Social Security Has Faced Peril Before. What Can We Learn?

Its final report, approved unanimously by commission members, included three plans for reforming Social Security. Under each option, workers could invest in personal retirement accounts, and their traditional Social Security benefits would be reduced by some amount. No congressional action followed any of the commission's recommendations.

About a decade later, then-President Barack Obama took another bite at the apple with the National Commission on Fiscal Responsibility and Reform. The 18-member commission was tasked with “identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.”

Ultimately, the commission did not meet the 14-member threshold needed to issue an official final report, but the two co-chairs released an unofficial report that received 11 votes.

In addition to recommendations for tax reform and discretionary spending cuts, the co-chairs proposed to address Social Security’s projected shortfall by increasing the amount of earnings subject to payroll taxes and reducing costs by modifying the benefit formula and cost-of-living adjustments. They also proposed expanding the program to cover all newly hired state and local workers, among other measures.

Again, there was no congressional action on the Social Security component of the plan, and the debate about how to stabilize the program has continued.

The passage of Social Security amendments in 1983 came just a few months shy of significant benefit cuts, underscoring how politically challenging it will be to make changes today — and just how much Congress loves a deadline.

The 1983 updates were largely based on the final report of the National Commission on Social Security Reform, also known as the Greenspan Commission, which was created by President Ronald Reagan after his proposal favoring benefit reductions failed to gain support. Some hope that a term-limited President Donald Trump could serve in a similar capacity and use his political capital to restore the program.

What May Happen Now

Regardless of what the interested parties may say or do in the coming years, the projected annual deficits suggest that Social Security will experience a weaker financial position with each year. This means the magnitude of the changes needed to eliminate the projected shortfall increase with each year, according to the report.

“Looking ahead, the timing, degree and nature of any future changes to Social Security will reflect the policy objectives of lawmakers engaged in the debate at the time,” the Congressional Research Service says.

While many proposals have sought to address the entire projected shortfall, the report notes, lawmakers could implement changes intended to extend the program’s solvency for less than the 75-year projection period. This could provide for a higher percentage of payable benefits after the trust funds are depleted, for example.

The current situation doesn't necessarily mean that the approach taken in 1983 reflects the policy objectives of lawmakers today. For instance, lawmakers may want to address the objectives, size and scope of Social Security or, the report suggests, include Social Security reform in a broader package of policy initiatives.