Policy Corner: Gore's Social Security Pander

Policy Corner: Gore's Social Security Pander

Policy Corner: Gore's Social Security Pander

Politics and policy.
April 5 2000 5:31 PM

Policy Corner: Gore's Social Security Pander

At a community center in Philadelphia, Al Gore yesterday proposed what he called "new reforms to modernize Social Security and strengthen it for the future." This is Newspeak at its purest. Gore's two proposed reforms--eliminating what he calls the "motherhood penalty" and increasing benefits for widows--are, in the versions he has proposed them, simply election-year benefits increases that would weaken Social Security by worsening its long-range fiscal problem.

Advertisement

Don't take it from me. Take it from Henry J. Aaron of the Brookings Institution and Robert Reischauer of the Urban Institute, the two foremost liberal experts on Social Security and the people Gore would be listening to if he were serious about ensuring the long-term viability of the current system without major structural changes such as privatization. "One of the ideas is not very good," Aaron says. "The other is half of a good idea."

Reischauer is equally harsh. "My view about both of these proposals is that they're only half a policy--the election year half," he says. "We still have a program that is going to face difficulties. Compounding those difficulties is not responsible public policy."

Let's start with the Gore idea that Aaron thinks is not very good: counting child-rearing at home as full-time employment. The way the system works now, women who leave the work force to stay home with their kids receive lower benefits when they retire than they would have if they had worked continuously. That's because benefits are calculated based on an average of a retiree's 35 highest-earning years. Women who stay home for extended periods are likely to spend less than 35 years in the work force. Gore's plan would compensate for this by counting up to five years spent as a "caregiver" as years earning half the average wage, an amount estimated to be $16,500 in 2001. For some low-income women, this could result in a benefit increase of as much as $2,100 a year.

Politically, it's a deft proposal. In one fell swoop, Gore hopes to simultaneously widen the gender gap by proposing a major new goodie for women and to co-opt the conservative notion that government should encourage mothers to stay home with their children. To steal a march on conservatives in this way, while embedding the idea in a program that many conservatives dislike--Social Security--is Clintonian in its synthetic shrewdness. Moreover, Gore's advisers argue that while appealing to conservatives and middle-class soccer moms, the change is actually an anti-poverty policy. "Eliminating the motherhood penalty will particularly help never-married and divorced mothers who don't receive a benefit based on a husband's earnings record," says Jeffrey Liebman, a former Clinton administration official now at Harvard, who contributed to Gore's plan.

Advertisement

This claim is subject to debate. Reischauer contends that increasing retirement benefits for mothers who stay home with their kids won't reach the women who need help most, because most women near the poverty line have no choice but to work. Instead, he argues, the benefit will go primarily to upper-income women who have the option of not working outside their homes. In any case, it's an odd way to make social policy. Tinkering with retirement benefits is an expensive and highly inefficient way of encouraging mothers to stay home with their children.

Aaron's objection to Gore's proposal is more basic. He argues that counting years that a person isn't employed in figuring benefit levels cuts against the fundamental principle of Social Security, which is to replace the earnings that are lost upon retirement. The proposal also happens to be extremely expensive. Just how extremely expensive, it's difficult to say. Gore's staff estimates the cost at $100 billion over 10 years. But Social Security changes are usually figured as averages over 75 years and Aaron's seat-of-the pants estimate is that the Gore's "motherhood penalty" proposal would require a payroll tax increase of around .25 percent.

That's the cost for phasing in the program only for future retirees. Passing this change retroactively to apply to women already retired, as Gore is apparently proposing to do, would cost even more. It would also create an administrative headache of a high order. Women--and men who qualify as "caregivers"--will have to demonstrate that the years they spent without employment were actually spent raising children. And the need for such evidence only raises additional fairness issues. Why should raising children have favored status but not caring for disabled relatives or doing socially valuable volunteer work? Using Social Security for the purpose of social engineering in this way is bound to erode its broad base of support by creating new grievances against a system already besieged by people who think (rightly in many cases) that it gives them a raw deal.

The idea that both Aaron and Reischauer deem half-good is Gore's proposal to increase the widow's benefit. The problem this proposal addresses is real enough. When one partner dies, his or her surviving partner receives between one-half and two-thirds of what had been the couple's combined monthly benefit. But it's not half as expensive to live alone, which is the reason that the death of a spouse pushes many elderly people into poverty. This effect falls mainly on women, who live seven years longer than men on average. It also helps to explain why the poverty rate for widows is so high--18 percent, as opposed to just 5 percent for married women. Gore's proposal that the surviving partner should get no less than 75 percent of the couple's combined monthly benefit, would help to alleviate this problem.

The problem here is that, as Aaron says, it's "the candy without the cod liver oil." Desirable as a benefit increase for widows might be, it would require a .15 percent increase in the payroll tax, according to an estimate included in Countdown to Reform, the very useful book on Social Security reform that Aaron and Reischauer wrote together. They propose to pay for most of a new widow's benefit by gradually reducing the so-called "spouse's benefit" from one-half to one-third of a worker's benefit. I apologize for how complicated this is. Basically, Aaron and Reischauer think that families where the wife never worked should get a somewhat smaller monthly check.

The argument for this change is that the spouse's benefit dates from the 1930s, when most women didn't have jobs. Though Gore claims that Social Security penalizes women who stay home with their kids, the spouse's benefit has just the opposite effect, penalizing women who do work full-time. The reason is that women who work full-time pay much more into the Social Security system than those who work part-time or not at all. But thanks to the "spouse's benefit," full-time, part-time, and no-time workers usually draw the same benefits. Absent a reduction in the spouse's benefit, Gore's reform of the "motherhood penalty" would tilt the system even more heavily and anachronistically against working women.

But whatever their merits as social policy, Gore's proposals fail because they don't address what remains the only major problem with Social Security, namely its long-term fiscal imbalance. The system faces a long-range deficit that will require an increase in the payroll tax of nearly 2 percent if nothing is done about it. The choice, as all who are serious about the problem understand, is between relatively small adjustments now, and major, painful adjustments later. In his effort to pry open the gender gap, Gore is offering small adjustments now, but in the wrong direction. By evading Social Security's solvency issue, he's abetting George W. Bush's case for drastic change.