The Economics and Politics of “the NRA”

Posted by Jeffrey Brown on Sep 13, 2010

Filed Under (Retirement Policy, U.S. Fiscal Policy)

When most Americans think “NRA,” they think of Charleton Heston – the American actor who served for many years as the public face of the National Rifle Association (the better known NRA).  But I want you to think about Charlton Heston for a different reason – namely, that he continued to work into his 80s – well beyond the Social Security Normal Retirement Age (the lesser known “NRA.”)

In the United States, the Social Security system defines a “Normal Retirement Age” as the age at which retirees can claim “full” benefits.  Indeed, it is sometimes called the “Full Retirement Age” – which is probably a better name, because there is nothing “normal” about the NRA, given that most people claim benefits much earlier.

For many decades, the NRA was age 65.  It is now approximately 66, and it will be 67 by the time most of today’s younger workers reach retirement age.  (Click here for the full schedule).

For many years, a large number of economists and policy wonks have publicly and privately expressed the belief that we ought to raise the NRA, especially in light of the fact that people are living longer and healthier lives than ever before.  If 65 truly is the new 55, then why have our retirement policy reflect this?

These issues have come to the fore in our public debate again, in part because President Obama’s fiscal commission appears to be considering a recommendation to further increase the NRA.  Indeed, politicians on both sides of the aisle (including Republican John Boehner and Democrats on the fiscal commission) have spoken favorably of the idea.  Even the AARP *might* be open to the idea.

This is despite the fact that messing with the NRA can be politically difficult.  I distinctly recall the first public meeting of the 2001 President’s Commission to Strengthen Social Security.  Before the meeting – and keep in mind, it was before the meeting, so nobody had a clue what the Commission was going to propose – there were protestors holding signs that said “don’t make me work til I am 70.”

The politics are not unique to the U.S.  This weekend, over a million citizens of France took to the streets to publicly protest against raising the retirement age.  Yes, that is right -  in a country smaller than ours, they managed to get a million French citizens to protest an increase in the NRA.

Personally, I think raising the NRA is a terrific idea.  It recognizes the increase in health and longevity.  It can be phased in gradually so that younger generations have plenty of time to adjust their work and savings behavior.  It will make a meaningful dent in the longer term fiscal health of the program (although it is nowhere near sufficient to eliminate the financing problem by itself – but it is a useful start).

But let’s be clear.  Despite all the political rhetoric, raising the NRA (while doing nothing to change the early entitlement age of 62) is nothing more than a particular way of cutting benefits.  If you claim at age 62, you will get a smaller benefit if the NRA is 70 than you would if the NRA were 67.  Normally, I am a big fan of calling things what they are – in this case, calling a benefit cut a benefit cut.  But if people want to believe that raising the NRA is something different, and if that belief actually allows Congress to make some progress against filling in the fiscal gap, then so be it.

But regardless of what we do about the NRA, the most attractive solution to our long term financing problems may be finding ways to get people to stay in the labor force longer (rather than still retiring at 62 with a smaller benefit).  So regardless of what you think about Charleton Heston’s “other” NRA, his model of continuing to work at older ages may just hold the key to our fiscal future.