Orszag on Simpson-Bowles on Social Security

I don’t really agree with Peter Orszag’s general sentiment that the Simpson-Bowles report deserves more warm fuzzies from the White House, but I agree with his assessment that the section of their report dealing with Social Security isn’t that far from the mark. And he correctly identifies the main flaw in their proposal as the idea of increasing the retirement age.

To spell this out a bit, on the one hand poorer people tend to work in more physically taxing jobs. So this is a higher burden on them. But what’s more, poorer people have a shorter life expectancy than richer people and this gap appears to be widening. So if you let the retirement age increase according to some metric indexed to the overall growth of life expectancy you’re talking about an extremely regressive measure that cuts benefits most sharply to the most vulnerable. This should really be avoided. There’s more Simpson-Bowles could have done on the tax side, and there are other ways to approach the benefits issue that put the burdens of adjustment more on those who can afford to bear them. That’s an important flaw, and it should be fixed. But it does leave us with the point that the commissioners’ Social Security proposals contain mostly reasonable ideas and it’s a framework within which liberals could work.