From the Annals of Social Security Reform
Via Brad DeLong, here's a post at Firedog Lake discussing the book, The Pact: Bill Clinton, Newt Gingrich, and the Rivalry that Defined a Generation, by Steven Gillon. The title of the post is both provocative and, setting aside my personal disagreement with the fourth word*, true: "How Monica Lewinsky Saved Social Security ..." The post focuses on the important role of Erskine Bowles in bringing President Clinton and Speaker of the House Gingrich close to an agreement on Social Security reform in 1998. When the Lewinsky scandal broke:
Politically, it forced Clinton to seek refuge in the liberal wing of his party, the same group he had agreed to abandon a few months earlier. “All opportunities for accomplishment were killed once the story came out,” reflected a senior White House official. “If we cut a deal with the Republicans on Social Security there was every possibility that the Democrats, who were the only people defending him in Congress against these charges, could easily get angry and abandon him.” With conservatives in an uproar, Gingrich lost his political wiggle room and was forced to appease his right-wing base. If Gingrich did not “feed the conservative beast,” recalled a colleague, he would have been removed from his job as Speaker.
I was very engaged in Social Security reform during this period, largely based on a proposal that is outlined here and that has gone through several iterations since. It was pretty clear that a deal was in the works and that the process was moving along. It was even more clear that the Lewinsky scandal ended it all. I had the dubious honor of testifying before the Senate Finance Committee on September 9, 1998, the day the Starr report was delivered to Capitol Hill. I also testified before the Senate Budget Committee on January 19, 1999, during the heart of the impeachment trial. To say that I couldn't get much traction with some very distracted Senators would be putting it kindly.
*My personal disagreement with the word "saved" is that not reforming Social Security when we had this window of political opportunity didn't do anything to save the system. The system still faces a funding shortfall. All we have "saved" is a few cohorts of workers from having to pay additional monies into the system to close that funding shortfall and a few cohorts of beneficiaries from having to accept lower benefits to close that funding shortfall.
Who's to Blame?
I would object to the second and third words as well. It's only a headline, but blaming this on Monica Lewinsky is misplaced. As usual, Bill Clinton, escapes responsibility. I would also say it is sexist, even though the article was written by a woman.
How to manage the accounts??
I know several clowns who are addicted to day trading and they have probably all lost more than their original investment.
How can these accounts be structured?? Do individuals control their own investments? Who bails them out if they go with LasVegas investments? Do we have Nanny manage their accounts? Or do the smart people have to hire a nanny (Investment advisor) and pay fees? If we start counting advisor and investment fees, how much better return do people get for the higher risk?
The other problem is insurance. No one knows how long they will live. Should I plan to live to 80 or 100? One function of SS is to reduce the amount needed to survive the full length of retirement.
It would make more sense to me to treat SS more like insurance. Today, SS payments to high income recipients is taxed and the taxes returned to the SSTF. Why not increase the tax rate on SS payments to high income recipients? As long as those recipients have good income, they can party along. If they run out of cash or get hit with the BigMed, then income and SS taxes would simultaneously drop- an insurance, automatic stabilizer.
No one wants to talk about this option because it is a tax that is only targeted at wealthy individuals.