revenues. The payback has arrived at a very difficult time, when Washington is running a $1.6 trillion budget deficit.

Geithner and his lieutenants argue that benefits reform will give the markets confidence that Obama and Congress have the will to address the problem of long-term national debt.

So, what to do? Do it now. Here's why:

• There is little to no chance that Medicare gets done during this term, being that we're about 10 months from the Iowa Caucuses now, and re-election year beckons for a lot of freshmen in the House. I cannot imagine Speaker Boehner doing a deal. So the only alternative to doing Medicare as a "big fix" to the deficit in 2011 and 2012 is to do Social Security.
• No one wants to see the Republican alternative "fix" to Social Security, privatization (maybe not even the GOP). It's unpopular, and a real drag on them with the older voters who put them in in 2010. By bringing out a reform plan, it will force the GOP Leadership, and Presidential contenders, to come out with a plan of their own. Politically, this is poison.
• No believer in Social Security wants to see the program gutted out to nothing. So, do it now, while the Democrats hold the Veto pen, and not risk losing that before we get the chance.
• Since Medicare isn't an option, this is likely to be the biggest thing he can do with the remainder of his term. It'd be pretty impressive to add this to an impressive first term resume, saying he was the President who did a "big fix" on Social Security. He would be standing up to the left-wing crowd that says "don't do anything" on Social Security, and standing up to the right-wing "all government is bad" crowd at once. Major points with independent voters for re-election there. Also, major points with voters in general, for showing the ability to get big, important things done in a re-election cycle.
• Even though insolvency is over 20 years away, it's the right thing to do, policy wise. The program does have long-term problems, and they would put us in a debt busting situation if not fixed. By doing it now, we avoid those problems, and see major benefits.

So then, I'm sure someone will shriek "cutting benefits is political suicide." Someone else will scream, "we can't afford this damn program." Both are very wrong. Fixing Social Security doesn't take as much effort as people think, and could be done to a benefit. Here's how:

• Eliminate, or change, the cap on payroll taxes for Social Security, which currently rests around $107,000. Why do we have this anyway? I'd get rid of the cap all together, and lower the tax rate as a result (still bringing in much more revenue), but even just an upward change would fix a lot. Raising the cap to say, $250,000, or even $1,000,000, would generate billions, if not trillions long term, to pay back the "iou's" in the trust fund. It's simply "upping" the revenue.
• Raise the retirement age, slowly. Most people in their 20's, like me, assume that the retirement age will be higher for us, because we'll live longer. Even raising it gradually, and only a year or two, saves billions.
• Adjust the "Cost Of Living Adjustments," or COLA's. This is what folks on the left are really the most angry about, but it's probably necessary, in the long run. Social Security's COLA is even more generous than the one enjoyed by most government workers. Just "tinkering" with it, to put it in line with their's, would solve a lot of future problems. Again, for me, a no-brainer.

I'd propose it this year. The President would take the "high ground" in the budget deficit debate, and take control of the "adult conversation" on the Hill. I see all positives here. The President should make his move.