Social Security: Political Handouts in Another Year Without Real Reform
Part 5 of the Annual Recap
This year saw troubling developments in Social Security policy that underscore how political incentives continue to hinder meaningful reform. Through the Social Security (Un)Fairness Act, Congress repealed the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)—two provisions designed to prevent paying excessive benefits to certain public-sector workers. While these provisions had flaws, Congress opted for full repeal rather than pursuing commonsense fixes, accelerating the Social Security trust fund’s insolvency and adding $200 billion to Social Security’s fiscal burden over the next decade. This legislation is a handout to politically influential groups like public-sector unions at the expense of taxpayers. Even though Congress ultimately chose the wrong path, we actively engaged in the debate as the legislation advanced—publishing articles explaining why repealing WEP and GOP was a costly policy mistake (see here, here, and here). Our analysis gained traction in the media, being featured in CNBC and Newsweek.
Congress soon followed with another giveaway—this time by temporarily expanding the additional senior deduction as part of the OBBBA, a watered-down version of President Trump’s “no tax on Social Security” campaign promise. We actively made the case against eliminating Social Security benefit taxation through various Debt Digest editions (see here, here, here, here, here, here, and here). While expanding the senior deduction isn’t as fiscally damaging as the original promise, there still was no sound policy reason for providing yet more tax subsidies to seniors, the wealthiest age group in America. As Boccia argued at the time, this was “a blatant vote-buying effort to benefit an electorally powerful group, who already receive 40 cents of every federal dollar on top of holding most of the nation’s wealth.” She discussed this issue in an interview with the BBC, and MarketWatch also quoted her on the topic.
We also went on the offense, correcting widespread misconceptions about Social Security and educating policymakers on effective reform options. In November, Boccia published The Social Security Trust Fund Myth, a policy analysis explaining why the program’s trust fund is merely a collection of IOUs, the redemption of which will add trillions to federal deficits. The paper was accompanied by an interactive visual feature that brought its key insights to life—from the shrinking worker-to-beneficiary ratio to the fiscal impacts of redeeming trust fund IOUs.
To demonstrate that reform is not only necessary but achievable, we co-authored Reimagining Social Security: Global Lessons for Retirement Policy Changes. The book draws on reform experiences of Canada, Germany, New Zealand, and Sweden to offer ideas for modernizing the United States’ largest federal program that turned 90 this year. John F. Cogan, the Leonard and Shirley Ely Senior Fellow at the Hoover Institution and author of The High Cost of Good Intentions, said the book “must be read by anyone interested in Social Security reform.” We can’t disagree! We also published a policy analysis that distills the book’s key insights, aimed at a congressional audience.
What’s Ahead on Social Security
With Social Security’s insolvency looming, we’re driving the conversation toward real solutions. On October 30, we’ll host a Cato Institute event to mark the launch of Reimagining Social Security. The event will feature leading experts on retirement and fiscal policy, with a live stream available online.
In the lead-up, we’ll also host an exclusive online discussion on September 9 at Noon ET to dive into the book’s key insights. This smaller, more interactive session will be open to Debt Dispatch paid subscribers, congressional staff, federal agency personnel, and Cato donors.
To better understand how Americans view Social Security—and what reforms they might support—we recently conducted a short Cato Institute survey, alongside a separate survey of Debt Dispatch subscribers. Two clear trends emerged: most Americans lack knowledge of key aspects of the program, and many are open to transitioning Social Security to a flat-benefit structure. See more details here. A larger survey will follow in October.
Finally, our in-house Social Security model is nearing completion. The October 30 event will include an optional, in-person-only presentation of the model.