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Two GSB faculty members with opposing points of view on how to fix Social Security went head to head for a second round this spring, only this time there was a moderating voice in the middle: Kevin Murphy, George J. Stigler Distinguished Service Professor of Economics.
Randall Kroszner and Austan Goolsbee joined Murphy April 5 for a Dean’s Forum at the Gleacher Center hosted by the George J. Stigler Center for the Study of the Economy and the State and moderated by Richard Leftwich, Fuji Bank and Heller Professor of Accounting and Finance and the Deputy Dean for Faculty.
Kroszner, professor of economics and former member of President Bush’s Council of Economic Advisers, predicted that by 2017, the system will have a $10 trillion shortfall and will need to rely on alternate federal funding. Part of the problem, he said, is that Social Security is the only program in the world indexed to wage growth, not prices. Kroszner said that this makes benefits 40 percent higher than they would be otherwise.
Goolsbee, professor of economics and a former advisor to the Kerry campaign, predicts a $3.7 trillion deficit. Raising the retirement age is a better way of cutting benefits than changing the indexing, he said, because it only effects the young old instead of the more elderly who already rely on a certain level of benefits.
Murphy said that part of the issue is that it is very difficult to predict the actual shortfall in a pay-as-you-go system because there are so many variables. He agreed with Goolsbee that raising the retirement age was a better option than changing the indexing. Private accounts, he said, might be a good political solution since it keeps more money out of Washington’s coffers. Another solution may be to open up America’s southern borders to more immigrants, who tend to contribute and then return home before collecting benefits.
In any case, faculty agreed with Kroszner who said, Clearly the Social Security program is broken and needs fixing.
Jennifer Vanasco