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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

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December 15, 2005

Why Social Security Reform?

My (admired) colleague-in-blogging Calculated Risk is unimpressed by my call for support of Andrew Samwick's latest proposal for reforming the U.S. social security system.  In the comment section of my previous post, CR writes:

Of course I oppose the Samwick, et. al. plan. The reason is simple: the two major fiscal problems facing America are 1) Health Care and 2) the General Fund deficit. Both of those problems dwarf any SS shortfall.

Any good manager would start with the most serious problems first. Wouldn't it be great if the blogosphere banded together and pushed the National debate to those two issues?

Ahhh. Now I remember why I haven't written about social security reform in awhile.  Oh well. I opened the door, so I may as well walk on through.

I'll start with this: I don't understand CR's position at all.  By his logic, we ought to avoid grabbing the perfectly edible fruit on the branches that can reached from the ground because there is some really juicy stuff way up at the top of the tree (that can be reached only after a fairly arduous climb.) That just doesn't make much sense to me.

Here's my view, in brief:

a) I agree with CR ranking the health care issue in front of social security, but believe it is a much harder nut to crack.  Where, for example, is the nonpartisan proposal on that one? If some civic-minded across-the-political-spectrum group like Samwick-Liebman-MacGuineas have a simple well thought out compromise plan, by all means let's all jump on board.  I've yet to see it, though. and am disinclined to let other opportunities languish while we wait for it to arrive.

b) Let's put things in perspective. No matter what side of the issue you are on, the most important immediate subject for the country is the war, as there is much more at stake than today's treasure.  If you are going to argue we can only do one thing at a time, then it seems to me everything on the economic policy list goes off the table for now.  I, of course, am willing to accept that we can walk down the policy street and chew a few pieces of gum at the same time.

c) My philosophy on the federal deficit is that if you get the spending, tax, and transfer stuff right, deficits per se -- especially of the magnitude we are experiencing now -- are of second or third order importance.  It is better to let the (completely manageable) deficits we have now run for a bit, while we get the big picture on fiscal policy right.  By getting some sensible social security reform, for example.

UPDATE: Calculated Risk posted his arguments mentioned here, and generated plenty of reaction. Jane Galt correctly (un my view) notes that the social security problem and deficit problem are inextricably linked. Arnold Kling reinforces the argument that we ought to be looking at the fiscal policy as a whole. And Andrew, not surprisingly, agrees that we ought to first solve the problems for which ready solutions exist.