Modernizing Social Security

The Social Security program is now an octogenarian, and it has not aged well in every respect. When President Franklin Roosevelt signed the program into law in 1935, he said that it was meant to “give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.” Most people now agree this is an appropriate function for government to serve. But just how to serve that function is a question that requires us to grasp how times have changed.

The Census Bureau’s Current Population Survey didn’t start collecting data on women in the workforce until 1948, when the labor-force participation rate for women was 32.7%. In 2015, it was 56.7%. And increasingly, women are the primary breadwinners of their households; in 2014, the last year for which there is data, the Bureau of Labor Statistics reported that women out-earned their husbands about a third of the time. More important, in 1935, the average American lifespan was 61.7 years; today, it’s 78.8. Not only are people living longer, but they are healthier and capable of working for much longer than they were 80 years ago. And new employment laws regarding disabilities and discrimination have ensured that even those who may have been unable to work decades ago now have far more opportunities to pursue a career.

Though Social Security still serves an essential role in providing basic benefits to retirees, survivors, and disabled workers, a combination of cultural changes, demographic shifts, and especially poor planning have left the program’s finances in dire straits. The program’s multi-billion dollar shortfalls are projected to accelerate in the coming decades, and its current design tends to favor highly educated workers with shorter careers over low-income workers who start their careers earlier. And Social Security has yet to really acknowledge higher life expectancies and the increasing prominence of women and older workers in the labor force.

Social Security’s two main programs—retirement and disability insurance benefits—must be reformed significantly to put their finances back in order, and their structure and design should be modernized to reflect new economic and social realities. Social Security should also be made fairer, so as not to discriminate against working women, the young, and the less educated and lower paid. And, to promote savings among low-income workers who often lack access to retirement plans, a national system of personal retirement accounts should be established with basic investment options and government matching of contributions.

After serving as deputy assistant secretary and then as assistant secretary for economic policy in the Treasury Department under President George W. Bush, I sat on the Social Security Advisory Board from 2006 to 2012. During that time, I put forward a number of Social Security reform proposals, including one in 2008 that was scored officially by the Social Security Administration’s chief actuary, and I have built on those proposals over the years, including provisions to fix the troubled disability-insurance segment of the program. What follows is a comprehensive, detailed plan for Social Security reform that recognizes political realities. Any reform must incorporate conservative and liberal concerns and be passed on a bipartisan basis to ensure its sustainability; only then can Social Security ensure its financial stability, treat all workers fairly, and adapt to a 21st-century economy and workforce.

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