Social Security Reform

Medicare Modernization

During the 2000 election cycle, candidate George W. Bush advocated an expansion of Medicare by adding a prescription drug entitlement program. After Bush won the election, Congress enacted the Medicare Modernization Act of 2003, marking the largest expansion of Social Security benefits since the 1965 enactment of Medicare.

During this period, the Bush administration convened a commission to study the future solvency and program viability of Social Security. By most estimates from economists and academics, the Social Security system will experience fiscal stress by at least 2040, based upon projected beneficiaries and monthly entitlement payments. As a result of these studies, President George W. Bush proposed a partial privatization of Social Security to allow individuals to manage and own their accounts. Advocacy groups, including the American Association of Retired Persons (AARP), objected and the Congress did not enact any of the provisions advocated by President Bush.

The political strength of advocacy groups and the political activity of Social Security and Medicare beneficiaries give pause to members of Congress and even presidential candidates in proposing reforms that could potentially cost them political support and, ultimately, electoral success.

Beyond the proposal by President George W. Bush to partially privatize Social Security accounts, there are numerous proposals that have been discussed by candidates for federal office. The issues discussed in political campaigns include: raising the retirement age for Social Security eligibility from age 65; establishing a means or income test for Medicare benefits; adjusting the automatic nature of COLAs yearly increases; and allowing for a partial privatization of Social Security funds held by the government or by individuals as the Bush administration has advocated.

Public opinion, as a major influence on electoral outcomes, does not support any major reform of the current system of benefits that includes benefit reduction [Page 754]or a form of account privatization. Unless public sentiment were to support one or more of the reform initiatives, it is unlikely that Congress or any future president will risk political defeat to change the current system in any manner that would potentially harm current beneficiaries or anger senior citizen advocates. However, many public opinion surveys indicate that future beneficiaries do not believe that Social Security will be able to pay monthly benefits to them when they become eligible. In short, the ramification of electoral politics has a direct relationship to policy outcomes based on the nature, influence, and scope of the interests associated with reforming Social Security.

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