Social Security Not In Crisis, Faculty Say

Newly released Advisory Council report discussed

By Sean Smith
Staff Writer

Social Security's financial problems are not at or near the crisis stage, but the system's structure must be adjusted to meet the needs of retiring baby boomers, according to three Boston College faculty members who spoke at last Friday's National Academy of Social Insurance 1997 Policy Education Seminar in Gasson 100.

Prof. Joseph Quinn (Economics), Prof. John Williamson (Sociology) and Assoc. Prof. Eric Kingson (GSSW) appeared as guest speakers during the afternoon portion of the seminar, which NASI offered as a briefing for Social Security Administration representatives, professionals in related human services fields and the public.

Prof. Joseph Quinn (Economics) makes a point at last week's seminar as Boston Globe editorial writer Tom Gagen, another panelist, listens. (Photo by Gary Gilbert)
Quinn, Kingson, Williamson and other speakers discussed public understanding of Social Security and analyzed the recently issued 1996 Advisory Council on Social Security recommendations for reforming the program. They also addressed topics such as generational perspectives on Social Security, retirement systems in other countries and prospects for action on Social Security in Congress.

The panelists generally agreed that the problems Social Security faces have wrongly been termed a "crisis," and despite its difficulties the program retains strong public support. Even if nothing were done, they noted, and the program's trust fund runs out as expected in 2029, Social Security would still be able to pay three-quarters of beneficiaries' costs. But they said the program at the very least needs some form of stabilization to meet the challenges posed by changing demographics, specifically the aging of the "baby boom" generation.

Quinn, who co-chaired one of the advisory council's two technical panels, said he doubted such measures - including the council's recommendations - will be pursued during the second Clinton Administration. "I think the problems with Medicare are far more prominent," he said, "and are liable to attract more political capital."

The panel focused on perhaps the most controversial of the advisory council's three models for reforming Social Security, which would partially privatize the program and allow funds to be invested in the stock market. Quinn and Kingson outlined, respectively, the possible advantages and disadvantages of this option, known as the personal security account plan. Under the PSA approach, Social Security would be transformed into a two-tier system with a basic benefit and a personal savings account, the latter of which could be used for investment.

Quinn acknowledged that the plan would change "the fundamental nature" of Social Security by separating its historic roles of providing income adequacy through redistribution while acting as a savings vehicle. But the PSA approach would likely induce more effective retirement planning and management among individuals, he said. The plan also could increase aggregate national savings, Quinn added, and lower political risk to the program.

Kingson, who co-edited and contributed to Social Security in the 21st Century with Quinn, advocated strengthening the existing program, noting that although it produced three reform models, the Advisory Council was in agreement on many points, such as increasing from 35 to 38 the number of years that a worker's earnings are used to compute benefits. The PSA plan, he said, would produce extra administrative costs and fees, exacerbate inequalities and uncertainties in the American economy and create potentially damaging interaction between the political system and financial markets.

Williamson, who served with Quinn and Kingson on the NASI advisory board for Social Security in the 21st Century , described the experiences of other countries, such as Chile and Great Britain, in establishing full or partly privatized national retirement programs. He pointed out that the US is one of many nations struggling to reform and redirect its Social Security programs.

"We are not alone," Williamson said. "Other European countries' demographic problems are far worse, such as Germany's, and some have little or no structure in place. We will have a number of models to look at and learn from."

The first part of the seminar discussed the findings and return-to-work recommendations of the Disability Policy Panel, a three-year study of the Social Security disability insurance program sponsored by NASI.

Other speakers were Boston Globe editorial writer Tom Gagen, NASI Research Director Virginia Reno, who also contributed to Social Security in the 21st Century , and NASI Research Associate Kathryn Olson.

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