Myth Busting: The Greenspan Commission Didn't Save Social Security

| Mon Sep. 3, 2012 11:16 AM EDT

I don't have a news hook for a post about the Greenspan Social Security Commission of 1983, but I was Googling around this morning for something else and happened to come across an old post from Pete Davis on the subject. The conventional wisdom about the Greenspan Commission is that it beavered away diligently for several months, produced a bipartisan plan to save Social Security from bankruptcy, and Congress passed it. Hooray! But Davis says this version of events is 180 degrees backward:

Mr. Greenspan and his fellow commissioners had met for months and were secretly deadlocked, despite optimistic public statements. Members of Congress were uniformly terrified of raising payroll taxes or cutting benefits, both of which obviously had to be part of any real solution. Then, one late afternoon, Pat Moynihan (D-NY) walked across the floor to talk to Senate Finance Committee Chair Bob Dole (R-KS). I couldn't hear what they were saying, but it didn't take a rocket scientist to realize the topic was Social Security. They cut the deal in broad outline right there, fed it to Mr. Greenspan, and left the details to his Commission.

So at the last minute, Republicans and Democrats locked arms around a plan "to save Social Security" by raising the payroll tax, to shave benefits, and to very gradually raise the retirement age on future retirees. President Reagan endorsed it, and the rest was history. Like a lot of bad economic theory, the idea that the Greenspan Commission solved the 1983 Social Security crisis has the causality backwards. Dole and Moynihan fed the deal to the Commission, not the other way around.

Then, in comments, Marc Goldwein says that even this account is too friendly to the Greenspan Commission:

Great blog post on how the 1983 commission was a cover. But even this post, I'm afraid, perpetuates some of the myth.

As of the beginning on 1983, the commission was all but dissolved. Understanding the dire political importance of not letting the trust fund run out of money, the White House then began a series of secret negotiations with Pat Moynihan and Former SSA Director Robert Ball (who was basically representing Tip O'Neill). I believe the White House representatives were David Stockman, Dick Darman, sometimes Kenneth Duberstein, and a fourth person.

Once they had agreed to a basic framework, then Dole was brought in, along with Alan Greenspan, James Baker, and Barber Conable. That group of nine or ten was eventually expanded further, to make sure they'd have the support of the leadership, organized labor, and enough commissioners.

Only then were the recommendations brought back to the commission to pass.

I don't have any particular political point to make here. This just happens to be a piece of political mythology that I'd always vaguely accepted without knowing much about what really happened behind the scenes, and I'll bet lots of other people believe it too. So I thought I'd pass along this little piece of myth busting.

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