By: AIF Staff
As the former Chairman of the House Budget and Ways and Means Committee, American Idea Foundation President Paul Ryan has long been recognized for his efforts to reduce our nation’s $26 trillion debt and to reform critical social safety programs like Medicare, Medicaid, and Social Security so the government is able to keep the promises made to current and future generations.
Early in his career, Speaker Ryan introduced the Roadmap for America’s Future and when he became the leading Republican on the Budget Committee, he authored and helped pass the Path to Prosperity budgets four years in a row in the House of Representatives. Speaker Ryan also served as a member on the Obama-era National Commission on Fiscal Responsibility and Reform, more commonly known as the Simpson-Bowles Fiscal Commission, where he worked on a bipartisan basis with former Congressional Budget Office Director Alice Rivlin on a plan to reform Medicare. He had a similar bipartisan approach with Senator Ron Wyden, a Democrat from Oregon.
Despite Speaker Ryan’s best efforts, making major changes to save and strengthen programs like Social Security and Medicare proved too tall an order for Members of Congress to pass into law and as a result of Congressional inaction, these programs have continued to march closer to insolvency.
Programs like Medicare and Social Security serve as a lifeline for millions of seniors, workers, and families. Each of these programs have seen their financial standing worsen drastically in the past year, due in part to demographic shifts but more so because of the economic turbulence caused by the Coronavirus. The economic difficulties that 2020 has brought only underscores the need for urgent action by elected officials. As the Committee for a Responsible Federal Budget noted recently:
“The ongoing economic contraction is certain to further weaken the finances of both programs, accentuating the urgency of legislating financial corrections soon. In particular, the solvency of the Medicare HI and Social Security DI trust funds may be imperiled much earlier than is recognized…. This crisis will only shorten the time that lawmakers have to stabilize the financial outlooks for these vital programs.”
Without question, this will be a critical issue for the next Administration and the next Congress to tackle. As Speaker Ryan said recently:
“My biggest concern, under whomever becomes president, is fiscal policy and our entitlements, which are unsustainable. They’re on an unsustainable path. It’s not too late to fix them on our own, in a way that fulfills each of their missions, but if we keep kicking the can down the road as both presidents and both parties have done, then I really do worry that our monetary policy and our fiscal policy are on a collision course with one another. The next president is going to have to deal with that.”
As the following chart shows, it’s not just Social Security and Medicare that are on a perilous track to bankruptcy. The failure of elected officials to act has also resulted in financing issues for the Highway Trust Fund and the Pension Benefit Guarantee Corporation. As the Committee for a Responsible Federal Budget stated in a recent analysis: “Using the Congressional Budget Office’s (CBO) latest economic projections, we estimate all major trust funds will be depleted by 2031…
“According to our latest estimates, the Highway Trust Fund (HTF) will be depleted by 2021, the Medicare Hospital Insurance (HI) trust fund by the beginning of 2024, the Social Security Disability Insurance (SSDI) trust fund in the 2020s, the Pension Benefit Guarantee Corporation (PBGC) Multi-Employer fund at some point in the mid-2020s, and the Social Security Old-Age and Survivors Insurance (OASI) trust fund by 2031. We estimate the theoretically combined Social Security OASDI Trust fund will run out of reserves by 2031.”
As Speaker Ryan’s experience reflects, a single legislator pushing for changes to these programs will undoubtedly struggle to get meaningful reforms signed into law. As such, a bipartisan approach to fixing the nation’s safety net for current and future generations will likely be needed. In a recent interview, Ryan shared his view on how lawmakers should approach reforming these programs given the political sensitivities around them.
“I was a person who spent a lot of my time in Congress working on debt issues as Chairman of the Budget and Ways and Means Committees. I was also on the Bowles-Simpson Commission. When House Republicans took the majority in 2011 and through 2018, we brought a budget that paid off the debt, that balanced the budget, and that reformed the entitlement programs every session. It had reforms for Medicare, Medicaid, and an Obamacare replacement. We could never get that beyond just passing it out of the House of Representatives.
“And so, I came to the conclusion that you’ll never get Congress – even with the right majority and the right presidency lined up, to go along with the votes that are needed to pass massive, comprehensive entitlement reforms. So, I’m a believer that it’s going to take a Commission.”
But Speaker Ryan’s experience also shows that it will take more than just any commission to address these trillion-dollar problems. Rather, a commission to fix the financing of these critical programs must be setup in the proper way. As Ryan said:
“I never really liked the idea of commissions in the past, simply because I always thought it was Congress dumping its responsibility, but I’m now convinced more than ever, based on my experience with the Bowles-Simpson Commission, that one is necessary. I was a big fan of Alan (Simpson) and Erskine (Bowles) but I wasn’t a big fan of exactly how they went about the Commission because I think they missed some big opportunities.
“My own belief is that the only way to make a commission work is like the Greenspan Social Security Commission in the 1980’s or a fast-track commission where Congress can’t amend or filibuster the report. They have to have an up or down vote in the House and an up or down vote on the same version in the Senate, and then it goes to the President for his signature. This way, legislators don’t own the process and they can’t avoid the decision to vote on the package.”
As Speaker Ryan mentioned, the National Commission on Social Security Reform, which was created by President Reagan in December of 1981 due to “the inability of the President and the Congress to agree to a solution, and the concern about eroding public confidence in the Social Security system,” and its efforts could prove instructive for lawmakers and individuals looking to fix these programs.
There are some key lessons that can be learned from the National Commission on Social Security Reform, often called the “Greenspan Commission,” which will increase the likelihood of successfully reforming these Trust Fund programs in the future.
- A Collaborative Setup & Agreement on the Math
One reason why Speaker Ryan and others who want to fix the solvency of these critical federal programs have coalesced around a commission model is because they have been successful in the past.
In a hyper-polarized political environment, individual pieces of legislation will often collapse among the weight of outside interest groups attacking them or will often stall due to the paralysis that too frequently grips the legislative branch. By contrast, a bipartisan commission, like the Greenspan Commission and Bowles-Simpson, creates a collaborative atmosphere where debate and discussion are possible.
As the Committee for a Responsible Federal Budget acknowledged in an analysis: Commissions create “an environment for compromise, where a deal can be struck and where both parties can work together. Troublesome political and technical issues can be worked out more easily under the umbrella of political cover that a commission would provide.”
Further, the Hudson Institute theorized that the National Commission on Social Security Reform succeeded because of two key reasons:
“[Commissioners] successfully involved both parties; they ensured that negotiators would be those willing to reach compromise; they engaged both the White House and a sufficient number of Members of Congress, and they withstood pressure from seniors ‘lobbying groups. Of equal importance, however, was the analytical clarity that attended the negotiations. Both parties appreciated the size and immediacy of Social Security‘s financing shortfall. Both parties understood that contemporary workers paid for the full cost of financing all Social Security benefits.”
It is vital to setup a structure that allows for a discussion on how to solve the problem, but it is equally important that individuals from both parties also agree on the nature of the challenge itself.
As its final report stated: “The National Commission has agreed that there is a financing problem for the OASDI program for both the short run, 1983-89 (as measured using pessimistic economic assumptions) and the long range, 1983-2056 (as measured by an intermediate cost estimate) and that action should be taken to strengthen the financial status of the program.”
Only by first having a shared understanding of the nature of the problems facing trust funds and key safety net programs can both parties begin to address them. Starting from a unified definition of the problem and then having the conversation in a collaborative manner often are pre-conditions for a commission’s success.
2. Leave No Stone Unturned; Agree that Compromise is not a Dirty Word
According to the Brookings Institution, the Greenspan Commission succeeded in part because:
“Both sides agreed to mutual sacrifice…. Democrats accepted a six-month delay in the annual cost-of-living adjustment and the increase in the retirement age, while Republicans accepted a faster-than-planned rise in payroll taxes and a substantial tax increase on the self-employed. The two sides closed the deal by subjecting up to half of Social Security benefits to income taxes for higher-income beneficiaries, a provision that allowed Democrats to say Republicans had passed a tax increase and Republicans to say Democrats had agreed to a benefit cut.”
One of the challenges facing the Bowles-Simpson Commission was the fact that both Democrats and Republicans were unwilling to move from previously held positions and embrace a notion of “shared sacrifice” to address the problem. Bowles-Simpson was further challenged by the fact that President Obama’s signature legislative achievement, the Patient Protection and Affordable Care Act, had been signed into law just years earlier and Democrats would not consider serious changes to the law as a result. By taking major health care changes off the table at the outset, Commissioners struggled to seriously and comprehensively address the debt and deficit. If future Commissions are to have a chance at succeeding, both parties must acknowledge there can be no “sacred cows” and everything must be up for discussion.
The Greenspan Commission considered a wide range of proposals to address the financing issues associated with Social Security before narrowing its solutions around ideas that a majority of the Commissioners could support. As the final report indicated:
“The National Commission considered, but rejected, proposals to make the Social Security program a voluntary ones or to transform it into a program under which benefits are a product exclusively of the contributions paid, or to convert it into a fully-funded program, or to change it to a program under which benefits are conditioned on the showing of financial need….
“The 12 members of the National Commission voting in favor of the “consensus” package agreed to a single set of proposals to meet the short-range deficit (with Commissioner Kirkland dissenting on the proposal to cover newly hired Federal employees). They further agreed that the long-range deficit should be reduced to approximately zero. The single set of recommendations would meet about two-thirds of the long-range financial requirements. Seven of the 12 members agreed that the remaining one-third of the long-range financial requirements should be met by a deferred, gradual increase in the normal retirement age, while the other 5 members agreed to an increase in the contribution rates in 2010 of slightly less than one-half percent (0.46%) of covered earnings on the employer and the same amount on the employee, with the employee’s share of the increase offset by a refundable income-tax credit.”
The Commission did not force all Commissioners to sign on to a final package in order for its recommendations to move forward, but it still was able to find common ground by prioritizing reasonable reforms that could ultimately accomplish the Commission’s purpose of putting Social Security on sound financial footing in the short-term and long-term.
Since the Greenspan Commission, the problems facing programs like Social Security and Medicare and the depleting trust funds associated with highways and pensions have undoubtedly become much larger, which only underscores the need for future commissions to enter conversations with an open mind about a mix of policy solutions that will ensure these programs exist for current and future generations of Americans.
3. Force Congress to Actually Act on Recommendations
A final lesson learned from the Greenspan Commission is the importance of these entities having real teeth and having a mechanism that more or less compels Congress to act on recommendations that are advanced by a bipartisan commission. The contrast between the Bowles-Simpson Commission, where the recommendations were almost immediately dismissed by the President and leaders of both parties, and the Greenspan Commission are stark in this respect.
As the Brookings Institution’s Paul Light explained: “As the 1983 rescue showed, Congress and presidents can take action when they are forced into up-or-down votes on urgent problems. The key is deciding just how urgent a problem is.”
Given that many of these trust funds are facing insolvency in the coming years, and given that their financial standing has worsened significantly in 2020, Congress should understand the clear urgency of taking on this problem. Consequently, a future commission with teeth, one which forces Congress to vote on recommendations advanced, will prevent legislators from continuing to duck the issue.
Time is of the essence, and further delay will have real consequences for tens of millions of Americans. As the Social Security Administration detailed, unless Congress acts, current and future seniors will see a significant decrease in Socials Security benefits, which would have profound impacts on their ability to pay bills, afford housing and medications, and live their lives.
The longer Congress waits, the harder these problems are to solve. The Greenspan Commission provides a template, albeit an antiquated one, of how Congress can stop delaying and start acting in a bipartisan fashion to address these critical programs which are driving our debt and which millions of Americans depend on.
Fortunately, there is a bipartisan group of legislators who have seemingly taken the lessons from the Greenspan Commission and applied them to the challenges facing our trust funds and safety net programs. The Time to Rescue United States’ Trusts (TRUST) Act proposes to create specific committees to develop legislation that would fix every trust fund and put each of them on sound financial footing.
The legislation proposes to have separate commissions of “12 members, three of whom would be selected at the discretion of the “four corners” of Congressional leadership: Senate majority and minority leaders, the House Speaker, and the House minority leader.” Each of these bodies would produce a plan that “prevents the trust fund’s depletion, ensures long-term solvency, simplifies the underlying programs, and makes other general improvements.”
In addition to requiring any reforms to be supported by both Democrats and Republicans, the TRUST Act also has an important mechanism to compel Congress to hold votes on proposed “rescue plans.” As noted in the press release describing the legislation, “If a Rescue Committee reports a qualifying bill for its trust fund program, it would receive expedited consideration in both chambers. While 60 votes would be required to invoke cloture for final passage in the Senate, only a simple majority would be needed for the motion to proceed, which would be privileged.”
The TRUST Act is rooted in an approach that has had success in the past and may very well represent the best chance Congress has of putting partisanship aside and actually solving these problems for the American people.
Congress and leaders who care about addressing our debt and deficits would be wise to use the lessons learned from the Greenspan Commission and the Simpson-Bowles Commission in order to tackle these fiscal challenges in a sensible way.