Nancy Altman: Drawing the Line on Social Security
Interviewed by Thomas N. Bethell
November 2005
Nancy J. Altman, 55, is a lawyer and longtime expert on Social Security who served as Alan Greenspan's aide on the bipartisan commission that strengthened Social Security's finances in 1983. She's the author of a just-published book, The Battle for Social Security: From FDR's Vision to Bush's Gamble (John Wiley & Sons, $24.95).Q: That's a provocative phrase - "Bush's Gamble" - in the subtitle of your book. What do you mean by that?
I don't question President Bush's sincerity, but I'm deeply concerned that by undermining public support for Social Security and advocating radical changes, he's putting the program needlessly at risk—along with the future security of millions of Americans. That's a gamble we can't afford.
Q: You've worked on Social Security for years. What prompted you to write this book now?
Social Security is intended to provide not just cash benefits but peace of mind. When the president went out on his "60 stops in 60 days" campaign, he created a great deal of anxiety about the future of the program among ordinary Americans. I decided to do something in 60 days, too: write a book to explain why we have Social Security, why it works and why it's fully capable of handling the challenges of the future. Writing the book took a bit longer than 60 days, but my family can tell you that I just basically disappeared until I got it done.
Q: And what have you accomplished?
I hope I've written a book that is both entertaining and informative for people who know nothing about Social Security. I describe the program's roots, its value, its funding, its critics' motivations, why it faces a long-term deficit and how we can fix that with modest adjustments that won't undermine its character and structure.
Q: What kinds of adjustments?
Keep a residual estate tax, which would affect less than 1 percent of the wealthy - the Paris Hiltons - and dedicate it to Social Security. Gradually lift the cap on Social Security payroll taxes, restoring it to the point where, as in the past, more of the highest-paid people in the nation are contributing their fair share. And invest a portion of Social Security's trust funds in indexed stock market funds.
Q: Doesn't that mean government interference in the stock market?
No. In principle it's no different from what the president proposes for private accounts. He would have the government choose the funds in which the individual accounts could be invested. But the difference is that under his approach individuals would bear the risk in market downturns. I would pool the risk. Social Security can ride out market fluctuations much better than someone unlucky enough to have to retire at the wrong time.
Q: Sounds a lot like what former Social Security Commissioner Robert Ball has proposed. Is that just coincidence?
No. I've studied all the options that are available and it's clear that he's on the right track. I explain why in the book, but let me make a point here that I think many people overlook. One of the reasons Social Security has been so successful is that it has been led by extraordinary public servants like Bob Ball and Bob Myers, who was the program's chief actuary for many years. I can't think of any other government program - or corporation, for that matter—that has had so much integrity at the top for so long. We should all be grateful.
Q: But a critic might ask, "If they were so smart, how come they didn't see the baby boomers coming along?"
They did. The actuaries fully understood the implications of the big baby-boom generation and rising life expectancy, and the funding of the program takes all that into account. I'm sorry to say the president has misled the public on this score, perhaps because he has been misinformed himself.
Q: Then why does Social Security face an eventual shortfall?
Partly because of some small changes in the actuarial assumptions, but also because we don't collect taxes from earners above an annually adjusted ceiling—currently $90,000. In today's increasingly polarized economy, we have lots of very affluent people with incomes climbing far above that cutoff point while at the same time we have lots of middle-income people below it who are stuck in a rut. So the $90,000 cutoff is starving the system. That's why the ceiling needs to be gradually restored to its historic level, covering 90 percent of all earnings. But this problem is external to Social Security. We have an issue of income inequality in the United States.
A key point I make in the book is that there's nothing very mysterious about what needs to be done to strengthen Social Security. The solutions are right in front of us, and in addition to putting the program in long-range balance, they're good policy improvements in their own right. So the political process we've been going through is a bit like spending all day hunting for your eyeglasses, only to discover that they've been on your desk right in front of you all along. Sooner or later anyone genuinely committed to strengthening Social Security will realize that we can do it, fairly and without burdening individuals or the economy, with the incremental steps I've summarized here and explained in the book. Unfortunately, President Bush is the first president who has brought an apparently inflexible ideological bias to the discussion. He doesn't seem interested in helping us find our eyeglasses.
Q: What's the most important message in your book?
Social Security works. As long as the American people continue to support it, there's no reason why it can't provide benefits to our children, grandchildren and great-grandchildren. But public support is crucial. That's why I worry about the president's campaign, and especially about what it has done to undermine confidence among younger people. If we stop trusting Social Security, then of course we'll want to put our money somewhere else—and that starts the fatal snowball effect. My book explains why Social Security continues to merit our trust. I hope young people will read it.
