Concord Coalition: Voters Should Expose Candidates that Support a "Do Nothing Plan"

December 12, 2003

Facing deteriorating fiscal environment as the baby-boom entitlements approach, the Concord Coalition proposes seven "Key Questions Voters Should Ask Candidates About the Budget, Social Security and Medicare." The brochure proposes concise questions that citizens and the media should ask candidates for federal office. By so doing, candidates will feel pressure to address these issues if they are elected. Each question is followed by a description of the problem.

Question 6: "Do you support the 'Do Nothing Plan' for Social Security? If so, why? If not, what steps would you take to close the program's long-term funding gap?"

Concord Coalition: "Imagine that a candidate promised to introduce legislation called 'The Social Security Do Nothing Plan.' Under this bill, promised retirement benefits would be cut by 16 percent for today's 30-year-olds, by 29 percent for today's 20-year-olds and by 35 percent for today's newborns. Alternatively, payroll taxes would suddenly go up by 34 percent in 2042. With either choice, we would still need to borrow trillions of dollars to pay benefits. How many candidates would campaign for office with such a plan? Probably none, and yet these are the consequences of doing nothing.

"Social Security is the country's largest government program, comprising 22 percent of all federal spending. Social Security's revenues, which come mostly from payroll taxes, are more than sufficient to pay benefits in the near term. But changing demographics make the current system unsustainable over the long term. Social Security is generating annual surpluses now, but large and growing deficits loom in the future. Between now and 2018, the program is projected to generate a $1.1 trillion cash surplus. But from 2018 through 2077, Social Security faces a cumulative cash deficit of $26 trillion. This change is due to the rapid aging of America's population.

"Low birthrates are reducing the number of taxpaying workers while longer life spans are increasing the number of beneficiaries. When the boomers were born there were more than five workers per beneficiary. By the time they are fully eligible for benefits there will be two workers per beneficiary. This declining ratio is a problem because current workers pay for the benefits of current retirees. Ultimately, the need for reform is not a matter of ideology. It is a matter of simple arithmetic.

"The Social Security trust fund does show a positive balance through 2042. However, the trust fund is simply an accounting device with 'assets' consisting of Treasury IOUs. The cash needed to pay these IOUs will have to come from tax increases, spending cuts, or borrowing from the public, all unattractive options for future policymakers. The key point is that the trust fund assets are also taxpayer liabilities. Their existence on paper does not ease the fiscal challenge of paying future benefits.

"Unfortunately, the window of opportunity to gradually phasein cost saving reforms and have the baby boom generation pre-fund a portion of their retirement benefits is rapidly closing. Given the magnitude of the projected Social Security deficits, it is clear that the failure of our nation's lawmakers to enact reforms will have dire consequences for future generations. And yet, the most popular reform plan in Washington is still the 'Do Nothing Plan.'"

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