Sunday, May 8, 2011

President #8: Ronald Reagan (1981-1989)

How did your policies contribute to the evolution of Social Security reform? What were some of the historical constraints you faced in doing so?

Social Security was a key issue for me as soon as I assumed presidency because of the massive fiscal crisis that loomed over American in the early 1980s. We faced both short and long-term challenges. Our short-term problem was that Social Security was paying out billions of dollars more in benefits than it was receiving in contributions. This difference was so great that the system was projected to go bankrupt in 1982. Our long-term problem was that less and less people were paying into the system as workers per beneficiary, meaning that the short-term problem would eventually become an indefinite one in the near future.
[1] On top of these problems, we were dealing with the reality that 1977 Amendments to Social Security, that included the highest payroll tax increases in American history as part of a multi-year increase plan, were projected to make the system solvent until 2030, until we found out the system ran out of money 48 years too early.[2]

Facing these problems, both urgent and longer term, we set off on a course to place Social Security on a permanently sound track
[3] It was clear that the “half-actions” of the past would no longer be enough to fuel the future and that we could not afford to let partisan posturing keep up from forging a solution.[4] Our commitment to make a better future for Social Security and for the nation rested on three main principles.

1. First, the integrity of Social Security and its benefits must be preserved.
2. Second, the tax burden imposed on workers must be kept as low as possible.
3. Third, we have to stop all the misuses of the system that negatively impact the elderly.

Originally, in 1981, I suggested that we delay the Cost-of-living-Adjustment (COLA) on a one-time basis, that we decrease the earnings test and that we restore the minimum benefit for current, low-income beneficiaries that they lost in the 1977 legislation, but is rightfully theirs by the spirit of Social Security.
[6] These changes would have allowed us to solve the short and long-term shortfalls of the system as well as stopped the 1977 tax increases scheduled for 1985 and beyond.[7] However, with the House of Representatives’ disapproval, we sought and passed into law the restoration of the minimum benefit and a temporary borrowing as a more permanent solution was formulated.[8]

This solution held until the National Commission on Social Security Reform presented its bipartisan recommendations in 1982, complete with compromises on major issues. These compromises were tough, but necessary in crossing party lines and creating a system that everyone could live with.[9] However, this “putting people before party”[10] was rewarded handily in the signing of the Social Security Amendments of 1983, ensuring that the promises we made to the elderly would be kept until 2030.[11] In this legislation, we made the
'best possible balance between the taxes we pay and the benefits paid back.”[12] Any more taxes, and we would have placed an undue burden on contributing workers. Any less would shake the foundations of the benefits we owe current retirees. These historical amendments adjust the Social Security system to an age of increased life expectancy and productivity, without placing an unfair burden on future generations.[13] Importantly, the amendments would raise the retirement age gradually to 67 and increase the payroll tax, while mostly maintaining benefits, a suggestion that we believed would keep the system solvent well through the end of the 20th century.[14]

Editor's Note

Like Carter, President Reagan faced imminent crisis and a long-term solvency problem. Like Carter, Reagan was able to pass sweeping legislation because of it. However, Reagan's solutions to the problem of Social Security were adhered to much longer and revered more than the tax hikes of the 1977 amendments. This is, in part, because Reagan wisely took off the table the reduction of coverage issues that had become taboo in American politics. Furthermore, as a strong Republican candidate, he represented a positive compromise between the parties in his moderate views on Social Security reform. By incorporating longer-term solutions such as a gradual increase in the retirement age and shorter-term ones like taxing social security benefits, Reagan created short and long-term solvency in Social Security for the first time in many years.

Furthermore, Reagan's successful bipartisan commission became the rallying call for every single president that came after him to do the same to create solutions for Social Security, with varying degrees of success. Reagan addressed both revenues and costs, allowing for a system that actually had the potential to make it to 2030 before runnning aground.

Reagan's "Star Wars" initiative and massive military spending, however, consistently took money away from social programs, and in the later years of his presidency, deficits drew from the surpluses of programs like Social Security and established a dangerous precedent that would continue into the next few presidencies before coming under control.[15] Reagan was also, like Carter, mistaken that his system could remain solvent indefinitely.

[1] Address to the Nation on the Program for Economic Recovery, September 24, 1981. Retrieved from
[2] Ibid
[3] Letter to Congressional Leaders about the Social Security System, July 18, 1981. Retrieved from
[4] Letter to Congressional Leaders on the Social Security System, May 21, 1981. Retrieved from
[5] Ibid
[6] Address to the Nation… (1981)
[7] Ibid
[8] Ibid
[9] Statement on Receiving the Recommendations of the National Commission on Social Security Reform, January 15, 1983. Retrieved from
[10] Statement on House of Representatives Approval of Social Security Legislation, March 10, 1983. Retrieved from
[11] Remarks on Signing the Social Security Amendments of 1983, April 20, 1983. Retrieved from
[12] Ibid
[13] Ibid
[14] Ibid
[15] Michael B. Katz, The Price of Citizenship: Redefining the American Welfare State (2001), Ch. 1, pp. 9-32.


  1. Reagan's contributions to the Social Security debate waned as his focus shifted towards military expansion the "Star Wars" initiative. How did this impact the circumstances faced by future presidents?

  2. Again, this is a strong entry that gets the essentials of the story right. Just a few things to comment on: first, as I discussed in class, the Greenspan Commission episode was far more complicated than recounted here; essentially a series of deals were cut between the administration & Tip O'Neill, and the commission's label was affixed. The legend of the "successful bipartisan commission," however, has prevailed in Washington as an item of faith, even though the commission itself actually failed. The result has been a tendency to over-rely on this device. Second, there is a broader issue here of what constitutes "long-term" in evaluating a president's (or any policymaker's) success. Here, does it mean truly permanent solvency? That is a high standard. Given that the 1983 programs have kept the program going for three decades (and beyond), that seems like a "long-term" success to me.