Why GOP Budget Plan Leaves Social Security Alone

Renee Montagne talks to David Wessel of the Wall Street Journal about the absence of Social Security in the budget proposal unveiled earlier this week by House Budget Committee Chairman Paul Ryan, a Wisconsin Republican. What were Ryan's political and economic calculations in not touching one of the biggest entitlements?

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RENEE MONTAGNE, host:

And America's debt problem is not as dire as Portugal's. But Republican Congressman Paul Ryan is prescribing strong fiscal medicine to keep it from ever getting that severe.

Ryan heads the House Budget Committee, and this week he put forward a budget proposal to cut all sorts of domestic spending, including Medicare and Medicaid. He did, however, leave Social Security untouched.

To talk more about this, we turned to David Wessel. He's economics editor of The Wall Street Journal.

Good morning.

Mr. DAVID WESSEL (Economics Editor, The Wall Street Journal): Good morning.

MONTAGNE: Why did Congressman Ryan spare Social Security?

Mr. WESSEL: Well, Congressman Ryan has before endorsed changes to Social Security - raising the retirement age, changing benefit formulas. But that was before Republicans were the majority in the House. This time, he needed some backing from his colleagues, and apparently the Republicans in House were willing to let him take on Medicaid, the health insurance program for the poor, and Medicare, but were afraid to give the Democrats a ready target by putting Social Security on the operating table as well.

Mr. Ryan says, though, that he still thinks there could be a deal on Social Security this year, but he didn't push that ball down the road.

MONTAGNE: Well, there is a lot of confusion surrounding Social Security, whether it contributes to the problem with the deficit. Some people say, also beyond that, that Social Security is going bankrupt. Others say it's not a problem right now. What is it?

Mr. WESSEL: Well, let's take the near-term first. Social Security is not a big part of today's deficit. It did collect less money in payroll taxes than it paid out last year last year in benefits, but that was primarily because so many people were out of work. And then, when you're out of work, you don't pay into the system. Now, the Social Security trustees say Social Security will be back in black in 2012, and that means it would actually be reducing the overall government deficit, as it has been for the past couple of decades. The real driver of the deficit in the next decade or so isn't Social Security. It's health care costs.

MONTAGNE: But then, of course, the thing people are worried about is whether it's going bankrupt or not, and there's been so much talk about Social Security being unable to pay promised benefits to baby boomers as they get aged into Social Security. What about that?

Mr. WESSEL: Right. So it's not a problem today, but it will be a problem in the future. After 2014, it begins to run in the red. And for a time, it can continue to pay benefits by the interest on the Treasury bonds it holds, and then by selling off those bonds.

But in 2037, which sounds like a long time - but it's when today's 40-somethings will be retiring - the trust fund will be gone, and payroll taxes coming into the system won't be adequate to pay the promised benefits. So people will only get three-quarters of the benefits that they've been promised. And so the idea is to avoid that kind of abrupt change. Changes need to be made now - raising the retirement age, tweaking benefit formulas, suggesting more wages to the payroll tax. And so people are talking about a fix today that would avoid a problem in the future.

MONTAGNE: And what are the chances Congress and the White House will indeed tackle Social Security anytime soon?

Mr. WESSEL: Well, you know Renee, with them unable to agree right now on a deal to keep the government open, it doesn't seem like much odds of doing anything serious, like Social Security. Republicans don't want to do it without the by themselves. They want to share the blame with the Democrats, and the Democrats are kind of divided. Some of them want to protect Social Security and run for re-election on that. Others think this is the perfect time to do a deal and say that if Republicans and Democrats could get together and do this, it would make everybody - the public, investors and all - agree that maybe Congress can work and the president can work and they can do something about long-term problems. But it's a long shot.

MONTAGNE: David, thanks very much.

Mr. WESSEL: You're welcome.

MONTAGNE: David Wessel of the Wall Street Journal.

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