Monday :: May 2, 2005

Has Anything Really Changed Now That Bush Has A Social Security "Plan"?

by Steve

Watching Mr. Bush roll out his “plan” for dealing with Social Security’s solvency problem Thursday night, and in reading some of the tea leaves surrounding the White House’s adoption of the Pozen progressive indexing scheme and their comments about other alternatives, we can now see where the GOP is headed on Social Security.

1. Having seen their claims to a political realignment hit the toilet in a grand overreach and misreading of a claimed mandate and then seeing their road show make the situation worse, the Bush White House realized that they cannot sell private accounts on their own any more. But they also realized that proposing any plan is better than no plan at all; hence the roll-out of the Pozen scheme.

2. Since private accounts couldn’t be sold to the public, and since Bush has made it clear that private accounts are more important than fixing the system’s solvency, a misdirection was needed to get the media to focus away from how Bush was planning to pay the transition costs for private accounts (massive new debt or massive cuts in domestic discretionary spending). So the Pozen scheme was a perfect way to get the media to think that Bush was going after the rich to help the poor, when in fact the middle class would get harmed the most and the wealthy would be unhurt by the Pozen scheme. The Bush plan is a variation of the Pozen plan, but neither of these plans closes more than 50% of the solvency gap by themselves, and Bush’s insistence on private accounts makes the problem worse.

3. The Pozen scheme gives the far right what they’ve wanted all along: a way to convert Social Security from being an egalitarian senior safety net into a hated welfare program whose support will wither after decades of middle and upper income wage earners seeing themselves pay into something that they will get little benefit from. Bush’s embrace of the Pozen plan now allows the wealthy to oppose any increase in the tax ceiling by wrapping themselves in the deception that they would rather help the poor with Bush’s plan.

4. The Pozen scheme, when married to Bush’s must-be-there-in-the-end private accounts, will actually deliver significantly lower benefits to almost all wage earners than leaving the system alone. Specifically, the Bush plan would deliver lower benefits to those making $55,000 a year and up, than simply leaving the program alone and allowing it to hit insolvency in 2041, whereupon it could pay out a little more than 70 percent of current benefits. In fact, the Bush plan would lead to many wage earners getting no Social Security benefits at all.

5. The Bush plan surreptitiously involves cuts in disability benefits.

6. From seeing the comments by the White House in advance of Bush’s press conference last week, Bush will oppose any increase in the payroll withholding ceiling from its current $90,000 because he will claim that such an increase will hurt the economy.

7. Bush has still not told anyone how he would pay for private accounts, and his “plan” addresses solvency solely through benefit cuts, and not through a balanced approach between raising the tax ceiling and adjusting benefits.

8. It is not at all clear that his own party will follow his plan.

So this is the lay of the land at this point in time: on the one side is Bush, still pushing private accounts and significant reductions in benefits as his solution, while still being opposed to any increases in revenue or taxes from upper-income wage earners. On the other end of the spectrum are Democrats and others like Paul Krugman, who still question whether in light of Bush’s position anything at all should be done now, given that Bush will never agree to 1) abandon unpaid-for private accounts; and will never agree to 2) a balanced plan consisting of revenue increases and benefit adjustments.

Given those two extremes, Bush wants Democrats to come along now and push the increase in the income ceiling as their “fix”, so that he can then whack them as being tax-raisers.

Knowing this, Democrats need to nail Bush on several fronts:

First, his plan cuts benefits for most Americans far more than doing nothing would.

Second, he still hasn’t said how he plans to pay the transition costs for private accounts.

Third, Bush’s claims about the system’s insolvency are based on productivity assumptions that are garbage.

Fourth, given how much higher-end wage earners have seen their wages go up since the $90,000 ceiling was implemented, why shouldn’t the ceiling also be adjusted upward?

In light of all this, Democrats shouldn't throw Bush a life line on Social Security until he embraces:

1) a balanced approach that relies upon revenue and benefit adjustments;

2) an approach that avoids massive and unnecessary benefit cuts;

3) an approach that avoids new debt or unrelated domestic spending cuts; and

4) private accounts as an add-on.

There are other alternatives out there that are balanced in their shared pain, such as the Diamond-Orszag plan. Some of the plans offered by the right, such as those offered by Senator Lindsay Graham, and the Ryan-Sununu plan are flawed and call for benefit reductions and either massive debt or budget cuts. But the Bush plan seems weighted totally towards benefit cuts and a private account replacement for the existing benefit, which requires crippling debt, or domestic spending cuts. And for that reason, the Bush plan should be rejected.

At this point, I'm still supporting Diamond-Orszag.

Steve :: 7:21 AM :: Comments (13) :: Digg It!