Social Security Needs Fixing. What Washington Can Learn From 1983.

Economist Alan Greenspan headed the newly formed National Commission on Social Security Reform that came up with fixes eventually adopted by Congress. (Bettmann Archive / Getty Images)

In 1982, an anonymous Democratic aide referred to Social Security as “the third rail of politics—touch it and you die.”

The phrase went viral, and it continues to serve as a warning to politicians looking to mess with the government retirement program that serves more than 70 million Americans.

The third-rail metaphor is center stage again after the latest calculations from the Social Security Administration show the program’s main trust fund headed for insolvency in 2033. Millions of voters are facing a bleaker future.

The pressure is now on Washington to fix it—without getting burned.

For inspiration, today’s politicians can look to their counterparts from the early 1980s. That was an equally fractious time, with Ronald Reagan’s supply-side revolutionaries clashing with the remnants of Franklin Roosevelt’s New Deal coalition.

No battlefield was more contested than Social Security, a much-beloved centerpiece of FDR’s sweeping agenda, which conservatives opposed from the start and vowed to kill, or at least privatize.

At the time of the “third rail” comment, first appearing in Newsweek and later attributed to Kirk O’Donnell, insolvency was months away, not years. Something had to be done, but everyone in Washington was afraid of getting burned.

Then a miracle happened. Politicians of both parties came together, accepted harsh compromises, and crafted the Social Security Amendments of 1983 that kept the system running ever since.

Can today’s Washington produce another miracle?

“Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls,” the SSA wrote, emphasizing the need for “action sooner rather than later.”

Roosevelt created Social Security, but his hand was forced by Huey Long, the populist Louisiana politician and only man to threaten his hold on the presidency.

In 1933, Long proposed a “Share Our Wealth” program that would redistribute wealth downward through a guaranteed minimum income for all families, plus limits on profits and personal wealth.

Millions of Depression-stricken voters loved the idea. Wall Street hated it, and FDR feared it. There were worries of Long contesting the ’36 Democratic nomination, or splitting the vote as a third-party candidate.

“To lessen the thunder of the share-the-wealth advocates,” Barron’s wrote on Aug. 5, 1935, FDR adopted pieces of Long’s plan, including Social Security, for his Second New Deal.

The Kingfish, as Long dubbed himself, was assassinated in a local political dispute in September 1935, a month after passage of the Social Security Act.

The program ran well for decades, with revenues outpacing payouts. But the equation changed with the “stagflation” of the late ’70s. Revenues fell as the economy sputtered, while payouts jumped as double-digit inflation rates triggered automatic cost-of-living increases. There was a sudden and alarming shortfall.

“Retire Social Security,” Barron’s wrote on Sept. 15, 1980, as insolvency grew nearer. “The system, with all its evils, should be gradually phased out.”

This magazine spoke for many on the conservative side, including one retiree who wrote, “Right on! I would have gladly accepted the challenge and made my own retirement preparations…but I had no choice.”

Another reader, however, said Barron’s suggestion “cannot be taken seriously. We are the only civilized nation in the world whose Social Security system is not financed from general revenues.”

Such was the divide between the two sides. In Washington, “there’s the makings of a battle royal,” one congressional aide told The Wall Street Journal on May 13, 1981.

But Reagan had already been burned on the third rail. He lost the 1976 Florida presidential primary, and ultimately the nomination, after the Ford campaign resurrected old calls of his to turn Social Security into a voluntary program.

Reagan punted the problem to the newly formed National Commission on Social Security Reform. Five members each were named by Reagan, Republican Senate Majority Leader Howard Baker, and Democratic House Speaker Tip O’Neill.

Economist Alan Greenspan was named chairman. It seemed like a hopeless task.

“If Alan Greenspan can succeed,” said Rep. Willis Gradison (R., Ohio), “he should get the Nobel Prize.”

Greenspan didn’t get his Nobel—he settled for Federal Reserve chairmanship—but the commission developed a solution both politically acceptable and economically viable.

Its recommendations, mostly adopted into the 1983 legislation, were a classic mix of benefit cuts—the retirement age was raised from 65 to 67—and revenue increases, with both employees and employers paying higher payroll taxes.

How did this group of divergent political characters, from conservative firebrand Sen. Bob Dole (R., Kan.) to labor leader Lane Kirkland, forge a consensus?

“When it was clear that a long-term shortfall was real, commission members lost their ability to demagogue,” Greenspan wrote in his memoir, The Age of Turbulence. “They had to support cuts in benefits and/or support a rise in revenues.”

Robert Ball, O’Neill’s man on the commission, recalled it differently. In his telling, members quickly deadlocked. It took direct negotiations between Ball and Greenspan, representing the speaker and the president, to resolve the standoff.

“[I]t was only after getting the blessing of the two principals, Reagan and O’Neill, that we secured the formal blessing of the committee,” Ball wrote in his memoir.

Rep. Bill Archer (R., Texas), who opposed the bill, offered still another explanation, more along “third rail” lines.

“People are afraid of the issue politically,” he told the Journal on March 3, 1983. “They want to clear the thing out and go on to something else.”

However it happened, and against all odds, an agreement was reached that kept Social Security solvent. To Reagan, the bill’s success represented something more important.

“It’s a clear and dramatic demonstration that our system can still work when men and women of good will join together to make it work,” he declared at the bill’s signing.

We now have eight years to find people of such good will. The clock is ticking.

Corrections & Amplifications

Howard Baker was Republican Senate Majority Leader in 1981. An earlier version of this article incorrectly called him Jim Baker.

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