Like Mark Thoma and Brad DeLong, I am left scratching my head after reading Kevin Hassett's column in Bloomberg about the "death" of Social Security reform. I'll focus on this passage:
Until two weeks ago, Social Security reform was sort of dead. But now it seems to be all dead. The breakdown occurred when the administration backed away from a proposal making its way through the House of Representatives that would have introduced personal accounts without specifically restoring solvency to the system.
Ben Bernanke, chairman of President George W. Bush's Council of Economic Advisers, publicly signaled the White House's displeasure with such an approach.
Asked if restoring solvency was an inviolable condition, Bernanke said, "Yes, I think the president will insist on maintaining the long-term solvency of the Social Security system.''The word from the other side of town, up on Capitol Hill, is that this signal from the president sucked the remaining life out of the House measure. There appears to be nothing left for even Miracle Max to work with.
The Administration should have backed away from a plan that would introduce personal accounts without specifically restoring solvency. From the outset (e.g. the President's 2001 Commission) personal accounts have been the sugar to make the medicine go down. The medicine is restoring solvency. And we particularly applaud Ben Bernanke for making it clear that taking the medicine is something to insist on. If that sucked the life out of the House measure, so be it. Nothing prevents them from starting over and making improvements.
Let's hope they do, or that the President puts enough specificity on his proposal so that it can be scored by the Chief Actuary at SSA and be used as the basis for legislation.