Institute Professor Emeritus, MIT, and Nobel Laureate in Economics
Saving Social Security: A Balanced Approachby Peter A. Diamond, Peter R. Orszag
While everyone agrees that Social Security is a vital and necessary government program, there have been widely divergent plans for reforming it. Peter A. Diamond and Peter R. Orszag, two of the nation's foremost economists, propose a reform plan that would rescue the program both from its projected financial problems and from those who would destroy the program in order to save it.Saving Social Security's strategy balances benefit and revenue adjustments, following the precedent set by the last major Social Security reform in the early 1980s. The authors' proposal restores long-term balance and sustainable solvency to the program without imposing additional burdens on the rest of the budget. Further, it protects disability and young survivor benefits and strengthens Social Security's protections for low earners and widows. Most important, the plan preserves the program's core social insurance role by providing a base-level of assured income to American workers and their families in time of need. To better understand the accomplishments and financial problems of Social Security, Diamond and Orszag provide background on the program, as well as on the causes of the long-term deficit. They suggest ways in which various alternative reform plans should be evaluated and explain the shortcomings of proposals to replace part of Social Security with individual accounts. Saving Social Security is essential reading for policymakers involved in reform, analysts, students, and all those interested in the fate of this safeguard of American lives.
About the Authors:
Peter A. Diamond is an Institute Professor at the Massachusetts Institute of Technology. He has been president and chair of the board of the National Academy of Social Insurance. His recent books include Social Security Reform, The 1999 Lindahl Lectures (Oxford University Press, 2002) and Taxation, Incomplete Markets, and Social Security: The 2000 Munich Lectures(MIT Press, 2002).
Peter R. Orszag is the Joseph A. Pechman Senior Fellow in Economic Studies at the Brookings Institution and a codirector of the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution. He previously served as special assistant to the president for economic policy during the Clinton administration.
Institute Professor Emeritus, MIT, and Nobel Laureate in Economics
Justus S. Hotchkiss Professor of Law, Yale Law
""This book should be read by all of those interested in the future of Social Security. It is the definitive defense of the collective approach to Social Security that the United States has pursued successfully for the last sixty-five years, and it provides important ideas that will figure prominently in future debates as Social Security reform inevitably returns to the top of our national agenda."" Lawrence H. Summers, Secretary of the Treasury, 19992001
"In their well-written and thought-provoking book, Diamond and Orszag convincingly argue that sound reform will require a balance of benefit reductions and revenue enhancements, while paying special attention to those who are most in need of the social insurance that Social Security provides. Although I favor a different type of reform, Saving Social Security is a must-read for those who want to understand the roots of the Social Security crisis and potential strategies for long-term reform.
" Fred Goldberg, Commissioner of the IRS, 19891992
"Proposes a reform plan for America's social security system that would save it both from its financial problems and those who would do away with it.... Exhaustively researched and deeply entrenched in practical issues and mathematical calculations... a highly recommended ray of hope against a looming national crisis." Wisconsin Bookwatch, 7/1/2004
"Written by two of the most influential thinkers in the Social Security community, this book makes an extremely important contribution to the field by filling in the details of one of the main approaches to reforming the US underfunded public pension plan. The Diamond Orszag plan serves the useful purpose of illustrating what it would take to make the Social Security system structurally sound while keeping it primarily pay-as-you-go. The authors should be given credit for not only restoring balance, but also making the program structurally sustainable an important objective that most other non-account plans fail to achieve. Whether one agrees with reform plan or not, what is most important is that this book contains an honest, transparent and comprehensive approach to making the much needed reforms to the Social Security program. For this reason alone, it deserves serious consideration. I hope that it will improve the tenor of the discussion, and it would certainly be unwise to underestimate the impact this book will have on the ongoing Social Security reform debate." Maya C. MacGuineas, Executive Director, New America Foundation, Journal of Pensions, Economics, and Finance, 7/1/2004
"In their new book, Saving Social Security: A Balanced Approach (Brookings Institution Press), for example, Peter A. Diamond of M.I.T. and Peter R. Orszag of the Brookings Institution outline a plan to preserve the best elements of sensible reforms, like indexing benefits to rising life expectancy and collecting some payroll taxes above the earnings cap." Alan B. Krueger, Princeton University, The New York Times, 2/5/2004
"When members of Congress get serious about fixing Social Security, they should begin by reading this book, instead of appointing another commission." Michael J. Graetz, Justus S. Hotchkiss Professor of Law, Yale Law School
"There is no shortage of plans to reform Social Security. Diamond and Orszag present another plan, but it is a plan that bears careful study from all in the Social Security debate. For one thing, the Diamond-Orszag plan really does reform, not replace, Social Security. For another, there is no reliance on financial gimmicks, transfers out of the general budget, or presumed (but not guaranteed) excess returns on stock market investments. For a third, it factors significant recent changes in the income distribution into its reform plan. The book makes a notable contribution to the Social Security debate, and should be required reading for all aspiring Social Security reformers.
" Edward Gramlich, Chair of the 199496 Quadrennial Advisory Council on Social Security
"The debate about reforming Social Security has become increasingly ideological. Scare tactics and unrealistic promises have become the norm. Diamond and Orszag bring some welcome realism and decency to the debate. They show exactly where the current system is strained, and they suggest concrete ways to strengthen and improve it with the least possible disruption to the lives of future workers and beneficiaries, especially the most vulnerable among them. There is no magic here, just the kind of honesty and common sense you would want from a really good mechanic." Robert M. Solow, Institute Professor Emeritus, Massachusetts Institute of Technology, Nobel Laureate in Economics
"This book should be read by all of those interested in the future of Social Security. It is the definitive defense of the collective approach to Social Security that the United States has pursued successfully for the last sixty-five years, and it provides important ideas that will figure prominently in future debates as Social Security reform inevitably returns to the top of our national agenda.
" Lawrence H. Summers, Secretary of the Treasury, 19992001
- Brookings Institution Press
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Meet the Author
Peter A. Diamond is an Institute Professor at the Massachusetts Institute of Technology. His recent books include Social Security Reform, The 1999 Lindahl Lectures (Oxford University Press, 2002) and Taxation, Incomplete Markets, and Social Security: The 2000 Munich Lectures(MIT Press, 2002). He is a former president of both the American Economic Association and the National Academy of Social Insurance. Peter R. Orszag is director of the U.S. Office of Management and Budget under President Obama. His previous positions include director of the Congressional Budget Office and Joseph A. Pechman Senior Fellow in Economic Studies at the Brookings Institution. He is also a research professor at Georgetown University and a codirector of the Tax Policy Center. He served as special assistant to the president for economic policy during the Clinton administration.
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