Securing Social Security

Q&A PROFESSOR JEFFREY LIEBMAN has been looking at ways to shore up the current Social Security program since serving as special assistant to the President for economic policy and working on Social Security reform in the Clinton administration. Last year, he joined forces with Andrew Samwick, a former economist for the Bush administration, and Maya MacGuineas MPP 1997, a former Social Security advisor to Senator John McCain, to craft a new compromise plan for Social Security reform.

How did this collaboration come about?
Early last year, my coauthors and I were getting frustrated with how things were going in Washington and wanted to see if there was something constructive we could do. Our idea was to create a plan that would bring together people from different points in the Social Security debate. We recognized that while such a plan would probably not be one that any of us would have chosen on our own, it would still be better than the status quo. Our hope was to get Washington’s attention by demonstrating how consensus was possible between different camps represented in the debate.

What makes your plan different?
Our deal involves continuing to allocate 12.4 percent of payroll to the traditional system, which is more than President Bush proposed. The plan also involves a significant amount of new revenue, along with benefit cuts. The new revenue aspect might make Republicans uncomfortable, but all of that new revenue goes into personal retirement accounts (PRAs) — so that’s a compromise. The funding of those accounts, which equals 3 percent of payroll, comes from a 1.5 percent mandatory contribution by each worker and 1.5 percent from diverting resources from the Social Security trust fund. (We replace most of the diverted resources by raising the level of earnings subject to the Social Security tax.) Our PRAs are also much more heavily regulated than those in President Bush’s plan. They’re mandatory, not voluntary, and payouts would be in the form of an annuity rather than a lump sum.

What’s a good time range for fixing the system?
Acting sooner, rather than later, allows us to share the cost of fixing the system over more generations, makes it easier to phase in some of the unpleasant parts of the plan, and enables people to plan. Six to eight years from now the baby boomers will be retiring at a rapid rate. It would be great if we could act in the next two to four years. — JH

For further details about the nonpartisan social security reform plan, go to www.nonpartisanssplan.com.