Saving Social Security

By PETER ORSZAG
NYT

The budget deficit figured prominently in much of the discussion surrounding yesterday’s election. Yet the outcome of the election will do little of meaning to restrain our medium-term deficits — and arguably makes a serious medium-term deficit reduction package less likely. The silver lining is that the election could make Social Security reform more likely — if the administration chooses to jump at the opportunity.

The shift to Republican control of the House won’t help that much in restraining medium-term deficits because most of the proposals that have been put forward are either lacking details and unlikely to be viable once the details are revealed (e.g., restraining non-security discretionary spending well beyond the administration’s freeze), or don’t have that big of an impact (e.g., freezing federal salaries, especially if the military is exempted).

And as I have written previously, meaningfully reducing the deficit over the next five to 10 years requires a significant increase in revenue — which is even less likely to be enacted given the shift in the House. In the meantime, look for a nasty fight over a debt limit increase early next year.

In contrast to the medium-term fiscal outlook, which is not improved by the election results, Social Security reform may be. Erskine Bowles and Alan Simpson, the co-chairs of the fiscal commission due to report at the beginning of December, have both expressed a desire to restore solvency to Social Security. And Republican leaders have previously expressed a willingness to tackle the issue too.

(More here.)

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