Howard Dean on Social Security: Raise Retirement Age; Payroll Taxes

July 2, 2003

For years, the Cato Institute and other organizations that advocate Social Security reform have made the point that the alternatives to personal accounts will be painful. This point is made clear as 2004 presidential candidate Vermont governor Howard Dean reluctantly spoke on how else to sustain benefit levels. After hard questioning on the Sunday, June 22, airing of Meet The Press from host Mr. Russert, Dean suggested the following options for Social Security:

Mr. Russert: In 1995…you were asked how would you balance the budget…. "The way to balance the budget, [Gov. Howard] Dean said, is for Congress to cut Social Security, move the retirement age to 70, cut defense, Medicare and veterans pensions, while the states cut almost everything else. 'It would be tough but we could do it,' he said." [You] would no longer cut Social Security?

Dr. Dean: But you don't—no. I'm not ever going to cut Social Security benefits.

Mr. Russert: Would you raise retirement age to 70?

Dr. Dean: Social Security, I—the best way to balance Social Security budget right now… is to expand the amount of money that Social Security payroll taxes apply to. It's limited now to something like $80,000. You let that rise. I also would entertain taking the retirement age to 68. It's at 67 now. I would entertain that.

Mr. Russert: But the deficit's $500 billion … You could close down the entire United States government, other than Social Security, Medicare and Defense and interest on the public debt, and you still wouldn't balance the budget.

Dr. Dean: But the problem for Social Security is that it is actually in fine shape until, I don't know, 2040 or something like that.

Mr. Russert: No, no, no, no, no, no.

Dr. Dean: Well, it's in fine shape—it's actuarially fine until 2025 or '23 and then the trust fund doesn't run out...

Mr. Russert: Receipts and outlays begin...

Dr. Dean: That's right. Around—in the middle of the 2020s.

Mr. Russert: When the baby boomers retire, we have a real impending crisis.

Dr. Dean: That's right. First of all, you've got to fix Social Security and you've got to fix the budget. Fixing Social Security is an independent problem from the budget.

You've got to look at expanding the amount of money that gets taxed for Social Security. You know, if you make $100,000 a year, the last $15,000 doesn't have to pay Social Security tax for it.

Mr. Russert: But, Governor…if you're not going to raise taxes $500 billion to balance the budget, where are you going to find the money? Which programs are you going to cut? What do you cut? Education? Health care? Where?

Dr. Dean: Right now there's—eventually, in the middle of the 2020s you're going to see more money going out than coming in. You've got to fix that. We've talked a little bit about how to do that. Maybe you look at the retirement age going to 68. Maybe you increase the amount that gets—payroll tax—I'm not in favor of cutting benefits. I think that's a big problem.

Mr. Russert: But you would consider increasing the payroll tax?

Dr. Dean: Absolutely. You don't have to increase the amount of the payroll tax, you increase the salary that it's applied to. You see what I mean? $85,000, maybe you raise it to $100,000 or whatever the numbers are.

For more information, see director of the Cato Institute's Project on Social Security Choice Michael Tanner's, "No Second Best: The Unappetizing Alternatives to Social Security Privatization."

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