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Volume 12 Issue 4 - May 2012

Social Security: What’s Happening in Washington?

In his lunchtime address at the annual MRRC Research Workshop, "Social Security: What’s Happening in Washington?" Resident Scholar at the American Enterprise Institute, Andrew Biggs touched on the recent history and dynamics of efforts by legislators and policy makers to shore up Social Security’s financial future.

He noted that a number of proposals involving funding retirement through personal accounts emerged during the administration of George W. Bush. Olivia Mitchell and others at the MRRC played a role in the discussions of these proposals. However, these plans often would have carried very substantial transition costs. Recent discussions of Social Security reform have focused less on personal accounts and more on the tax increases or benefit reductions necessary to balance the program’s finances.

Biggs touched on recent policy discussions of encouraging people to work longer -- including proposals to reduce payroll taxes for older workers. The burdens of financing entitlements with an aging population could be moderated if people extended their work lives.
Biggs observed that Social Security Disability Insurance (SSDI) reforms have received attention and might be easier to enact in the current climate, because the SSDI system is under such great pressure. The Disability Trust Fund has only about 5 years of solvency remaining.

He noted that some SSDI reform proposals have similar components, suggesting potential grounds for compromise. Pointing to one example of a possible approach to SSDI reform, Biggs mentioned the recent book, “The Declining Work and Welfare of People with Disabilities,” by longtime MRRC scholar Richard Burkhauser and his coauthor Mary Daly. There is currently an incentive for employers to move disabled individuals onto SSDI to save money noted Biggs.  The book proposes instituting an experience-rated employer payroll tax. Biggs also mentioned a recent proposal by David Autor and Mark Duggan that requires employers to bear part of the cost of moving their employees onto the SSDI system.

While there are differences between these proposals, said Biggs, they both offer employers incentives to keep employees working and keep them off the disability rolls.