tv Social Security Solvency CSPAN June 18, 2018 1:53pm-3:00pm EDT
>> democratic congressman john marsden republican congressman tom rice spoke at the forum on capitol hill recently about guaranteeing the solvency of social security that was followed by a discussion with former social security administration officials. from the committee for responsible federal budget, this is an hour and 10 minutes.
>> good morning, everybody. nice to see everybody. thank you for joining us. i am i in the guinness. i council for budget and thanks to people here who thinks are a guest on c-span and i believe we are live streaming this. i'm glad we have a good group ready to focus on a good discussion on social security reform. the trustees came out this week and talked about the future imbalances in social security, so i'm really pleased today we are joined by two bipartisan members of congress to talk about the issue in a panel of experts following now. social security reform is probably not going to happen in an election year, but that doesn't mean it shouldn't. this is a problem we've known about for so long and as it continues to get closer, it means the choices we face are more difficult. if there's one thing i've always thought working on this issue and realizing how contentious it is, when you look at the numbers, we should be able to
agree. we need to talk about how to fix social security. vertically legitimate will disagree how to do it, but a discussion this country should be having because it's so important to the lives of those who depend on the program. the six seniors are now in the trust funds are officially not able to pay full benefits, that's a short amount of time when it comes to a retirement program. today's 51 euros will be reaching retirement age at the time they are not able to pay full benefits. this is actually the first year the program will now not be able to pay full benefits and be facing deficits internally forever as his heirs to draw down many assets. again, so many choices for how to fix the program. one of the things we have on our website for people who are interested in something where you can plug-in your age and find out when benefit cuts will be coming and how much they
would be improper even more productively after we scare you, you will simulator and how to fix the program. there are many options. this is a simulator used by members of congress to put together proposals for how to fix the program and it's important to engage people around the country so we can start a discussion moving forward. in that vein, i'm really pleased to be joined by the two members of congress who are going to kick off this panel, both of whom have played very productive discussions and social security. congressman larson is the ranking member on house ways and means subcommittee on social security in this event actually came out of a discussion we were having because listening to him and the proposal he has for how to get social security i found it tiring because a member of congress out there talking about the issue and had a full plan and he's done a ton of work, taking the lead in starting
discussions. we'll be joined by tom wright with ways and means, budget and recipient. which comes from leaders of congress who are willing to make hard choices when it comes to paying for policies and putting for things to make proposals. this is great to have a discussion from the people stuck in the political arena where it's a contentious issue, but those who are true to the numbers and how important is to understand this program. i'm excited to welcome congressman larson. [applause] >> thank you. >> thank you very much, my out. what an honor to be here with my good friend and colleague, tom rice who i didn't realize you got that award. congratulations as well. i travel around the country talking about the issue of social security and i carry two
props with me. one is the actuarial report on our proposal and the other is that starbucks coffee lot table call it. you'll see how that comes into play as well. the sense of urgency with regard to social security should be obvious to everyone. 10,000 baby boomers today become eligible for social security. do the math. 10,000 a day, 7000 a week, it 280,000 a month, 2,360,000 a year. the sense of urgency should also have congress. i'm pleased to work on the ways and means committee with sam johnson who would really like to see a full debate. yesterday we had the actuary before congress and there are
two plans to solve this issue. one does it by virtue of cuts and raising the age. the other one, our proposal social security 2100 or would like to address and talk about today. i really feel and i believe. i forget who in the organization mark goldman who said it is time for the demagogues on the left and right to put away the talking points and start working together on a solution that does right by her grandchildren, children, current retirees and the clock is ticking. of course he's right about that. that is why we have to focus on this. one of my contention with my social security is not an entitlement. the citizens of this country know it. it's the insurance that they
paid for. they know this because i have to look at their paycheck and see fica. federal insurance contribution. whose? you were spared the of this great country of ours understands that they aren't making these insurance premium payments. .. they came together bipartisan me to come up with a solution
but the problem is they did not index it off as they were protecting going forward but they did solve the problem initially by coming together and coming up with a solution. they understood that this is an actuarial problem at its core i ask you, have any of your insurance premiums gone up since 1983? think about that for a moment. since 1983 there has not been an adjustment in social security and yet people consistently pay in and we have reserves in social security but not, as learned from the report yesterday, enough to sustain us by law for the 75 year. that social security should be. a proposal doesn't. we make sure first and foremost and don't trust me but taken from the actuary that we extend
social security beyond the 75 year deadline but also recognize that we have to enhance the program primarily because we have far too many people in our country most notably women and women of color are retiring social security as their only source of income and retiring into poverty. in the wealthiest country in the world where all you have to do is make an actuarial or insurance adjustment that is non sense that we would make that adjustment on behalf of people, especially women out of the workforce, so that we could your children and raise them and also why they were in the workforce were earning 77 cents to their male counterparts dollar. this equity adjustment has to take place and we do that within our bill making sure that the new percentage of social security becomes 125% of what the poverty level is. we expand benefits across the
board by 2% and we also incorporate into that thinking arp concept which is cpi e, consumer price index and you although cpi e stands for the elderly and the cost that they will incur in old age. rather than having a cold and calculated on the cpi alone to focus on what the actual cost of seniors are as opposed to chain cpi which came out of the simpson bowles committee which would in fact, hurt seniors going forward and give them less money the longer they live. i don't know what to make sense but nonetheless that was the proposal. it will also provide a tax cut to seniors. how? because back in 1983 we did not index appropriately so if you are more than $24000 if you are single and 32000 if you are a married couple social security becomes taxed. by moving that to
50,100,011,000,000 seniors currently will receive a tax break on their social security. with many of them still wanting to work out of necessity we find that support proposal. the big question is how do you pay for this? we pay for it quite simply -- doing what actuaries do. if you took a look at your fund and realize that you have not made an adjustment since 1983, how about if we adjusted by making everyone contribute an additional 1%. by that we mean both the employer and employee. it is the way the system works but that contribution even at 1% represents a lot of money so we face that in over five years so it comes out to be .05% or to make it easier to understand if you are making $50000 a year
would cost you 50 cents a week in order to fix social security and that is where this starbucks comes in which i was in broward county florida and i put it up and is at how much do you think the starbucks latte costs everything and the person knew there was $4.50. or nine weeks of social security payments. the other way when he and the program is that we lift the cap of people with incomes over $400,000. even at $400,000 what we are proposing for social security it cost you more a week to buy this starbucks latte that it would to fix the social security program with all the enhanced benefits that we just laid out. why is that important? it's important and you know, especially here, because we don't increase the national debt. we pay for it and it's in an insurance program. that needs to be actuarially
injected and if you do so in an incremental fashion you can both expand the benefits and provide not only current recipients but future generations. again, how do we know? because the actuary has take a look at. yesterday under testimony in asking steven glass about every aspect of the program that we put in there he asserted under oath that yes, these are actuarially sound and they are sound beyond the 65 year requirement. that is what i believe we go to the citizens of this country and as was pointed out the opportunity to draft and drop the acrimony and besides and roll up our sleeves, like ronald reagan and tip o'neill did, and come to a solution on something that becomes quite easily
resolved. when i'm out on a tour and i talk to people and they say why hasn't congress acted on this and quite frankly because there is an ideological divide here where some feel strongly that social security is an entitlement program. it is not. it's an insurance program and an insurance program that is easily fixed by just making sure and we also scrap the cap on people making over $400,000 and every year until about 2044 that cap will increase until we get to 400,000. it does give window and for
those in the middle class and that is why we asserted both of those. it is actuarially sound and the gets the job done and it will be there not only for current generations but future generations as well. i thank you for the opportunity to be here and look forward to listening to your comments, as well. [applause] >> thank you to everybody for having me. thank you, maia, for your hard work and your attention on our nation's debt problems. it is very important and fundamental to every aspect in life right now to our national defense. social security is one of the drivers of the debt, not the biggest, but one of the drivers of the debt. i want to focus on yesterday i was asked to be on a foxbusiness
news interview and some folks here came up and commented about the interview and i wanted to focus on that for a second and the interviewer was speaking with his cohost and said do you think you'll ever see one dime of social security benefits but she said no and he said i don't think so either but then he asked me is that what you done with social security is like what bernie made off did and he is in prison now. that is exactly what the guy said to me. growing up -- [laughter] growing up and going through potential life and not focusing on that but focusing on trying to provide myself a retirement when i retired i really was not sure i could get social security because i read about it in the papers and the past and is always negative about the prospects but once i got older and studied and got here and looked at the stain of it i can tell you without a doubt folks back home i have seniors in my district in myrtle beach, south carolina and everyone in my
district is retired to my district -- [laughter] i can absolutely ensure you social security is a promise that will be capped and it is golden. what they say right now is the so security trust fund will expire and some scary and is scary but it's not that hard to fix it and it will get fixed. it is politically inconvenient to fix it which is why we have a built with it. it's not just about an ideological divide, i think, but more about whatever you do you will affect one group or anoth another. when i looked at this two years ago i was coming up with a plan and i wanted to come up with my own plan and there are two plans exist right now that i am aware of to fix it. one is sam johnson has which is basically cut benefits and raise the retirement age and it cuts the initial benefit by spreading out the number of years is used
to regulate initial benefit and it does jane cpi which mr. larson said was the only or one of the proposals that came out of the simple balls bipartisan group to figure out how to and is the only proposal i know that barack obama tried to make and it doesn't fix it but this is a small part but it is one way the variables there are limited number of variables this is a math problem. you too much money going out and it is higher than going in. you either have to get it from one source or the other. increase the money going in for take the money away for the money going out. is not that company. i don't think sam johnson's proposal to do it all by reducing the money going out is politically feasible and i don't think mr. larson's proposal of doing it by increasing the green and is politically feasible. in the end, everybody will have a little skin in the game. that is what ronald reagan and
tip o'neill did. you know, when i first started practicing a lot as a tax lawyer and those numbers are near and dear to my heart and in 1982 i believe the maximum wage on which social security was around $3000 and today the tate -- roughly that so five times, six times as much as it was when i started in 1982. it is an index and there is a whole lot more tax being upheld and every year it goes up some based on the inflation rate. when i first started looking at this i knew that for anything that we did had to be politically feasible we had to get broad consortiums on boards of the first people i called was the aarp and they will matter you attend at me but i tell you.
they sent folks over to my office and i had a computer program that had the variables for the retirement age and the cap on the payroll tax and the amount of the payroll tax in the chain cpi in the adjustment of the thing every year and i said let's look at these variables and see if you come up with something that you all might be willing to help with because you present the biggest of seniors and young people don't think they'll get it although we will make sure they do. i said i need your help because i know if you are not on board then we don't have a chance. they said we do not do that. i said you come up with a plan and i'll comment on it. this is about, i don't know, doing or july 2 years ago and it was like during the process of time areas at the beginning of the primaries and maybe three years ago and about to move later i saw commercials on tv and they said tell your
candidate to take a stand and asked them how they will fix social security. they would not take a stand. this is a politically difficult issue and it's -- the math is not that hard. this is one of the easier issues, i think , too solve. every presidential candidate said social security but fund when every actuary if anyone knows anything about the world knows that every presidential candidate said the findings want elected and the president knows that it is not fine and barack obama it was fine and i was surprised he did not offer more solutions in his second term but i suspect that will happen with donald trump. i suspect he will participate and try to fix social security like ronald reagan did but it will be two years now. to speak to the trustees report yesterday i was in people were
talking about and i was pleasantly surprised and it was better than i thought it would be. i mean, there are exceptions for the exhaustion did not change from year to year but it just change that we are one year closer. what did change was the disability portion. with the stimulus behind the economy and regulatory reduction to the tax rollback and the economy is outperforming their projections and right now if economy outperforms that social security gets more revenue and if the economy up forms and less people are on disability they go back to work than that social security lives longer. social security projects that
our economy will perform at 2.4% the next ten years. when i first got to congress in 2013 they were thinking cbo was saying it will be 2.8 or 2.9% over the next ten years. the next year they lowered it to 2.5 and get down to 1.9 and the cap lorna and i asked the director of the cbo was on the budget committee to say we are not really sure and it was the burden of the regulations that were being put on businesses. since that has been lifted the economy is moving up and cbo tells us they expect the economy will grow it 3.2%. that substantially higher than what the trustees are projecting. this year the trustee moved their production to the exhaustion of the disability fund from i think 2024 to 2028. people are dropping off the disability was for two years they peaked in 9 million active
people were dry disability today is a half-million today there is more jobs available for there are people who take them. if we can continue to entice people to get off of disability and back into the workforce that lincoln's life as a security and makes the problem is resolved and makes the math easier. if we continue to have gdb up 2.4% which is what they are projecting out it makes social security money it takes a security last longer. social security report if you think about it was much better than we thought it would be and i think the atlanta battery now is expecting 4% plus for the next.
severe growth in gdp. if that happens all these problems get a lot easier to solve. again, i thank you for coming and i thank you for having me and with that i guess we will move on to do we take questions or what do we do? [applause] >> thank you so much. i like to invite the panelist to come up and join us. good morning. it is a great crowd. i love it. my name is lisa and i'm with the pbs news hour had a cover congress and read a lot of very lengthy reports often at night. during the day every hour we have a new breaking story these days. thank you for coming. "to be moderating what i think is a very important panel and in
thinking about this when i was thinking about the year 2002, 16 years ago. in 2002 of the biggest movies was lord of the rings, the two towers, which is my personal favorite. i'm up late at night a lot and in that movie in the 16 years that has passed 16 years was good for that movie but also in 2002 something new happened in europe they introduced the euro. sixteen years has not been enough time for the european union to become fully stable and to become fully cohesive. also in 2002 the us was in afghanistan in the country that would be, increasingly unstable and 16 years has not been enough time to eradicate the television or to stabilize afghanistan.
think about that in terms of the 16 years we have for social security to become solvent. it is not a lot of time especially to deal with big problems. that is where we are here with us panel today to talk to the future report that came out this week and it is my pleasure to introduce david from the mercator center. >> thank you. my name is jason currently with the mercator center of george mason university. i am joining the full-time faculty at johns hopkins at the school of international studies. you will reflect not a my employer's current, present, past future anyone living et cetera it's all my comments from their. >> i'm kathy and i'm budget policy priorities and before i came to the center i worked for has many years at the so security ministration where the sky was my boss and at the
congressional research. >> you already heard from me and i will take my second to say i felt better after listening to the two members of progress. i think this debate seems contentious in the way that normally pays out and when we sit down and have members that are willing to work on it i'm glad for kicking off that setting the stage to optimistic willingness to engage. >> we like to take your questions. someone already handed in a few of these but please pass them over and if you need me to raise your hand and pass up the question but i want to start with your impressions of this latest report and what stood out to you some things are different adjacent i will start with you. >> we have the remarks so --
>> take your time. >> all. >> be fiscally responsible. >> fair enough. we want to focus on the di problem so there was a lot of change and it was important to take this in context. the di trust fund it fosters rate may and before that the trust fund was going to be depleted in a 16 so we almost iran out of money in the trust fund and the 16 but the bipartisan budget after 2015 past a payroll tax so now currently we have a less money going into the trust fund and the total doesn't change but the allocation did and that and set the end of the sheer but is important about why are we getting and back in 2010 there was a lot of discussion about whether or not the events rapidly increased disability, applications and rewards. it will be a constant ten movie
board that we will bankrupt and the feet and what do we redo at that point. probably handle? we look back since 2014 we've seen a decline in the applications in awards now we are asking for this continue and to congressman a crisis point, the economy has changed. a lot of people are able to find jobs and they can go to work but the trustees have told us is a temporary situation and it will not last forever. we will go back to some historical norms for comes to the operation and allowance rates which means the di trust fund could get worse as soon as we have to slow down economy recession so we can't look at this date and say it's in the future and let's not worry about it. we really have to focus on the retirement program but also di. can't get completion but focus on these issues now. to get the highlight of why this is important they pointed out
the need to act and now is post later just to give you a sense of the magnitude to focus solely on the tax and saw social security solvency problem by taxes the 75 year actual deficit that require today a permanent pill tax increase of 2.78 percentage points so marital point for going to social security add 2.70% and that would get you up to 15.1 if you have accurate medicare taxes. that's 22% increase in taxes and wants to go out against political or go to your constituents of the was a 22% increase in payroll taxes question will want to do that. if we wait until the trust funds are depleted in the report that changes a 3.87 percentage increase and that's a 31% increase in payroll taxes. imagine going out for reelection and saying the news, raising your taxes 41%. with the surround on the benefit
side. it's about a 70% reduction overall for all current and future beneficiaries. if you wait until 2034 and saved 23% reduction who wants to run for reelection say were cutting your benefits by one fifth. no one does. it will not happen. that is why it is hard to do this. we want to have open and honest debate and i want to thank the members were doing it today. realizing that it will not be the tech side but on the benefit side and somewhere in the middle there will be a couple mice. the sooner we do that the less the manager will be on current beneficiaries and the more fiscally responsible we will be. >> kathleen. >> well, the trustees reminded us earlier this week that social security has a real but manageable long-term shortfall so that amounts to one percentage of gdp over long-term and as congressman rice played out it's a mass problem that we can do.
1% of gdp is more money and order less money out. however, we have to bear in mind that it is more than a mass problem. nearly every american including all of us returned to social security at some point in our lives when we reach old age or when a breadwinner dies when we are too sick to work. for many, many americans social security is their primary or even a sole source of income. i, along with most americans in both parties, think we should solve this primarily on the more money inside. when careful studies have been done for example by voice of the people i think they are here today and the national academy of social insurance talking to americans about what they would prefer trading off the different options people overwhelmingly choose to solve this problem primarily [inaudible]. it is justified for policy reasons as well. social security benefit amount of [inaudible] the retirement
age is rising from 66 to 67 and another question is who should be affected and i agree, everyone has to have a skin in the game we should focus primarily on higher earners because of those trends i mentioned including in addition to financial mortality and higher income people tend to live longer and drop benefits longer than lower income people we can't do it only on higher earners. everybody will have to have skin in the game and so we can consider doing things like raising the rate and broadening the base. how should we do it? i think we should compatibly. the conversation should include both the disability trust fund and retirement survivors trust fund and those programs are closely linked and while we're at it we should consider and
enhancements that congressman larson mentioned as well as reopening of as i which is not been updated for decades and several times finally we do it? we need to start talking about this now and start fixing it in the near future and sometime in the next decade before we reach the 11th hour but we don't want to rush into it and this is, dated and as congressman rice it out politically company because these are people's lives. we want people to people with the most probable years indignity and get brought up buy-in and finally it will require bipartisan legislation. we cannot grow our way out of this problem and we can't do it on up the line vote. we need to be reasonable, constructive and come together and try to come up with some solutions. >> want to get your reaction to everything they said but i also want to ask you about something
and i will read this he said that the administration's economic regulatory form, if treatments will give the long-term growth that is needed to help secure rams and lead to a more stable hat and what do you think of that theory and you test on this a little bit about solving this problem. >> i love the chance to comment growth is always advantageous and you always want to find a way to grow the economy but i found his remarks more in the camp of the fiscal [inaudible]
which is we don't have to make pieces and this is going to magically get fixed. we'll have to make significant policy choices that are manageable but harder the longer we wait. the other thing i was somewhat concerned in the tone of his remarks and others i heard was this shows we are okay for the immediate time being we don't need to worry. that to me is the kicking of the can we have seen for so long. let me make for main points that one is the one he made in opening remarks is i really hope it is time with this trustees warning us about where we are in the time we need to get it done can move from a debate which is a contentious debate but over whether we need to do something to yes we need to do something but there many and we need to have the conversations raising revenues which kathleen mentioned and i would say raising the tax base is not touch had enough and there is potential that can be done there and slowing the growth of benefits and that should be done across the board for many of us think no, it's be done on the higher end we can do benefits and on the program and that is an important core value. ...
make changes reflecting that. thinking how we index benefits on and on the other side expand benefits so there are plenty of levers you can play around with. we are talking about which of those make the most sense with the package. the other points quickly, waiting until the last minute is too late and i thought jason made that point clearly. if we wait until the trust funds aren't able to pay the full benefits, cost of the forms goes up by 35 to 40 percent. there's no good reason to do that other than people ducking those choices. already were getting to a point where title uses
something that has been political for a long time and i don't think we are eager to walk away from. third point is, it helps in many ways that social security is its own program and off budget but it helps to think about it in the context of the overall budget with the cost we are going to have to have a package that changes the growth and raises revenues. i don't think there's a possibility for one that doesn't look at both but we will have to look at both of those things, spending and revenues when we are dealing with the national deficit and debt which are at an unprecedented level and there are new or unmet needs in this country from investment in infrastructure to human capital to recognizing that our economy is drifting dramatically and we should be looking at all of our resources as the budget and think where do we want to put our resources for the future? where are the best long-term investments we should be making? i mentioned the fiscal free roll lunch.
i'm worried we are in a period of this goal free lunch where first we had taxes paid for, then a big spending increase which we didn't pay for and you are hearing more arguments about why you don't need to do things and growth is very helpful and i'm concerned that stimulus during a period of economic expansion is not does not lead to sustained growth, it's more of a short-term burst and we are going to need to find improvements that will have long-term growth but this comes down to policy and the wrong way to makethose choices, the more difficult it will be while we have a window . >> this seems to be the core of the problem, smart people in this room know the options and i think you even see a potential solution here, combination of fewer benefits for some groups. lisa, i want to ask you about the politics here.
either party moving in one direction? we heard about representative larson bill, it has 170 sponsors on it but they are all democrats, is that right? >> that's right.it's either party moving in the direction , we saw president obama with the grand bargain, the offer and benefit cuts, we haven't seen that happen since. where you see the parties now on this issue? >> you're asking me the political question. one of the issues we had with politics is how to educate the populace to the people who are voting on issues and there's confusion about the importance of the problem. this is going to happen, why should we bother about it now and that takes the can down the road and allows members to do so because no one's really pushing.
the debt ceiling, all of a sudden there was the focus and we kept putting off until the end and unfortunately that's where we are headed when it comes to social security. every year we are up here raising the alarm bell and we will be up here next year. the presidential term is the time to do it and it may take a democratic president to offer social security form which i was surprised obama didn't take that chance to do so in his second term but with each passing year we missed another opportunity and i'm not ones us all the problems on the tax time. i was the deputy commissioner and the chief economist in that role and i was the secretary of the board of trustees. when we did the report in 2008 so 10 years ago, we had just raised the payroll tax, lifted it all together in 2008, that would have salt it. we don't have that option anymore. help covers one half or two thirds but you still have to do more. now we got to raise and look
at benefits for highest earners, we didn't need to attack the most vulnerable and now all these options we are doing become more expensive because we failed to do something 10 years ago. how do we convey that to the public so they get the sense that urgency is here, today and not 15 years ago? >> john duke has this question, does the american public want to salvage social security and if so, why isn't it politically feasible? >> people have studied this and i think overwhelmingly, the american people really value social security. they're willing to pay more to strengthen it but the problem as irishmen right mentioned, it's really difficult because it means people are either paying more or getting less and everyone is willing to put that choice on until tomorrow we put that choice into another tomorrow. i'm also not optimistic this
year is going to be the year or even this administration is going to be the administration, what with the one news story breaking every hour. it doesn't give us the space you have the introspective discussions we are having here and educating the populace. that's so important to get people to buy into a solution and of course the bipartisanship that will be necessary , that doesn't seem very plausible in this moment . >> it's important because congressman larson mentioned this, framing is important. if you do surveys, social insurance and you're willing to pay more in taxes , the vast majority say yes. you pay for a cup of coffee that this week, that's easy. what if someone says change the question, are you willing to pay for a tax increase, no
. it's this idea when you change the frame you get different answers. willing to serve way where your chance of life is 90 percent?do you want to take surgery where your chance of death is 10 percent? same answer but with a different question you get a different answer. you have a bifurcated side that basically sells one language versus another and that creates confusion so we need to create the space but we come together and say here are the facts, here's the math, what are our priorities and have members on both sides so they can come together in a bipartisan way and have that protection against the other side. >> you talk these numbers, and public sometimes they tell you things they are saying in public about what they want, what they can do. why don't you talk about what the politics are and are we in a time, it feels to me there's real leadership vacuum. i was amazed talking to the fiscally conservative members as the omnibus was passing and the tax bill was passing who were just shrugging off
the potential very likely deficit effects and these were people who had been leaders on the issue. what's happened with leadership here and both parties that you talk to? >> that's a thoughtful question because i do think the bad news is there's no leadership on this right now. and our president, when he ran for office and also in his promise not to fix this problem so it is hard to make changes that are going to involve hard choices unless there's leadership on doing that. i think that's made it more difficult and politically, no matter what framing one chooses, the other party had the opportunity to reframe it in the other way so there's always the chance to demagogue on this issue so it's vulnerable and i think political leaders need to downsize moving forward and saying, pointing out the things we are pointing out, that we are doing damage to people by waiting so the bad
news is, i agree with what you are implying which there is not the political leadership we seen on social security in particular, on fiscal issues and even alerting the public how bad the fiscal situation is whether it's overall debt and deficit or individual programs like social security, medicare and other programs we need to make changes. what you hear behind-the-scenes is there a lot of willingness to do the hard work and on social security in particulari think this is the program where there's the most willingness to compromise. this is the issue if you put republicans and democrats in their boxes , cut taxes, cut spending and democrats want to raise spending, it's a lot more nuanced because i think people realize they're going to have to compromise, that bipartisanship will be critical and you can't do this all on one side or another . that's good news means if we can switch on the leadership
and part of that comes from people saying i really want this program to be fixed, that there's support from a lot of political members on both sides for this one in particular. it may be easier to do something on social security first, to take this and put some plan to fix the commission or working group or frankly , you know the answer, we could get down and fix this and we've been working on this a long time that it may be easy to work on this one first because there is that willingness. >> i want to get a little wonky right now. let's talk about the revenue side. catherine wrote down that more money in is seen as a primary solution. you agree with that and where do you think the money needs to come from? people talk aboutraising the payroll tax what are the other options as well? >> one , the response for the federal budget from mccreary
and pomeroy which is a nice looking and goes to a lot of things from how we can change di, your offering private insurance as part of this, the savings incentive is one product but there's a bipartisan policy center did a commission, for the retirement savings future and it was bipartisan.we had people on the right and left come together and their goal was to basically have a 50-50 split between bringing more revenues in and getting revenues and solvency and they did it in a way that improve poverty for older americans in the future so they found a way you could do this in a bipartisan way . helping the most vulnerable americans and we think about revenues and the solutions and you can't just do it all on one side. >> how much revenue? >> no one mentioned it but the idea of social security, use a means and that gets me thrown out and a number of members of congress thrown
out of the room but we do have a backdoor means to social security. we tax benefits for upper income workers. we should look at the idea of maybe trying to go to higher income earners, not just 85 percent but look at the payroll tax. maybe find other sources henry erin digested looking at the state tax . though i think when we look about reform, we need to think holistic way about what sources of revenue we should get and what other sources we should do. some are thinking more creatively, perhaps we change it and instead of doing a payroll tax, why not a carbon tax or value added tax? there's disincentives to working when it comes to social security that makes labor more expensive. if you got rid of the payroll tax,labor is more expensive . you tax carbon to fund social security, that's another idea. we should be talking about . >> even if there any
potential backing? >> again, they need to have a discussion. if you raise the payroll tax, i've made labor more expensive and i've also made it less attractive. >> but we're also making old age more expensive for the federal government if we don't do that. >> but not on the other side, you're talking revenue. if i change the revenue source to a value added tax or carbon tax i get a broader base and more revenue and i get rid of those. >> to reinforce that, when you're thinking about revenue you want to tax the things you want less of, not the things you want more also taxing wages is less desirable than taxing something like carbon that could have multiple positive effects. i do think it's possible in the coming years that that enters the discussion. >> we should be talking about other sources of revenue. >> that is fascinating. what else do you want to add?
is there anything? >> one idea for broadening the base is that over time the cost of healthcare has skyrocketed and in corresponding, health insurance is not subject, the premiums are not subject to social security tax. that's one thing we've seen on a bipartisan basis. apply the payroll tax to those premiums that your employer he's on your math. if you buy your own insurance or as people increase and reduce through the aca, you have to pay that tax already so this would be equalizing treatment among people regardless of how they get their health insurance. that's one idea that has bipartisan juice and i think it's interesting to look outside of that. i've traditionally focused on payroll tax, a focus of social security, but i was nodding and smiling to you are talking about carbon tax. if we could get to a place where that was realistic, that would be worth
considering. >> then let's talk about the benefits side and let you guys jump in. what do you think is realistic and benefit cuts are coming right now as the system stands. how we mitigate and what we do, can you talk about this idea of just ringing down the benefit itself versus changing who gets that benefit, changing the retirement age, changing the benefit base, the trade-off they are? which of those things helps the system more and how do those things work? >> i'll jump in because i find that interesting you are worried about means testing because when i find when i'm talking in public, we do talks around the country around the simulator.if i don't mention means testing, it's the first question i get from the audience. somebody will inevitably end up and say i want social security to be there for my kids. i don't think i'm going to need it though i would be happy to get some of it back.
if i knew it was going to be used to preserve the program and be there if something happened and i needed it so we will have a strong sense of need in the insurance program but if they're doing well, they would be very willing to step up and share. i often think about it you get a small movement of people saying get it back, they want to get it not to ceos in the country to show that people -- >> to starbucks. >> right, get back your starbucks coffee. so the idea that there's a lot of willingness for that, and i think you want to make sure you build in protections. if you do end up raising the retirement age, you want to strengthen protections for people who work in jobs where they can't work longer want to think about shipping it to protect against risk and to broaden the issue, that's what so much of our economic
challenges going forward. our economy is going to be changing more rapidly than it ever has. people are going to be going through rougher times and i think figuring out how to insure against risk in our economy is one of our biggest goals going forward. talking about revenue, my projection is when you look at these different policies, we will probably have a solution which relies more heavily on the revenue front because it's easier to get a lot quickly if you let the payroll or something but then relying more on growth benefits over the long term where some of those savings and give people more time to adjust . >> kathleen, you've written in the past about, i think this is wrong, raising the retirement age as a risk to take away benefits. can you talk about that? do you think that's going to be necessary or do you think it's avoidable?
>> this is where the most misunderstood areas of social security fall so i appreciate the opportunity to clarify. when they people think about raising the retirement age they think about it in terms of eligibility. that's not actually how it works. there's a sliding scale of benefit depending when you retire so it you raise the age by one additional year which we are in the process of doing right now, if any given age you are going to get seven percent less than you would have to otherwise, it's an across-the-board cut and it means less benefits in your social security check . no i think first of all there is this public misunderstanding and the other thing, the common justification is people are living longer. yes, some people are living longer but not everyone half the population has high income tax , has gotten some pretty impressive gains in longevity but the bottom half , nothing. and the very bottom, we've seen backward progress. so actually shorter lives, the united states of america so that's troubling and this
is the kind of stuff we will have to grapple with, trying to stay on top of these trends and make sure we are being fair to the people being left behind. >> this goes back to the framing in language because it's important for public debate. obviously i didn't change when i had the chance but it's called the normal retirement age, what makes it? then there's the early eligibility age happy mentioned. a lot of people say i'm now eligible for social security, i'll take it so i think the higher age which you would still takebenefit, they're getting a reduced benefit. why don't we change the nomenclature? we call it the minimum benefit . minimum benefit age and we were going to field offices and asking people why they were here, they are saying they get benefits. you realize you're getting what is then a 25 percent
reduction in benefits? they walk out. they'd say why are you doing this to us? if you wait until february, it's a 32 percent increase but they don't understand the benefit of the delay and it's because of the language we are using we have to change the nomenclature and doesn't require a change in congress. we can say no longer early eligibility, it's your minimum benefit age . that's the reduced benefit and that's what we are going to start calling it. the other thing is representative larson mentioned this and i appreciate it coming from him, i've been trying to talk about an insurance program for 14 years because you often think about it as an entitlement. we talk about insurance and again, i'm a finance professor andinsurance is designed to mitigate risk . the program is the old age driver's insurance program, survivors in case the primary worker dies is a benefit and originally it was for old age which back then was 65 and if you made it to 65 you didn't
live more than a year or two and so we changed it to an entitlement program. if we go back to the insurance nomenclature, we can have a discussion about increasing minimum benefit, what do we do for higher earners and start flattening those points so those are the high end who don't need that full insurance value. those who need more would get more and and we can use the insurance nomenclature, that's very important. >> a couple questions the audience has pulled together, one from me arguing who's asking can you fix a critical problem in order to fix this problem and she says for example reduce giant spending, abuse and the broader approach to the way government spends and then we also have a question here, why are the trustees not considering moving annual because congress would have to make those decisions and
not trustees but i'll let you guys, either one have this broad question about the way congress spends which my untouched on alittle bit. i think , is it inevitable that congress, representative wright has gone public but is itinevitable that congress will always tend to spend more and not be fiscally responsible or is there a way to turn that around ? and how much are our eligibility problems here which this question is about and fraud abuse, how much of that is real estate and is that possibly in the question? >> it reminds me the joke that the party offiscal responsibility is the party in the minority . >> it's not a joke. >> it's really hard to talk about. when we have discussions about spending it's irresponsible to say let's increase pending on one area. you have to think realistically about it. both the money coming in for dedicated programs and tax revenues. we have to think holisticlee.
and it's wrong to say , but education spending somewhere else. these are programs that have their own intent, own purpose and own design and have to be reformed independently. but we can't ignore one to solve the other. >> i want to expand on your definition of this goal responsibility. i don't think bending more is necessarily irresponsible. anymore or cutting taxes and not paying for it is fiscally irresponsible. >> we are on a trajectory. but i do think those pressures from things like this in norma's tax cuts do raise the pressure on social security, even though that had nothing to do with total security, people cds benefit as a technical term and they say oh, now we are in this fiscal top spot. you're in a spot of your own making and it's not social security fall that you decided not to pay for your
tax cuts. >> agree with the fact that more spending is what is solely responsible, that has nothing to do with bigger or smaller government, it have to do with your willingness to pay for things. there are times when we got borrow because we don't like the bill. certainly an issue and i take the same point catherine made but switch a little bit because there's so much damage i'm afraid that the tax cut has done both in terms of to our deficit and debt situation but to our need to reform entitlement because people will rightly say we now have this huge problem because we cut taxes, we're not going to fix that cutting social security but we need to fix social security before the tax cuts so it underlines that through argument. that free lunch kind of erodes the entire budget process. >> let me add to that because
my first question is there's no such thing as a free lunch. i tried to expel the word free from my vocabulary. there's no free anything. we're not going to get through a discussion about taxes and decide whether or not it was politically good but there were something that had to be done but that said, were they paid for? we're getting to the point where we are getting close to $1 trillion deficit and if you look out at the budget window, we are going to hit $1 trillion of interest payments per year. i trillion dollars interest payment. that is the cost of the annual fund for social security so we're going to be paying so much in interest we can fund social security so we can't ignore the fact that deficit arrives with interest so right now i want to create a low interest rate environment, one percentage point or two percentage points and all of a sudden interest point is 1.4, 1.6 and all of a sudden you're in education and infrastructure though the debt, but that is so important, that should the
one of our primary discussions. >> we've been talking about the macro ends of government, how we look at government and one thing about the micro and individual americans, it's 60 million americans receive social security benefits of one hide or another, predicted to rise to 80 million by 2030. it's a huge group of people, many of whom will depend on these benefits but this is also at a time when we are seeing the way americans pay for their retirement change. no longer are people getting attention as a rule, many people don't even understand what i'm talking about it's a pension. out of that play into the dependency on total security and could there be a political will that comes from people needing social security more and how do they realize that?>> i think the importance here is to think about it holistically. social security is a portion of it but it was designed, remember the old three-legged
horse discussion? one is an employer pension and one is see things, if that employer pension is gone, you've got to leggett stool. you get rid of personal savings, i get very tired of bouncing up and down for a long period of time. we not need to talk about how we change the incentives and even if we go through the benefits and we are now in a dc world that defiance contribution, we're making it easier for our employers to contribute where whether it's through having a public option thatcongress has options , does the public have an option to?maybe we change the tax incentives. right now you get a tax deduction for a 401(k) which helps i higher income earners. why not change it because it some sort of credit that helps higher income earners? when we talk about the idea of social security, think about retirement purity written large and how we change other parts of the school and retirement that
are for americans. >> i agree with a lot of that and we need to keep in mind that for every, all every american, social security is the base of that retirement security, no matter what happens, you get hit by a car, your retirement savings get wiped out, social security is always there no matter what happens and people to rely on other sources of savings and pensions but those hopes don't always have and social security is there and does protect people even when they're moving jobs and dealing with this economy so that have to come first. we have to talk about comprehensively but social security has to come first. >> i agree is a fundamental leg and there's a structure to help you protect against outliving your savings and an important piece, there is good news means there's talk about an upcoming retirement crisis but in many ways those numbers overstate a problem because they don't take into account the savings that go into 401(k)s