Fatally 'progressive' plan

• Article
• Comments ()
• Click-2-Listen
• Videos

By

Despite President Bush's promise not to negotiate with himself on Social Security, he keeps tossing out ideas meant to placate Democrats that have the opposite effect.

In his April 28 press conference, he said, "I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off. By providing more generous benefits for low-income retirees, we'll make this commitment: If you work hard and pay into Social Security your entire life, you will not retire into poverty."

The idea came from Democrat Bob Pozen, an attorney and mutual fund executive. For workers with average "career" earnings below $25,000 by 2012, "progressive indexing" would continue adjusting first-year benefits upward to keep pace with wages, with price indexing after the first year as we do now.

Those with average career earnings above $113,000 would have initial benefits adjusted for inflation alone -- about 1 percent a year slower than with wage indexing. That is what the president had previously proposed for everyone -- and with fewer complaints from Democrats.

When the president embraced the notion of benefits growing least rapidly for high-income workers, the idea received the harshest criticism from egalitarian Democrats.

New York Times columnist Paul Krugman called it a vicious "attempt to turn Social Security into nothing but a program for the poor." Kerry adviser Jason Furman called Mr. Pozen's plan "a system... in which upper-income people would have less of a stake in traditional Social Security, potentially undermining political support for it."

Mr. Pozen finds this hypocritical, since his fellow Democrats have been eager to raise the salary subject to payroll tax from $90,000 to a much higher figure. Do they imagine Congress could slap an extra 12.4 percent tax on upper-income people without making them feel they had "less of a stake in traditional Social Security"?

Even without the Pozen plan, the Social Security benefit formula is already rigged so those who paid into the system for the fewest years receive a much better deal that those who paid "their entire lives." Those who paid payroll taxes for decades are also more likely to have saved for retirement or to keep working past age 65 -- either of which means 50 percent to 85 percent of their benefits will be taxed.

Even if Social Security remains an unreformed time bomb for a while, fewer and fewer people will feel they have a fair stake in it in the near future.

All proposed solutions we've seen so far from Democrats would further undermine popular support for Social Security by tilting today's heavily means-tested Social Security system even more severely against those who pay the most in payroll taxes.