Andrew Biggs, senior fellow at the American Enterprise Institute
American Enterprise Institute
When Andrew Biggs, senior fellow at the American Enterprise Institute, was nominated by President Joe Biden to be a member of the Social Security Advisory Board in May, it came at an important inflection point for the program.
A report subsequently released by the program’s trustees in June projected its combined trust funds can only pay full benefits through 2035, at which point 80% of benefits will be payable. While that is one year later than was projected in 2021, it still sets a deadline by when Congress must act to make changes to a program approximately 70 million beneficiaries rely on for income.
The Social Security Advisory Board does not have a direct role in coming up with fixes to address that issue. But after decades of research on Social Security, Biggs has established himself as an opinionated voice on the program.
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CNBC.com caught up with Biggs on what he thinks should be done to fix Social Security and what he hopes to accomplish in his role on the Social Security Advisory Board that is up for confirmation by the Senate.
(Editor’s note: This interview has been condensed and edited for clarity.)
Jj Gouin | Istock | Getty Images
Lorie Konish: You were nominated to be a member of the Social Security Advisory Board by President Joe Biden. You recently wrote that he is the “biggest obstacle” to expanding Social Security. Why?
Andrew Biggs: The article I wrote actually was arguing that President Biden’s position on not raising taxes on lower-income people pushes Democrats and Republicans towards a compromise on Social Security, that the existing plans to expand Social Security significantly rely on raising taxes on Americans earning less than $400,000, which is contrary to the President’s position. So if the president has said he doesn’t favor that approach, that pushes towards a more compromised position, which is what I would favor.
(Reporter’s note: The Social Security 2100 Act: A Sacred Trust proposed by Rep. John Larson, D-Conn., calls for reapplying the payroll tax and $400,000 in wages, in keeping with Biden’s promise. However, the exclusion of increases to the payroll tax rate limits the amount of time the program’s solvency can be extended, Biggs argues.)
LK: Democrats are staunchly opposed to benefit cuts. Republicans are against tax increases. Do you think they can meet somewhere in the middle?
AB: The political reality is that on really any big legislation, but in particular entitlement reform like Social Security, it’s impossible for one political party to pass its own plans without any support from the other side. Our system requires it to pass the House, then have a super-majority in the Senate, then get the president to sign on. It is very unusual for one political party to hold all those keys to power. So in the U.S., big reforms like the 1983 Social Security reforms tend to be bipartisan. I think that ultimately is how things are going to have to turn out.
LK: Do you think reform efforts will advance under Biden’s presidency?
AB: It’s really hard to say. There is still talk among sponsors of the Social Security 2100 Act, which is the largest or most prominent Social Security expansion plan in the House, that they want to push it through committee and have a vote on it. And yet, that really doesn’t really have any chance of becoming law. I think just as Republicans tried to push a Social Security plan of their own back in 2005 under President Bush without any Democratic support, and they failed, I think ultimately Democrats would realize they would be in the same position.
If you want to fix the problem, you really have to build from the center on out, rather than starting from an extreme position of either the left or the right. And that doesn’t say these positions are extreme positions, are wrong in a technical sense. It just means that in our system, to enact a large change to an important program, you have to build from the center out. It’s just the reality of how our system works.
LK: Do you have a sense of President Biden’s stance on Social Security reform?
AB: I do not. I have not had any discussions with them on this. The Social Security Advisory Board, to which I have been nominated by the president, does not advise in any way on things like how to fix Social Security. It really deals with more technical issues of how the Social Security Administration runs the program, issues of how the system is administered, technical issues along those lines. It is not an advisory committee on how you fix Social Security through reform.
LK: What do you hope to get done in that position?
AB: I think the advisory board has done a lot of useful work over time. If you’re in the Social Security world, you follow what they do. I have done some work in the past at their request, looking at how you analyze the program. The stuff that resonates with me from the advisory board is every four years they appoint a technical panel which looks at the projections for the Social Security program of are we accurately projecting fertility and mortality and all the things that affect the system’s finances, but they also look at things like how are we administering the disability program in order to make sure that people can get their applications filed in a quick and accurate manner.
So I don’t go into this with any agenda for what I think the board could do, but to go in and work with other members of the board, who are people from both political parties, and just try to continue the good work that’s already done.
LK: Sometimes there’s a perception out there that people have an agenda, regardless of whether the position lends itself to that.
AB: On something like that, what I would suggest people do is look at the people who serve on the Social Security Advisory Board. You have Democrats and Republicans who have strong differing opinions on how Social Security should be fixed. But then look at the actual work that is done at the Social Security Advisory Board, and it really has nothing to do with those differences on policy.
It is really about how you make the program and the system work better for people. So professional people can separate their views on how we fix Social Security with their technical expertise on how do we make this program work better from day to day. So they are really simply just separate issues.
A Social Security Administration office in San Francisco.
LK: What changes would you like to see made to Social Security to fix it?
AB: I would emphasize that my views on Social Security reform and how you fix the solvency of the program have literally nothing to do with what I would do on the Social Security Advisory Board. My views on Social Security — I write on it commonly — I tend to believe the program should focus its benefits most strongly on people who need the benefits the most, enacting a true guarantee against poverty in old age, which the current benefit formula doesn’t.
But I also believe that over time, gradually, middle- and higher-income people should save more for retirement on their own and rely a little bit less on the program’s benefits. I would tend to favor more long-term adjustments in the growth of benefit over dramatically increasing taxes. At the same time, I understand that any Social Security reform that may pass, that can be enacted, is going to be a compromise. There’s a distinction between saying what are your personal policy preferences, with understanding the sorts of compromises that have to be made in order to fix this important program.
LK: What inspired you to devote so much of your career to Social Security?
AB: I guess you could think of it in two ways. One the one hand, Social Security is an extremely important program. It’s the biggest federal spending program. It’s the biggest tax most Americans pay, more than income tax. It’s the biggest source of income for most Americans in retirement. It’s also scheduled to be insolvent within a decade or so. From a policy perspective, it’s an extremely important issue.
From a personal perspective, as a policy researcher, it’s just an incredibly interesting topic to work on. You touch on whole areas of economic policy, from people’s individual retirement savings, to how they are affected by taxes, to how they decide when to retire, to how much income they have in retirement. Just as an individual researcher, it’s a fascinating area to work on. Beginning work on Social Security 25 years ago or so was just one of the best professional decisions I’ve ever made.
Source : CNBC