Deficits and Social Security: Time For a Plan

Blog Post
Monday, May 14, 2018

Former U.S. Rep. Paul Hodes discussed fiscal responsibility, the need for bipartisanship, and his House experiences in the latest episode of “Facing the Future.”

“The economy is in something of a recovery… it is time to address those debts and deficits in a responsible way,” Hodes said. To him this means reforming the nation’s health care system as well as areas of “mandatory” federal spending like Medicare and Social Security.  

“Talking about Social Security is the third rail of politics,” said Hodes. “I’m not running for federal office, but even if I was, I think it’s time to get smart and get honest about it.”

Hodes, a Democrat who represented New Hampshire from 2007 to 2011, is concerned that the current administration is too comfortable with the nation’s debt level. President Trump has referred to himself as the “King of Debt,” a title Hodes considers appropriate.

“So, he’s not afraid of debt,” said Hodes. “I don’t like it; I’m from New Hampshire, and I ran as a fiscally responsible Democrat.”

One reason Hodes ran for Congress in 2006 was to help move the economy in what he thought was a better direction. He had largely disagreed with recent tax cuts and the continuation of the Iraq war.

“There are times in our history when deficit spending is necessary; if you are at war...if there is an economic crisis,” he said. “A responsible approach now would be to say, ‘That was then, this is now.’ ”

Hodes stressed the importance of bipartisan cooperation. “All the legislation that I was able to author and pass, we were able to find a Republican sponsor,” he said.

“Outside the chamber, where everybody is slinging arrows and stones, we had regular dinners with members of the Republican class of 2006,” he said.  “We would just talk and get together.”

However, Hodes lamented that over his time in Congress, that congenial environment changed and partisanship began to foster an “oppose everything” mentality in the House.

Robert L. Bixby, executive director of The Concord Coalition, joined the radio program to discuss the current state of Social Security, its future challenges and the need for reform.

“Social Security is a social insurance program,” Bixby said. “It’s not a pension program, it’s not an investment program, it’s a government-run program where everyone pays in through the payroll tax.”

“The amounts you are paying in now, and I am paying in now, are going to pay the benefits of today’s beneficiaries,” he said.

But Congress may have to act soon to address the program’s challenges.

“Basically, the problem right now is that the current stream of revenue from the payroll tax is not sufficient to pay the level of benefits,” Bixby said. “That deficit will get progressively worse as the Baby Boom generation retires.”

The retiree population enrolled in the program is expected to grow from 49 million beneficiaries today to about 79 million by 2035. That will result in just two workers paying into the system for each beneficiary, if policies remain unchanged. The Social Security trust funds will eventually be exhausted.

“It’s a demographic tidal wave that has been forecast, and it’s already cresting on the shores,” Bixby said.

If the trust funds are exhausted, the Social Security Administration will not have authority to continue paying out benefits beyond the level of revenue coming in from payroll taxes. Retirees enrolled in the system would see a benefit cut of about 20 to 25 percent, Bixby said.

“Whatever way you look at it, the fundamental issue is that the program as it is structured now cannot pay the benefits that it promises to future generations,” he said. “That creates great uncertainty and potential hardship, so the sooner we can correct that, the better.”

I host “Facing the Future” each week on WKXL Concord News Radio (N.H.), which is also available via podcast. Join us as we discuss issues relating to national fiscal policy with budget experts, industry leaders, elected officials and candidates for public office. Past broadcasts are available here. You can now subscribe to the podcast on iTunes, Google Play or through RSS.