“Essentially, the President is proposing to shore-up Social Security by crediting the trust fund with presumed interest savings from presumed debt reduction, made possible by presumed budget surpluses. There are too many presumptions in this chain of logic to be credible or to constitute a genuine reform strategy,” said Concord Executive Director Robert Bixby.
“More importantly, the plan has the wrong goal. It focuses solely on trust fund solvency and ignores the huge long-term operating deficits that the program will face as the baby boomers begin to retire. Even if the budget surpluses and debt reduction that the President anticipates actually occur, the looming shortfall between Social Security's dedicated tax revenues and its benefit obligations will remain precisely the same as it is now. The only change would be that Social Security would have a large new claim on future general revenues. This would be a major break with the program's self-financing tradition,” Bixby said.
“While the Concord Coalition agrees with the President that debt reduction is an important use of any surpluses that may develop, we do not agree that his plan to credit Social Security with new Treasury IOUs does anything to save the program. All it does is literally paper over the real problems,” Bixby said.
Impact of the President's Plan on Key Fiscal Issues
· Under current projections, Social Security will begin running annual cash deficits in 2014. The President's proposal would not change this.
· Under current projections, in 2050 alone Social Security's annual cash deficit will be $1.7 trillion ($343 billion in 1999 dollars). The President's proposal would not change this.
· Under current projections, between 2014 and 2050 Social Security's cumulative cash deficit will be $28.6 trillion ($8.4 trillion in 1999 dollars). The President's proposal would not change this.
· Under current projections, Social Security's cost will rise to over 18 percent of workers' payroll, up from the current 11 percent. The President's proposal would not change this.
“The Concord Coalition continues to believe that there are only two roads to genuine Social Security reform, and a workable plan must pursue both. Reform must reduce Social Security's long-term burden by reducing its long-term costs. And it must make the remaining burden more bearable by increasing national savings, and hence the size of tomorrow's economic pie. Doing so requires hard choices. There are no magic bullets,” Bixby said.
The Concord Coalition was founded in 1992 by former Senator Warren Rudman (R-N.H.), the late Paul Tsongas, former Democratic Senator from Massachusetts, and former Secretary of Commerce Peter Peterson. Former Senator Sam Nunn (D-Ga.) joined Rudman as co-chair of the organization in 1997. The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy.