A good deal of the long-term problem had a relatively uncontroversial technical fix.
Leaders of both parties, labor unions, and business groups agreed that the system’s mechanism
for raising benefits in line with prices and wages was seriously flawed. (Left untouched, it would
eventually lead to anomalous results, such as benefits for some retirees that were higher than the
wages they had earned in work.) When Carter won the presidency, he had little trouble achieving
consensus on amendments to the formula as it maintained the value of benefits, even as a
percentage of rising wages.
long term. It would not resolve the system’s immediate cash shortage, and it would still leave the
program with a substantial financial imbalance over the next several decades.
Carter’s favored response to these remaining near-term and distant problems was a
strictly distributive one that would place most of its burden on the affluent and business. In
addition to the formula fix, it would increase in the tax burden on employers and high earners and
a modestly accelerate contribution rate increases already scheduled into law (to 1985 and 1990).
Moreover, the Carter plan included a countercyclical safety net that would – for the first time ever
– transfer general revenues to Social Security whenever unemployment rates climbed above 6
tax, the measure amounted to a redistribution of the financing burden toward the upper end of the
income distribution.
The political advantages of the Carter plan were clear, for it shifted the burden of
adjustment away from the Democratic Party’s base, diffused much of the cost across the entire
5/23/1977),
Accession Number: 0131933,
Question ID USYANK.777610, Q10H, Roper Center for Public
Opinion Research, LexisNexis™ Academic,
.
48
Martha Derthick, Policymaking for Social Security, (Washington, D.C.: The Brookings Institution, 1979). According
to Lawrence Thompson, a staff economist at the Department of Health, Education, and Welfare during the reform
process, labor ally and former Social Security chief Robert Ball played an important role in convincing the AFL-CIO to
support the wage-indexing fix. Personal communication, October 16, 2001, Washington, D.C. According to Derthick,
labor saw wage-indexing as acceptable partly because the old formula was not reliably more generous – it was “above
all erratic.” Yet a crucial advantage from labor’s perspective was that the new formula would guarantee the current
generosity of the program, even under an expansive view of how that generosity ought to be measured.
49
Congressional Quarterly Almanac, 95th Congress, 1st Session, 1977.
36
Convention