Give Sen. Bill Cassidy (R-LA) credit for being one of the few national legislators with enough guts to insist that major reforms will be needed to save Social Security .
One idea in particular, that of creating a separate investment plan apart from Social Security but whose proceeds are dedicated to the retirement program, is worthy of extensive consideration.
BILL CASSIDY CALLS BIDEN AND TRUMP ‘IRRESPONSIBLE’ ON SOCIAL SECURITY
Right now, the main Social Security “trust fund” is projected to become insolvent in just 10 years. Yet the major contenders for president in 2024, especially former President Donald Trump and President Joe Biden but also Gov. Ron DeSantis (R-FL), are spewing demagoguery portraying just about any reform effort as an attempt to “cut” Social Security. As Cassidy has noted innumerable times in recent months, these politicians lie. In fact, under current law, benefits would be cut by 24% immediately upon the program reaching insolvency. Trump and Biden, by doing nothing, are the ones who would be cutting Social Security.
A month ago, Cassidy left Treasury Secretary Janet Yellen all but muttering gibberish as he questioned (and lectured) her about this simple, undeniable fact.
Cassidy has been working with Sen. Angus King (I-ME) to produce a plan to rescue the system while preserving as inviolable the option of “early retirement” at age 62 for those willing to accept lower monthly payments. They haven’t put forth a final proposal yet, but Cassidy, on April 16, confirmed on Meet the Press that one element almost sure to be included is the creation of a “sovereign wealth” program.
“In our big idea, we create a fund which is separate from Social Security,” Cassidy said. “We put about $1.5 trillion in it, and we allow it to be invested in the nation's economy. There's no risk borne by the beneficiary. And there's no Social Security dollars put into this separate fund. And we allow it to sit there. And we allow it to grow. And at the end, it bridges, helps bridge Social Security's sustainability. All the risk is borne by the fund.”
The idea isn’t new, and it’s not even as good as it was when former President Bill Clinton floated something similar in 1999. Then, Clinton proposed financing the separate Social Security investment fund by using the overall federal budget surplus a Republican Congress forced him to create. Now, Cassidy’s fund would be deficit-financed. On the other hand, if it worked as intended, the corpus of the fund wouldn’t be lost, so it essentially would be a semipermanent loan from the regular budget to Social Security, but one which never actually increases the overall government’s total indebtedness.
Clinton proposed his plan as an alternative to Republican proposals for individual retirement accounts within Social Security, which would be harder for the government to implement but which would have the advantage of giving people real ownership of their accounts.
The same objections some conservatives raised to Clinton’s plan still apply to Cassidy’s. First, it would violate free-enterprise principles by effectively giving government control over 5% or more of the national investment markets. Second, even if Congress created the fund to operate in a notably autonomous way, a future Congress could just as easily pass a new law raiding the expected surpluses for other purposes . Politicians are not known for reticence when public funds are on the table.
Still, with Social Security so close to insolvency, the benefits of Cassidy’s suggestion probably outweigh the risks. If the free-market economy continues to grow, some 75% of Social Security’s shortfall could be eliminated at no permanent cost to the federal balance sheet. And if the economy falters enough to make this investment fund unsustainable, the country will face enough other problems anyway that this one will be dwarfed in significance.
Either way, Cassidy deserves thanks for trying to do something constructive rather than letting Social Security insolvency leave impoverished seniors stranded.
