Reid on SocSec reform: Talk to me in 20 years

posted at 12:55 pm on March 17, 2011 by Ed Morrissey

I’m not sure which is worse: the suggestion that even the easiest kind of entitlement reform won’t get any hearing in the Senate this session, or the idea that Harry Reid will still be in the Senate in 2031. In an appearance last night on MSNBC, Larry O’Donnell asks a good question of Reid about the solvency of the Social Security fund and the need for reform. Reid literally waves it off and says wake him up when the meltdown is in full swing:

Give O’Donnell some credit for both asking the question at all and framing it properly. He gives a fairly objective description of the problem and the parameters that reform will have to follow. Either we raise the retirement age, which would also help with Medicare reform, or we start cutting benefits. Reid’s answer is that he won’t do anything for the next 20 years until the singularity approacheth, or something.

Why take action now, if the “solvency” of Social Security won’t be at issue until 2037? In the first place, that’s debatable in and of itself. The SSA has slipped into red ink on a monthly basis six years earlier than projected by Peter Orszag in 2008, when he ran the Congressional Budget Office, which means that the extended projections are certainly questionable. The “fund” has no cash on hand, either; it consists of Treasuries that SSA received so Congress could spend the money over the last few decades. When SSA starts cashing those Treasuries, as it has to do now to cover monthly deficits, the federal government has to sell more bonds to cover the cost.

Even if one accepts the solvency argument, reform earlier means a lot less pain later, and a better chance at holding benefit cuts to a minimum, especially for those already on Social Security. Chuck Blahous explained it in his book, Social Security: The Unfinished Work (Kindle link here), with this warning on the costs of delay:

Another notable aspect of the Social Security challenge is the cost of continued delay in repairing program finances. The longer that we put off dealing with Social Security, the less fair the solution will be.

We could, hypothetically, make the system permanently sustainable today without raising Social Security taxes in any way, without changing benefits for those now in retirement, and while still allowing future retirees to receive benefits that are higher than those paid today even after adjusting for inflation. That is, benefits could grow smoothly on a path that rises consistently in real terms, without raising taxes.

Within just a few years, however, that will no longer be true. Within about a decade, a Social Security solution would require a choice among raising taxes, reducing benefits for those already in retirement, and/or forcing future retirees to receive lower benefits than previous retirees received. Either we’d need to tell young Americans that their taxes are going up or we’d need to start telling retirees that their standards of living are going down.

If we run this thought experiment all the way out to 2037, we see that we would then face a choice of suddenly reducing benefits by 24 percent, increasing taxes by 31 percent, or some equally disagreeable point between those poles. Moreover, even this array of choices assumes that we’d be willing to suddenly cut a retiree’s benefit from $2,000 in one month to $1,520 the next— hardly likely. If instead we wanted to shield then- current retirees from sudden cuts, we could only get a comparable amount of savings by cutting the entirety of benefits for new retirees.

Whether we define the “problem” as occurring in 2016 or 2037 thus matters little to the question of whether we should act soon. Either way, a solution enacted today will be far fairer across generations, and involve far less concentrated pain, than one enacted ten or even five years from now. As we delay for reasons of political expediency, the ironic consequence is that the political difficulties of reforming Social Security only mount.

Why is delay so costly? There are a number of reasons, one of which I just touched upon: the bipartisan political consensus that we shouldn’t cut benefits for those now in retirement or about to retire. Thus, every year that passes, another class of retirees joins the rolls with benefit obligations locked in as politically inviolate.

Moreover, due to the wage- indexing of the benefit formula, each year’s delay means that we’re also locking in a greater base benefit level.  This makes it less and less possible to avoid future declines in real benefit levels without raising tax burdens. In practical effect, delay inevitably exacerbates the tax increases that we will oblige young Americans to accept.

Perhaps the easiest way to understand the consequences of delay is to note that each year that we fail to act, we take another cohort of Americans— specifically, a historically large class of baby boomer retirees— out of the solution process. This means that the burden of filling the Social Security shortfall must be borne by a shrinking fraction of the population. Further concentrating the sacrifice on younger Americans is particularly unfair given that these generations already stand to lose money, net, through Social Security as it is.

Why is that?  Because they’re funding the preceding generations, and the succeeding generations won’t be sufficient to fund their retirements:

The table also shows, however, that those already in Social Security will, in the future, get back $18.7 trillion (in present-value dollars) more than they will contribute henceforth. In short, their past excess contributions, even if they had been saved, are nowhere near the amount needed to pay for their future benefits.

This is where young and future generations come in. Social Security is a pay- as- you- go system: each generation’s benefits are paid primarily by taxing those that follow (this is true even if we adopt the controversial viewpoint that the $2.4 trillion Trust Fund is effective pre- funding). Were we to exclude current program participants from the solution, those just entering Social Security now will effectively be asked to put an additional $16.3 trillion into the system beyond what they will ever receive.

Waiting two decades to wake up Harry Reid isn’t a policy.  It’s a pusillanimous political dodge, and it threatens the fiscal health of the United States.  If Harry Reid can’t stay awake and do his job for the next twenty years, then he needs to resign so Nevada can find a Senator with intestinal fortitude who can handle the job.


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He’ll be dead.

VegasRick on March 17, 2011 at 12:55 PM

If Harry Reid can’t stay awake and do his job for the next twenty years, then he needs to resign so Nevada can find a Senator with intestinal fortitude who can handle the job.

Ed, this last election told us what Nevada voters want. You sound like they aren’t in favor of this approach.

a capella on March 17, 2011 at 12:59 PM

Sorry, but I can’t even look at Reid anymore without throwing up in my mouth. How anybody could elect this pile of goat dung is beyond imagination.

rplat on March 17, 2011 at 1:02 PM

TIP

Donald Trump Goes Birther – 3/17/2011

Nearly Nobody on March 17, 2011 at 1:04 PM

At the risk of sounding like a broken record, face the facts people:

1) . The Oppressive-left does not care or want to solve the Fiscal Insanity problem.

2) They want to USE this ‘Serious Crisis’ to either implement an oppressive taxation regime or Cloward-Piven the country.

Chip on March 17, 2011 at 1:04 PM

Doctor: “You have major blockage of your arteries. You require immediate bypass surgery or you will die. Do you understand that?”

Patient: “Meh”

catmman on March 17, 2011 at 1:05 PM

Reid on SocSec reform: Talk to me in 20 years

Does God let the dead make a phone call?

rukiddingme on March 17, 2011 at 1:06 PM

did he bust any ‘cowboy poetry’ rhymes?

ted c on March 17, 2011 at 1:06 PM

This is how adults make the tough decisions!

/

How anyone can take the Democratic Party seriously is beyond me.

mankai on March 17, 2011 at 1:07 PM

HR is a f…..ing tool as well as an idiot. That election in Nevada had to have been fixed. I just cannot see how people can be so stupid,,,but then again, OStupid was “elected”.

retiredeagle on March 17, 2011 at 1:07 PM

He’ll be dead.

VegasRick on March 17, 2011 at 12:55 PM

Oh snap, you said it first.

rukiddingme on March 17, 2011 at 1:07 PM

Is Harry Reid even going to be alive in 20 years? I doubt it. So of course he wants to punt it down the road, rather than deal with a real issue. This is Bear Liar on Libya level of cowardice. These Fascist-Democrats don’t give a rat’s @ss about anything outside of their short term hold on power.

rbj on March 17, 2011 at 1:08 PM

He’ll be dead.

VegasRick on March 17, 2011 at 12:55 PM

What does Reid need SS for? He doesn’t pay into it.

upinak on March 17, 2011 at 1:08 PM

He’ll be dead….that is the problem, these pols keep kicking the can down the road, knowing they will have kicked the bucket and will not need to deal with it….cowards….

t on March 17, 2011 at 1:10 PM

The guy is a moonbat. What else can you expect?

dogsoldier on March 17, 2011 at 1:13 PM

Wonder if Crazy Larry was taken to the woodshed by his MSNBC superiors for being “fairly objective” with Dingy Harry here, instead of ranting and raving and foaming at the mouth, and, above all else, blaming everything and anything wrong with Social Security on BOOOOOOOOOOOOOOSSSSSSSSHHHHHHHHHHHHH!!!!!!!!!!!

pilamaye on March 17, 2011 at 1:13 PM

Taxes are voluntary, aren’t they?

BobMbx on March 17, 2011 at 1:13 PM

He doesn’t care. He’s got his fat pension and free healthcare.

Beaglemom on March 17, 2011 at 1:13 PM

a capella on March 17, 2011 at 12:59 PM

Yep. This is exactly what it takes to represent the typical Nevadan, or they wouldn’t have elected a smooth used car salesman type over someone who’s smart enough to see problems such as this, but who can’t deliver lines of bulls**t as well as Reid.

Nevada spoke. Trash is indeed what it takes to represent them.

MNHawk on March 17, 2011 at 1:15 PM

They will both be dead if O’Donnell can’t control his temper.
Oh BTW, have a crappy St. Patty day Larry. Everyone else, have a great one!

Hummer53 on March 17, 2011 at 1:16 PM

Harry Reid will be 92 in 20 years, if he beats the odds and survives that long. Perhaps O’Donnell will be able to visit him at “the home” to see if Reid remembers what Social Security is.

Dee2008 on March 17, 2011 at 1:16 PM

Is Harry Reid even going to be alive in 20 years? I doubt it. So of course he wants to punt it down the road, rather than deal with a real issue.

rbj on March 17, 2011 at 1:08 PM

A lot of folks in the Senate are Reid’s age, if not older. They have no desire to risk their cushy jobs and the perks that come with them by tackling entitlement reform. The way they figure it, they’ll just leave it to the next crop of Senators and House members to deal with the problem.

Of course, the dirty little not-so-secret is that judgment day is fast approaching. That’s why you see so many of them opting for early retirement. No way in hell do they wanna be around when the fit hits the shan.

Doughboy on March 17, 2011 at 1:16 PM

Nevada walked the talk……………more PORK!

dmann on March 17, 2011 at 1:18 PM

Liberal.
Mental.
Disease.

angryed on March 17, 2011 at 1:19 PM

“Talk to me in 20 years when I’ve passed away and thus do not care what becomes of Social Security…” – everybody over 65, currently on Social Security

Jeddite on March 17, 2011 at 1:22 PM

Doughboy on March 17, 2011 at 1:16 PM

Daniel Patrick Moyniham was sounding the alarm bell in the 1970s & 80s. And he was a Democrat.

We’ve got the worst political class ever. And sadly, I’m not sure we don’t deserve it.

rbj on March 17, 2011 at 1:22 PM

When SSA starts cashing those Treasuries, as it has to do now to cover monthly deficits, the federal government has to sell more bonds to cover the cost.

When the only way you can pay for your credit card is with another credit card, you know you’re an idiot when it comes to money.

miConsevative on March 17, 2011 at 1:23 PM

So the Democratic leadership in the Senate boldly endorses the “Do Nothing” plan.

What more need be said?

Rev Snow on March 17, 2011 at 1:25 PM

Talk to Reid in 20 years?

Ummm, OK.

Actuarially speaking, Reid will not be around in 20 years.

rbj on March 17, 2011 at 1:22 PM

If Daniel Patrick Moynihan were around today…he’d be deeply miffed.

coldwarrior on March 17, 2011 at 1:26 PM

It’s a reasonable answer.

If Harry Reid attempts to tackle Social Security reform now, he will face huge opposition within his own party and he might not get re-elected.

If Harry Reid waits 20 years, he will most likely be retired (and possible dead of old age) before it has to be dealt with.

Choice 1 gets you vilified, earns you death threats and potentially costs you your power. Choice 2 gets you tons of union money for your re-election efforts and keeps your power safe. Very few politicians are actually the type of statesmen that will risk the downside of choice 1 simply because it is better for the long-term health of the country.

Some day (very soon), things will be bad enough that the politicians will not be able to pass the buck down the road. However, it’s probably not coming soon enough to effect Harry Reid’s senate career, so, there is no motivation for him to make the tough choices.

JadeNYU on March 17, 2011 at 1:27 PM

Reid’s statement should have been “What? Me worry?”

GarandFan on March 17, 2011 at 1:27 PM

Reid knows this is all just a scam, if they have to they’ll just take personal property (assets) that they need to borrow more money from creditors.

We are in such deep doo doo as a Nation.

PappyD61 on March 17, 2011 at 1:30 PM

How is Harry Reid’s position on SocSec different than President Obama? I cannot see any difference between the two.

WashJeff on March 17, 2011 at 1:31 PM

Harry Reid will be 92 in 20 years

(and if 2010 was any indication he’ll still be in the SENATE), if he beats the odds and survives that long. Perhaps O’Donnell will be able to visit him at “the home” to see if Reid remembers what Social Security is.

Dee2008 on March 17, 2011 at 1:16 PM

PappyD61 on March 17, 2011 at 1:33 PM

However, it’s probably not coming soon enough to effect Harry Reid’s senate career, so, there is no motivation for him to make the tough choices.

JadeNYU on March 17, 2011 at 1:27 PM

I question that, if only because the government’s ability to churn out new T-bills is going to be limited soon.

1. The debt limit is rapidly approaching

2. Treasury is blowing through their cash-on-hand

3. SS is running in the red, meaning more outlays in checks than taxes coming in from workers.

Combine the three of those and SS may grind to a halt before Reid’s next term. H@ll, it may grind to a halt before the next election with the group of economic geniuses running the show in DC.

teke184 on March 17, 2011 at 1:34 PM

I wish these people could be held legally responsible for their actions. The Dems howl when someone in the private sector makes more money than they think they should, yet they are free to take money from every working American and flush it down the sink hole, or spend the future of Americans on personal pet projects and then simply walk away rich, pensioned and with the best healthcare money can buy (our money), and that’s not the garbage socialized medicine they installed.

Hening on March 17, 2011 at 1:35 PM

I got mine. Screw you.
H. Reid

MassVictim on March 17, 2011 at 1:43 PM

For someone who doesn’t wear a hat, he sure talks a lot through his hat. I guess that’s what you do when you are too dumb to engage in intelligent dialog.

SS is running a $50 billion a year shortfall and the actuary says it will just get worse.

tarpon on March 17, 2011 at 1:54 PM

If Harry Reid can’t stay awake and do his job for the next twenty years, then he needs to resign so Nevada can find a Senator with intestinal fortitude who can handle the job

Nevada isn’t capable of that.

antisocial on March 17, 2011 at 1:59 PM

The table also shows, however, that those already in Social Security will, in the future, get back $18.7 trillion (in present-value dollars) more than they will contribute henceforth. In short, their past excess contributions, even if they had been saved, are nowhere near the amount needed to pay for their future benefits.

We would have gotten back a LOT more if we’d been allowed to invest the money ourselves, rather than being forced to pay into the Ponzi.

unclesmrgol on March 17, 2011 at 1:59 PM

and these folks chastise W cuz he wanted to be proactive….

we live in a reactive world…

Miss me yet?
-W

cmsinaz on March 17, 2011 at 2:07 PM

I got mine. Screw you.
— H. Reid
MassVictim on March 17, 2011 at 1:43 PM

+infinity

cmsinaz on March 17, 2011 at 2:08 PM

Reid: We can’t be broke. We still have checks! Now I’m going to put a gun to your head and make you pay for my cowboy poetry.

Thanks Nevada for re-electing Mr. Magoo.

RadClown on March 17, 2011 at 2:15 PM

Somehow i am missing something. Rs want to talk about ss reform. ok. and cutting the budget…ok.

but what about Obamacare? I thought the whole thing about not letting it go thru in dec was all about Obamacare.

Defunding Obamacare. Bachmann said the other night she didn’t know why the REP leadship was not interested in this

What about Obamacare. Have Rs decided that, well, you know, we have to do Something…right? This is not good, but you can’t pin it on us. And really, i’m pretty comfy right now…if i say anything Schumer/Press will start shrieking about children lying dead in the streets…is it the CHILDREN will DIE problem????

r keller on March 17, 2011 at 2:17 PM

Reid on SocSec reform: Talk to me in 20 years

You mean the Soc Sec or the SocSec Reform will be dead (just like you) in 20 years, senator?

Sir Napsalot on March 17, 2011 at 2:47 PM

He’ll be dead.

VegasRick on March 17, 2011 at 12:55 PM

Nah, he’ll be 92, and I sincerely hope somebody takes him up on his offer at that time.

Since I’ll only be 86, I’ll definitely be available for the interview.

warbaby on March 17, 2011 at 2:52 PM

I guess I’ll be talking to a headstone. If the headstone is in Chicago, I guess he’ll still be voting too……

adamsmith on March 17, 2011 at 2:55 PM

The incontinent of the pants and the brain in action…

Schadenfreude on March 17, 2011 at 3:08 PM

Seriously, kids, you need to get over all this “doddering old man” crap.

Getting older is not only a privilege, it’s mandatory. One of the things you learn is that Churchill was right; only idiots are liberals past a certain age – and very few people cling to their idiocy in the face of the realities of aging.

Face it, you’re unlikely to remain so hip that you die before you’re 50. There’s a hell of a lot of old guys that are conservatives due to great experience, and Reid’s problem is that he’s avoided most of that experience via the insulation of privilege (See; Kennedy, Edward and Obama, Barack.)

If you’re not insulated, you can’t avoid Thatcher’s truth that “The facts of life are conservative.” Ignorance is curable; only idiocy, Harry, is chronic.

warbaby on March 17, 2011 at 3:52 PM

We’ll need a Psychic, I’d say.

mojo on March 17, 2011 at 4:33 PM

Reid on SocSec reform: Talk to me in 20 years
Does God let the dead make a phone call?

rukiddingme on March 17, 2011 at 1:06 PM

Somehow I don’t think God is the one he’ll need to be asking.

runawayyyy on March 17, 2011 at 5:29 PM

Harry Reid will be 91 years old in 20 years. Average life expectancy is just about 80 years. so basically, he just said “over my dead body”.

Michael K. on March 17, 2011 at 5:37 PM

Two questions for Harry:

- Just how are we going to get the $3.48 trillion it will take to get the combined SocSecurity “trust funds” to 2031, much less the nearly-$8 trillion to get them to “exhaustion”?

- What are those on federal disability going to do in the 15 years between the exhaustion of the DI “trust fund” and 2031, eat the 15%-25% reduction in benefits?

steveegg on March 17, 2011 at 8:40 PM

Ho about peeing on his grave in about 15.

wepeople on March 17, 2011 at 9:19 PM

I think he’s applying the Underpants Gnomes’ business theory to Social Security.

flataffect on March 17, 2011 at 10:58 PM

Harry Reid will be 92 a moldering pile of fetid, decaying vegetable matter in his grandkids’ compost pile in 20 years

Dee2008 on March 17, 2011 at 1:16 PM

FIFY.

The War Planner on March 18, 2011 at 11:31 AM