Research by Author & Topic

Publications by Rudolph G. Penner on Social Security

The prevalent theme in recent discussions of stimulus is that the risk of doing too little exceeds the risk that we shall do too much. But we must ask how much of too much we can tolerate. The risks of overdoing it are severe and are not emphasized enough in the current discussion. The main worries are that the speed with which the national debt is being increased could eventually cause a very rapid rise in interest rates on Treasuries and that federal, state and local bureaucracies may not be able to manage the proposed huge increase in spending. Turning to the long run, the testimony discusses the need to address short- and long-term budget problems simultaneously and the prospects for using the Conrad-Gregg commission to do so.

Pittsburgh Post-Gazette op-ed, September 28, 2008. The current financial crisis poses a severe threat to the economy, but it also creates a tremendous opportunity, writes Rudolph Penner in the Pittsburgh Post-Gazette. It gives politicians cover for undertaking painful actions to get the long-run deficit under control-actions that should have been taken long ago.

Government analysts portray a bleak fiscal future as the retirement of baby boomers and soaring health costs push up expenditures on Social Security, Medicare and Medicaid much faster than projected tax revenues. Some argue that the analysts' economic growth projections are too pessimistic. This analysis argues that official growth projections are quite reasonable, but even if they are too pessimistic, faster growth will accelerate Social Security costs because of the program's structure and health costs are also likely to grow more rapidly. Faster growth will, however, ease the pain associated with necessary reforms.

Fiscal policy is out of control. Programs, such as Social Security and Medicare, have design features that push up spending faster than the growth of revenues. It is time to change the course of the automatic pilot driving these programs. To do so, policymakers can develop “triggers” that automatically curb spending. Triggers will level the playing field between programs that have large automatic growth and those where growth or even maintenance of effort cannot be obtained without new legislation. The paper examines triggers employed to reform Social Security in other advanced democracies and explores design options for an optimal trigger.

International Perspectives on Social Security Reform looks at public pension revision in six countries that, like the United States, are members of the OECD and have a long tradition of social security threatened by population aging. Canada, Sweden, Japan, Germany, the United Kingdom, and Italy have much to teach the United States about what works well—and what works badly. A substantive analysis of each country's reforms is augmented in commentary by distinguished economists, who offer their own opinions. Ideas examined include private accounts, notional accounts, incentives to delay retirement, and automatic systems of pension adjustment.

Discussions of the federal budget often refer to mandatory spending — on Social Security, Medicare, and similar programs — as "uncontrollable." In contrast with discretionary programs that Congress usually funds with annual appropriations, entitlement spending is determined by permanent laws specifying who qualifies for what benefits. This article examines changes in the percentage distribution of federal outlays since 1962. It highlights the rapid growth in mandatory spending driven by increased spending for health and retirement programs and the contrasting decline in defense spending as a share of total spending.

In this Five Question feature, Rudolph Penner, a senior fellow at the Urban Institute, addresses Social Security reform, especially the risks and benefits of individual savings accounts.

Older workers could be induced to work longer, as improved health has accompanied longer longevity and as jobs that require hard physical labor have declined in relative importance. Many older workers have suggested that more flexible work arrangements, such as shorter hours and longer vacations, would enhance the attractiveness of working longer.

[Investor's Business Daily] In this article, Senior Fellows Rudolph Penner and Eugene Steuerle diagnose the hidden calamity confronting the federal budget and offer a mix of simple, powerful mechanisms to "make the budget ever more responsible instead of ever less." Currently, Social Security, Medicare, and Medicaid spending grows automatically, by default, faster than tax revenues as the population ages and health care soars. If Congress makes no changes, these huge programs will require an additional 6-9 percentage points of GDP by 2030 and "force other legitimate claims to compete for the budget leftovers."

It's clearer by the day that fundamental, radical reform is needed to restore fiscal responsibility to the federal budget. Under current policy, spending grows automatically by default, faster than tax revenues as the population ages and health costs soar. These defaults are threatening the economy with large, unsustainable deficits. More important they deny to each generation the opportunity to orient government toward meeting current needs and its own preferences for services. This brief discusses some ways this might be achieved.