A Simple Social Security Reform Program? Blame, Blame More – Center for Retirement Research

This proposal will undermine support for the program and delay a real solution.

My brilliant friend, and occasional co-writer, Andrew Biggs is at it again. He and his attorney Kristin Shapiro argue that we don’t really need to worry about ending the Social Security trust fund because the worst effects can be prevented by executive action. Instead of an across-the-board benefit cut of 21 percent in the early 2030s, the President could simply direct the full payment of benefits to those most in need — preventing any increase in poverty — and cut benefits for high earners to roughly. 40 percent. The authors describe this provision as “a reasonable starting point for discussions about long-term reforms.”

Here’s what I don’t like. First, the article suggests that fixing Social Security is not a pressing problem. It is stressful; we don’t want to be a year away from the fatigue that is causing so much anxiety and insecurity among middle-class Americans. Second, exercise is a tough way to shift Social Security away from social insurance for all and toward a welfare program for low-income earners. Basically, it’s asking Congress to find money to subsidize the “wealthy”. And, to make matters worse, the lawyers I spoke to were skeptical that the President has the authority – in the current legal framework – to change the distribution of the benefit cuts.

Social Security’s retirement trust fund is headed for depletion in 2033, at which point spending must be reduced to the amount paid from current income – payroll taxes and income taxes collected on benefits. Mathematicians estimate that fatigue will require benefits to be reduced by 21 percent. The conventional wisdom is that those cuts will be applied equally to high and low earners. Indeed, when the Social Security Administration and the Congressional Budget Office show reductions in benefits, they assume that all beneficiaries receive the same percentage reduction. So far, so good.

This is where Biggs and Shapiro go off the rails. Perhaps out of fear that the prospect of plunging millions of older Americans into poverty might encourage Congress to raise revenue to ensure full payment of benefits, the authors argue that the cuts need not be proportional. To make their case, they prominently cite a 1974 Supreme Court decision (Morton v. Ruiz) that considered how the Bureau of Indian Affairs could manage a program where Congress had authorized more benefits than appropriated funds. The court concluded that the Bureau may have greater flexibility to develop an appropriate eligibility standard, to be applied consistently, to all potential beneficiaries. They say this is the situation facing Social Security.

Biggs and Shapiro then laid out their plan for the President, in consultation with the Social Security Commissioner, to cut benefits for high earners. They say this move could reignite the debate. Instead of Congress debating how much money is needed to protect all retirees, it will have to negotiate the more difficult issue of getting money to protect the highest earners.

So, there you have it. Yes, it’s smart. It helps, not much. Although the authors agree that complete reform is the most desirable outcome, they undermine that goal by offering only a partial solution. Similarly, proposing a simple approach reduces the urgency to act sooner rather than later as we face the abyss of 2033. Their drive to find a system with significant progress seems to ignore the huge progress already in the system and the political importance of having all workers. they feel like they have a plan that benefits them.

Finally, “my lawyers” seem to be unhappy with the idea that the Supreme Court’s 1974 decision Morton may be given more weight by the Court today. The Court’s respect for “reasonable decisions” by government agencies has declined significantly over the years, reaching an all-time low in 2024. Indeed, for many years, “Chevron deference” (established by a 1984 Supreme Court case) instructs courts, where the rules are unclear, to defer to government interpreters. However, two Supreme Court decisions in 2024 overturned this longstanding precedent. Therefore, today, courts are less likely to overrule an agency’s interpretation. In the current situation, the Supreme Court is unlikely to accept as “reasonable” the Social Security Commissioner’s recommendation to reduce benefits only to the highest earners. Instead, a protracted, politically charged, and unpredictable court battle seems more likely.

My overall conclusion is that Andrew should only share articles with me.