Tuesday, January 25, 2005

Altruism vs. Social Security Reform

President Bush's attempt to argue for Social Security reform on altruist grounds is leading to predictable results. An attempt to reduce the absurdly generous future growth of Social Security benefits is being watered down into a redistributionist attempt to make Social Security taxes even more "progressive"—making the system even more of a raw deal for the most productive taxpayers.

"White House Looking for Ways to Ease Opposition to Social Security Overhaul," Edmund L. Andrews and Richard W. Stevenson, New York Times, 1/25/05

"The White House has already floated one approach to the issue of future benefits, suggesting that the benefits be based on price increases rather than on the current formula, which is based on economy-wide growth in wages. Since wages tend to rise faster than prices, the effect would be to set benefits at lower levels than promised under current law. But that approach drew intense criticism from Democrats and some Republicans. Administration officials are now reviewing an idea called 'progressive indexation.' The idea is in effect a compromise that would allow initial benefits for low-income workers to rise in line with their wages but would peg benefits for affluent workers to the inflation rate. The effect would be to direct relatively more benefits to lower-income people than to higher-income people. White House officials say that future benefits have to be reduced in order to close a long-term financial gap that the government estimates at roughly $3.7 trillion over the next 75 years....

The new approach would help protect people at the lowest rungs of the income scale. But it would not save nearly as much money. By one estimate, it would close about two-thirds of the projected shortfall."

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