Addressing fiscal challenges, improving Social Security

Friday, April 19, 2024

In this week's newsletter: Addressing fiscal challenges, improving Social Security

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A bipartisan route to fiscal sanity...

“I think this is the world war for our generation,” House Budget Committee Chairman Jodey Arrington (R-TX)?said?of the nation’s spiraling debt, now more than $34 trillion. “We need people who are willing to do the right thing, even if it’s not politically popular.” Of the nation’s current fiscal straits, he added, “the wheels are coming off” and our “fiscal health... is rapidly deteriorating.” Arrington joined other top budget policymakers, former lawmakers, and ex-Congressional Budget Office directors at a Capitol Hill?forum?that BPC co-sponsored this week with The Hill to mark the 50th?anniversary of the 1974 Congressional Budget Act.?

Brendan Boyle (D-PA), the House Budget Committee’s senior Democrat, echoed Arrington’s call for bipartisan action to address the fiscal challenge. He also pushed for a “permanent solution” to the debt ceiling process, rather than?continuing the current brinksmanship that threatens a calamitous federal default.?Beyond Arrington and Boyle, a broad consensus emerged among the forum’s speakers that, with annual interest payments?fast approaching?$1 trillion a year, and with missed deadlines for budget resolutions and appropriations bills now far more a rule than an exception, the budget process could use serious reform. So despite the latest drama on Capitol Hill –?over foreign aid –?that will likely spill over into the weekend, there are D’s and R’s who are willing to work across the aisle to get things done.? And we’re ready to roll up our sleeves and make that happen.

...but on the right path

Shalanda Young, director of the White House Office of Management and Budget (OMB) and a former House Appropriations Committee staff director, agreed at the forum that policymakers need to address rising debt, noting that President Biden has proposed “a path to deficit reduction” in each of his annual budget proposals. She stressed, however, that details matter. “You have to know what outcomes you’re trying to achieve,” she said in conversation with BPC President and CEO Margaret Spellings . The goal, she said, should be a level of debt as a share of the economy that would support a “healthy” economy and enable the federal government to make “investments” for the American people. She explained that even under a deficit reduction path that includes both spending cuts and revenue increases, as Biden advocates, policymakers perhaps should look “differently” at spending on childcare and education that generates benefits more than a decade into the future.?

Reforms to Social Security?

Reforms to two provisions of Social Security would make the program fairer and also simpler for beneficiaries to understand, BPC Chief Economist Jason Fichtner, Ph.D. told?the House Ways and Means Subcommittee on Social Security this week. The program’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) reduce benefits for workers and family members that have pensions from earnings that were not covered by Social Security. “It is important to maintain equity between covered and non-covered workers,” Fichtner said, but “these provisions create an overly complex structure rife with what economists call perverse incentives” and “can hinder people’s ability to accurately plan for retirement and potentially cause undue hardship for retirees.” One recommendation is for lawmakers?to address the problem by either changing Social Security’s benefit formula or empowering the Social Security Administration to better administer WEP and GPO.

Have a good weekend. Members of the House and Senate are scheduled to be back home next week. We’ll be back when they return to DC.