John A. Turner is Director of the Pension Policy Center. Serena E. McCarthy is a Senior Policy Analyst at the Pension Policy Center.
Social Security OASI will have insufficient funds to pay scheduled benefits in 2032, according to current projections. Though crucial for the retirement income of millions of Americans, Congress has had difficulty passing reforms that raise taxes or cut benefits. The longer Congress delays, the larger will be the tax increases and benefit cuts required to restore solvency.
Nevertheless, these delays have benefited the Baby Boomers, now age 62+, because older people are unlikely to experience benefit cuts. They have held a majority in the House of Representatives or the Senate from 2000 to the present. Population aging also makes reform more difficult, because it raises the shadow price of Social Security benefits, which is the cost per worker of increasing average monthly benefits by one dollar. For these reasons, accomplishing Social Security reform will require reforming the reform process.
In our recent book, Social Security for Future Generations, we discuss the reform process. This needs to occur in three stages: 1) the discussing-to-discuss stage, 2) the discussing stage, and 3) the deciding stage. Currently, Congress is discussing legislation to establish a commission to develop reform proposals — the discussing-to-discuss stage. The discussing stage involves developing and evaluating reform proposals. The deciding stage involves voting to pass legislation. The stages can overlap.
Stage One: Begin the Reform Process
Our first proposal facilitates the discussing-to-discuss stage. It would require Congress to appoint a commission to recommend Social Security reforms when the projected OASI Trust Fund depletion date is fewer than 10 years away. Such a commission could provide political cover for Members of Congress voting for difficult changes. Every Member of Congress on the 1983 Greenspan Commission that sought re-election won.
Recognizing the technical and political aspects of reform, the commission would include policy experts, and bipartisan, bicameral Members of Congress, including two party leaders. It would hold public hearings and provide legislative recommendations. It would facilitate earlier discussion and earlier reforms.
The commission would need to address the key issue of the appropriate mix of payroll tax increases and benefit cuts. Viable reforms would generally involve both, falling into one of three approaches: a balanced reform of equally-weighted benefit cuts and payroll tax increases, a reform that leaned more heavily toward benefit cuts. or one that emphasizes payroll tax increases more heavily.
Rather than relying on ideological opinions, the commission would survey voters asking what they prefer. Some reformers propose equally-weight benefit cuts and payroll tax increases, arguing that these would fairly address competing viewpoints. Nevertheless, survey data suggest that most voters want to protect benefits and prefer a reform weighted toward tax increases.
Stage Two: Lower the Barriers to Reform
Our second proposal is to facilitate the discussing stage. Though not a legal requirement, policymakers generally evaluate Social Security reform proposals over 75 years — currently to 2101. For people entering the labor force today at age 20 and who could anticipate passing away at age 95, this would cover their remaining lifetime.
Social Security program costs have risen over time due to increasing life expectancy, falling birth rates, and increases in earnings. Nevertheless, it is difficult (if not impossible) to accurately predict these factors over the next 75 years. Analysis using the Penn Wharton Budget Model found that “options that are most effective at delaying the (Social Security Trust Fund) depletion date are the least effective at reducing the 75-year imbalance.” Dalmar Hoskins of the Social Security Administration, has noted that “the United States stands out as one of the very few (countries) that uses a projection period as long as 75 years. … several European countries, including France, use a thirty- to forty-year period.”
We propose that a shorter review period be used, somewhere between 40-60 years. In a perfect world, a 75-year period might be preferable because it could project problems over a longer period and could result in less frequent reforms. Yet we believe that a shorter projection period would be more useful, in view of the impossibility of accurate long-term projections and the issues in Congress that make reform difficult, including the decline in bipartisanship.
Social Security solvency is one of the most difficult issues Congress faces, viewed as the political “third rail,” which is too dangerous to touch. Reforms over a shorter period could involve smaller changes that would be easier to pass. In July 2026, the Promise Act in Congress would require that reforms provide solvency for 50 years.
Stage Three: Facilitate Passing Legislation
Our third proposal facilitates the deciding stage. The Senate’s 60-vote requirement to pass Social Security reform legislation, adopted in 1985, is a major hurdle. The Senate passed the 1983 reform by a vote of 58 to 14 (36 Republicans and 22 Democrats voting for it). Since then, it has not enacted into law any solvency reform with 60 or more votes.
We propose that the Senate reduce the required number of votes to 58. The existing 60-vote requirement for structural changes to Social Security, such as means testing or privatization, would be retained. A 58-vote requirement generally would mean a bipartisan vote. Nevertheless, following Franklin D. Roosevelt’s 1937 landslide victory, there were 75 Democratic Senators. To ensure bipartisan reforms, we propose that the Senate require at least 5 minority party votes.
Alternatively, the Senate could retain the 60-vote requirement, but if there were a Social Security reform vote with 58 or 59 votes, including at least 5 minority party votes, and negotiations over 30 days to reach 60 votes failed, then our proposal would take effect.
Conclusions
Our proposals could facilitate the currently needed reform. By facilitating earlier reforms, they could result in smaller, easier-to-pass reforms and a more equitable sharing of the burden across generations. Our book also discusses a wide range of reforms to restore solvency, improve equity, update Social Security benefit and tax provisions, and make those provisions easier to understand for people with moderate and lower levels of financial literacy (i.e., most people).
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.
