Political backlash in 1983 was minimal because the first Boomers were still 27 years from retirement. Furthermore, AARP was not nearly as powerful 25 years ago as it is today.

Increasing the retirement age of Boomers is a much riskier proposition for politicians today. They're not going to do it until all other options have been exhausted. Means testing as a means of reducing social security liabilities is a much easier option for politicians, IMO.

If the US economy does badly over the next century, wage growth will be low and benefit growth will be low. If the US economy does well, wage growth will be higher and there will be more payroll tax to take from people in 2050. For various technical reasons, the offset isn't perfect, but the system is sustainable possibly with minor benefit cuts or tax increases.

If you want to argue that a defined contribution scheme would be even better, you can go ahead, but it is correct to point out that higher returns have to be traded off with higher volatility.

Will,

I thought you accepted social insurance arguments in principle. Here we have a defined benefit scheme with low administrative costs and widespread support from the payors/beneficiaries. If expected retirement income will be lower, that is a price most people are willing to pay to reduce risk. What's so terrible?

Just because a solution is easy to type into a blog comment doesn't mean it is easy to implement. Boomers nearing retirement are not going to vote for additional increases in the retirement age. Neither will they, nor the current retirees, vote for reduction in indexing.

Social Security is an annuity program. With the death of private, long-term pensions, they are the only guaranteed annuity stream most Americans have. Privatizers would like to turn it into a retirement savings program. Americans are by no means short of retirement savings options. They are worthwhile endeavors, but if anything, we need to be simplifying and consolidating the ones that are already out there. Transforming Social Security from one into the other is not only unnecessarily complicated and require far more administration than traditional SS ever has, but it also invites the SSA to function, effectively, as a sovereign wealth fund. This would not be a welcome development.

I'm curious as to your view of the stability of the Social Security Trust Fund, such that the stock market can tank and America's banks and lending houses can lose $1,000,000,000,000 in value on paper without having any effect on it. I know the Dow Jones ain't the home team, after all, but doesn't a crippled U.S. economy suggest that the future of Social Security might be poor, too? How is the national pension going to be a better investment than the nation it pensions off?

Social Security is a guaranteed benefit (leave aside the notion that benefit levels can be changed through legislation). Personal accounts provide non-guaranteed benefits (it depends how the market does).

Philosophically, many liberals believe that the benefit levels must be guaranteed by law. Otherwise we are subjecting people to the risk that when they retire, there won't be enough benefits to give them the needed support.

It is plain to see that returns from private accounts will be more volatile than returns from Social Security as it is now. Reasonable people can disagree about whether the higher mean return justifies the higher volatility, but there's the disagreement.

Of course, another side of the argument is the opportunistic notion that liberals can really punish conservatives and weaken them by pushing hard on this argument, because SS is so popular. This helps liberals achieve other goals by reducing the overall political capital of conservatives.

You appear to regard Social Security “reform” getting killed in 2005 as regrettable. I would point out that had the changes outlined been implemented in 2005 or 2006 (private accounts as a carve-out to part of the guarantee), the system would be in worse today than it actually is since it has remained outside the distress of the stock market.

biggest political fight, I mean.

It is DEFINITELY either/or. Major changes to the philosophy of Social Security would definitely be the biggest political of the 21st century thus far. It would instantly suck all oxygen and attention away from any other reform effort. If you want to add carve-out private accounts to Social Security, you'd better be resigned to that being the only reform of your presidency. .Even if it doesn't “cost” much in budgetary terms, it would cost a great deal in “political capital”.

That said, some new sort of program to encourage/mandate private savings (universal 401Ks or whatever) does seem fairly likely. This will actually be easier to pass if you *don't* sell it as a reform of Social Security, but rather as a good idea on its own terms.