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Tue April 9, 2013
Social Security Will 'Lose Credibility' If We Do Nothing
Originally published on Tue April 9, 2013 12:26 pm
MICHEL MARTIN, HOST:
I'm Michel Martin and this is TELL ME MORE from NPR News. Coming up, the Louisville Cardinals capped off a dramatic journey through March Madness to take the NCAA men's crown last night. We'll look back on the men's college basketball tournament. We'll look ahead to the women's final. That conversation is just ahead.
But first, though, we want to look at a new development in the future of Social Security, at least possibly. The official release of President Obama's next budget is set for tomorrow. And in time-honored Washington fashion there have been leaks of the touchiest proposals. One of the touchiest is a proposal to change the way cost of living calculations are made to Social Security, which could cut benefits.
Now, Social Security is a significant source of income for 58 million older Americans and that's already upset some of the president's progressive allies, but it pleases those who say that the program is long overdue for a new look. We wanted to get perspective on this, so we've called someone who knows the program well. That is Michael Astrue. He spent six years serving as the Social Security commissioner before he stepped down earlier this year.
And he's with us now from NPR member station WGBH in Boston. Welcome back. Thank you so much for joining us.
MICHAEL ASTRUE: Thank you for having me back.
MARTIN: What do we know about President Obama's proposal to change Social Security? I know we don't know everything, but what do we know now?
ASTRUE: The current cost of living adjustment is based on what was the only cost of living adjustment that was available in 1974. And there have been various efforts to change that, some of which would increase the benefit, some of which would reduce the benefit. What the president is proposing is something called the chained cost of living adjustment.
And it's similar to what we do now but it tries to take into consideration the substitutions that people make when budgets get tight. In other words, you might move from one cut of meat to a cheaper cut of meat if your budget is a little tighter. And so it tends to be a little bit less generous than the current COLA. But we don't know this precise - whether there's a phase-in, whether it will be based on one quarter data, full year data.
We don't know whether there will be any blending of the current COLA - the current cost of living adjustment and the proposed new one.
MARTIN: Well, what's wrong with the way the cost of living adjustments are calculated now? Do people feel that - the people who've looked at this closely, like yourself, if the feeling that it really is the wrong way to measure inflation? Or is it just a matter of money?
ASTRUE: I think it's primarily a matter of money. The old cost of living adjustment was not perfect. It's based on one quarter's data. It tends to be very hypersensitive, for instance, to spikes in oil prices and things like that. So you get some strange results both on the high end and the low end. Not perfect. There is a standard out there now that tries to get what inflation does to the budget of older Americans.
That would tend to be a little bit more generous. But as a practical matter, the system can't afford it. I think that we have to look at this from the perspective that if we stay with the status quo, in 20 years every retiree, every disabled person on Social Security, would take a full 25 percent cut in their benefits. By comparison, what President Obama is proposing is very mild. It's just a reduction in the increase.
And again, a lot of people are on fixed incomes. They're struggling economically. Even a small change is a big deal. But we're looking at the, you know, we're slowly approaching a cliff 20 years from now, and the sooner we make adjustments, the easier it is to spread the pain over a larger period of time.
MARTIN: Overall, you have been - at least since you left office - you've been critical of the way national leaders have addressed the question of Social Security in general. For people who haven't been familiar with your earlier conversation with me or other interviews you've given, could you just tell us overall what is the problem and why is it that people like yourself feel that our national leadership, both Democrats and Republicans, both in the White House and in Congress, need to take this more seriously?
ASTRUE: Sure. Social Security is the most successful government domestic program ever, in my judgment. And it's gone a long way toward eradicating poverty among the elderly, which was well over 50 percent in 1935. And so I think it deserves a look as a system. You know, I give President Obama some credit for taking on a hard issue and I don't want to be unduly critical.
But on the other hand, it's been five years and there's been no effort by this administration to be a catalyst for putting Social Security on a firm financial basis. And we're 20 years away from insolvency in retirement but we're only three years away from insolvency in disability. And unfortunately we've got one piece of the puzzle dropped in in a budget context. It's really not taking a look at the system comprehensively.
And it's overdue and I really think that the president and the Congress should be doing this and I think the media and the public should be pressing Congress and the president to take on Social Security reform.
MARTIN: If you're just joining us, we are speaking with the former commissioner of Social Security, Michael Astrue. We're talking about proposals which are expected to be released in the president's official budget tomorrow to change the way cost of living benefits are calculated for Social Security which could have the effect of cutting benefits. We're talking about the pros and cons of that.
So let's talk a little bit more about the pros and cons of this and taking your point that really we need a more holistic approach to entitlement programs more broadly, but just focusing on Social Security for now. On the plus side, you've told us before that when the program was originally set up, there were 35 workers to support every retiree. The retirement age was set at 62. The average life expectancy was 63.
MARTIN: So people who designed the system didn't expect these payments to go on very long. Now we have three workers supporting every retiree and the average - the life expectancy has changed a very great deal. On the other side of the question, though, there are many people who say that what all these proposals do is advantage the people who are already very advantaged and disadvantage the people who are already disadvantaged.
Which is to say that people who work with their backs, people who work with their hands, their life expectancy is less. And they are the ones, in terms of, you know, changing the retirement age and all these other things, who are getting the short end of the stick here. What would you say to that?
ASTRUE: Well, I think there's been a pretty serious effort to be responsive to that. The benefit system is highly progressive. It's a unique system around the world. No other country does it the way we do. The taxation is actually regressive the way we do it now, but the benefit formulas are very progressive. And I think sometimes people don't factor that in.
So if you're a lower income American, you will take out of the system almost for sure much more than you put into it. And if you're a higher income American, you will take out less than you put into it almost for sure.
MARTIN: So you feel, what, overall that these efforts to change the system are from a policy standpoint addressing the right things in the right way.
ASTRUE: I think that this cost of living adjustment, while not perfect, does model human behavior better than the current cost of living adjustment, if only coincidentally. It moves in the right direction and with the kind of savings that we have to make. And presumably if we do this, we will not have to raise retirement ages as much and things like that. But we're probably going to be looking at those sorts of topics over time as well.
MARTIN: We understand that this is your perspective but I do want to ask you, what is the cost of doing nothing, in your opinion? Because there are those that say that the program is not broken and this is all sort of a political hype by people who just don't like the idea of the government doing anything to support low income people.
ASTRUE: I think that's just a refusal to accept the numbers. I mean the numbers are straightforward. If we do nothing, in 20 years the system will lose credibility. If we have the kinds of massive across-the-board cuts that would automatically go into place 20 years from now and we don't do anything about it, I think there's a serious risk that public support for the system will evaporate and maybe we don't have Social Security at all.
MARTIN: Let me ask you, how does this work? So let's say you're 42 years old now and you clean chickens for a living. Right?
MARTIN: And so you're planning to - and you're on your feet all day. Your hands are in cold water and you're planning to take early retirement at 62. What do you get, compared to what your mother got?
ASTRUE: Right now, you would get more than, in all likelihood, what your mother got because, in the 1970s, we increased benefits by more than the rate of inflation and that was part of why we had to have the '83 amendments that made some changes to bring the program back into a more solvent basis. But, if we were to do nothing, you would not only lose that increase that came from the 1970s. You would lose more and you would get less in real dollars, as a chicken cleaner today, than your mother the chicken cleaner, you know, got before you because, you know, 25 percent cut in the base benefit is a very substantial cut.
MARTIN: What's your sense of what the politics are of the president putting this proposal forward? I mean, as we know that some of his allies in the Democratic Party, among progressives, are not pleased with this, don't really know whether people on the other side of the aisle will find this credible. What is your sense of the politics of this going forward?
ASTRUE: Well, certainly, the politics from the president's point of view are relatively unproblematic. The president had that off-mic moment where he thought he was off mic with the president of Russia last year where he said, well, I can do certain things in a second term that I can't do now. And he was right about that. He was right about that in foreign policy. He's right about that in domestic policy.
So, right now, you know, the groups can complain and they will, but there's really, I think, very little consequence for the president taking this step at this moment. The groups that are most upset and are most adamant that there never be any cuts - they're not going to walk away from the president and they're probably not going to be voting for, say, Marco Rubio or Rob Portman in 2016, so there'll be a lot of public vitriol, but I don't think there's any real risk to the president, politically.
MARTIN: Michael Astrue is the former commissioner of the Social Security Administration. He also is an acclaimed poet and we will be hearing his contribution to our Muses and Metaphor tweet poetry series later this hour.
Michael Astrue, thank you so much for joining us.
ASTRUE: Thank you so much. Transcript provided by NPR, Copyright NPR.