Is Social Security Reform Ready for the American Public?

Benjamin I. Page

IPR working papers from Institute for Policy Resarch at Northwestern University

Abstract: Public opinion is relevant to entitlement reform because it bears upon issues of political feasibility. Proposals that go against the strongly held views of ordinary citizens are not likely to be politically feasible. In addition, we may consider public opinion ­ especially well-informed, deliberative opinion ­ relevant to what policy makers ought to do in a democracy. The available data indicate that the American public, as a collectivity, knows quite a bit about Social Security and rather firmly holds a number of opinions that have been highly stable over many years. This is particularly true of general support for the program. Since 1984, for example, more than 90% of Americans have regularly indicated a desire to keep the program the same or expand it. At the same time, most Americans are aware of impending financial shortfalls in the program and acknowledge that major changes must be made. Proposals of benefit cuts have generally aroused considerable public opposition, whether in the context of reducing budget deficits or preserving the program. This is true not only of across-the board cuts but also of reducing COLAs, extending the retirement age, or even ‹ as best we can tell ‹ more technical program changes. (Only cutting benefits of the well-to-do wins substantial public support.) Resistance to benefit cuts may possibly decline with further deliberation, but this does not appear likely. Most members of the public prefer other solutions. General increases in payroll taxes are also quite unpopular, but large majorities of the public say they prefer tax increases to benefit cuts. Some data suggest that there is support for using general revenues. The public¹s willingness to tax the benefits of higher-income retirees also indicates possible receptiveness to a more progressive financial system ­ through such measures as removing the ceiling on income subject to payroll taxes ­ but more survey questions on this matter are needed. Privatization is an area in which opinions are much less well formed. There is considerable interest in the idea of receiving greater returns on Social Security contributions and in having individual choice about investments. But support for privatization drops sharply when issues of risk are raised and when other costs and limitations (administrative costs, limits on choice, obligations to current retirees) are mentioned. As debate continues and as the public becomes more aware of such costs it is possible that public investment in equities ­ currently less popular than private investment ­ may gain in appeal, especially if it is insulated from the political process. More time and more data are needed before we can judge.

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