Fiscal Commission's Rivlin says Social Security salvo lies in income tax reform

COLUMBUS, Ohio (CGE) - One of the two nationally prominent economists who spoke Thursday to an audience attending a conference on Ohio's future in the state's capital said privatizing Social Security is a bad idea, and that adjustments to the income tax is a sensible long-term strategy to shore up the nation's retirement system. 

 

 

Alice Rivlin, a member of the National Commission on Fiscal Responsibility and Reform, created by President Barack Obama to address the nation's fiscal challenges, participated in a panel discussion with Arthur Laffer, the Founder and Chairman of Laffer Associates & The Laffer Center for Supply-Side Economics.

 

Rivlin and Laffer sat on stage at a downtown Columbus hotel with a local TV news personality to discuss the national debt, deficits and the future of fiscal federalism. As a powerful voice on fiscal, monetary and social policy, Rivlin has assembled a long and distinguished pedigree including serving as Director of the White House Office of Management and Budget in the first Clinton Administration.

 

Speaking to an audience peppered with currently serving and former elected officials, government activists and watchers, policy gurus and think-tank wonks, Rivlin cautioned that despite the debt the nation has accumulated over the past decade, a sum of approximately $14 trillion, which many attribute to borrowing to fund unpaid wars and tax cuts, there is no need to pay off the debt. What's important instead, she said, is reducing the rate of borrowing.

 

A respected voice in her field, Rivlin, now a Senior Fellow in the Economic Studies Program at Brookings and a Visiting Professor at the Public Policy Institute of Georgetown University who makes regular appearances on national news shows, spoke to CGE following her midday talk on shoring up the Social Security Trust Fund, and why privatizing Social Security is a bad idea.

 

 

Asked if removing the cap on contributing to social security, now pegged at $106,800, is a simple and powerful strategy to remedy any shortfalls the trust has going forward for future generations, Rivlin said that is not a good idea.

 

"I think it's a partial, we should raise it faster than it raises now," she said, noting that it go up automatically every year, since it's indexed to wages. "It should go up a little faster to get back to the point at which we are covering 90 percent of the earnings by Social Security," she continued, cautioning that she would not raise it all the way. 

 

Instead of eliminating the earning cap, the former Vice Chair of the Federal Reserve Board said it would be better to put much more emphasis the income tax.

 

In a follow up question on extending the payroll tax, which Democrats and Republicans say they are for but are at loggerheads over how to pay for it, with Democrats wanting to impose a small tax on income over one million dollars per year while Republicans want to focus on paying for it through reductions over time to the federal workforce - Rivlin was quick to reject any effort to privatize social security now, as Republicans generally want to do, or in the future.

 

"I don't agree on the privatization," she said, "largely because we can't afford it. If you divert the payroll tax into private accounts for 40-50 years, then somebody has to pay the currently retired, and we can't afford to do that now."

 

 

The Fiscal Responsibility and Reform Commission Rivlin served on, which was charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run, also included 17 other members, including business, labor and elected leaders. 

 

The group met once a month while Congress was in session in 2010. But for reasons akin to why the bi-partisan Super Committee failed to reach agreement on reducing the nation's debt or why President Obama's American Jobs Act has floundered for lack of track in a politically polarized Congress, the fiscal commission failed to render a report that a minimum of 14 members could agree upon.

 

Sponsored by The Buckeye Institute for Public Policy Solutions, The Center for Community Solutions and Greater Ohio, the conference - Across The Spectrum: The Future of Ohio And The Path to Prosperity - offered attendees a chance to listen to a smorgasbord of state, county and city leaders discuss the challenges facing Ohio, a once powerful Midwestern manufacturing state, the home of Titan industries like autos, steel, glass and rubber, whose political punch in Washington is shrinking as fast as its citizens are increasingly becoming older, poorer and less healthy.