Paying for Your Pension
Better late than too late. The Clinton administration, the first boomer presidency, has finally quit playing mum about that biggest baby boomer question of all: fixing Social Security.
More verbosely, that should read: How to fix Social Security to support retirees in the next century - without straining the boomers' own children as they reach mid-career and fund their retirements and their children's needs.
It now looks as if the public is going to get a serious discussion. No demagoguery this time, please. Just a solid look at alternatives for future repair.
Treasury Secretary Robert Rubin and White House adviser Gene Sperling launched this year with the clear intent to make Social Security reform a "Clinton legacy" item.
In part, this may be an attempt to restrain Congress and the administration's own department heads. Both are readying grandiose plans for tax cuts and program expansions, as the federal budget heads toward its first surplus in three decades. Before it's too late, the basic national pension program should be hustled into the list of alternative uses for that surplus. We're glad GOP congressional leaders have welcomed the new White House seriousness. Often burned, they might have spurned this source of political pain in an election year.
Social Security is not supposed to go into deficit until about 2030. Since its funding system is really pay-as-you-go (from payroll taxes), how can we fix it now?
Basically, the answer centers on the need to plan ahead. We need a national consensus soon on whether to: (1) raise payroll taxes faster, (2) cut benefits, (3) reexamine inflation-adjustment, (4) partially privatize, (5) delay the starting age further - or do some of each.
We favor a further indirect but farsighted approach: Reserve a portion of the projected budget surpluses of the next few years to cut the national debt. That would mean at least a modest reduction in the heavy debt service payments that all taxpayers have to fund alongside their rising payroll tax for Social Security. Reducing that slice of the budget pie in the future would make for fairer burden sharing between generations.
Now is the time for serious public debate and understanding of the issue. The budget surplus window is not expected to remain open for long. We'd better make the most of the opportunity.