* Why don't Dims love Bush's SS plan?
Topics: Welfare
06 Mar 2005
From: Ervan Darnell
Last week Bush suggested he would be open to raising the salary cap on social security. What he said and what that implies are two different things. The current system is the more you pay in, the more you get out. There is a welfare component so your effective rate of return drops from 2% for low-income earners to 0% for high-income earners (a bad joke in either case) according to the SF fed, but at least paying more gets you more. By lifting the cap, they don't mean forcing people to pay more into their social security. They mean strictly attaching a new 12% tax on all income about $90K, without any extra benefit. That's a very progressive tax, even more progressive than the income tax. Dems should like that. Bush's main proposal is to cover the shortfall of partial privatization via income tax. Income tax is more progressive than payroll taxes. Dems should like that. Of all the options, the one Bush said was non-negotiable was increasing the payroll tax, which is
the least progressive tax the feds have (excluding sin taxes). Dems should like this too (refusing to raise payroll taxes).
SS advocates have tried for a long time to portray it as a retirement plan rather than a transfer / welfare plan. For what it's worth, "raising the cap" lays lie to that immediately. It's also a tidy lesson in why the government can never be trusted to run any service, but because it will disconnect supply and demand and instead soak the rich (or politically disconnected) and subsidize the opposite.
For my part, I find myself drifting from vaguely in favor of Bush's plan to vaguely opposed. I'm perfectly situated to get hammered by the more progressive taxes (as most of my income is salary), and get little benefit from it. Seems like that could be more painful than simply letting the system go bankrupt. There is a valuable object lesson in that anyway. Well, okay, the government won't let it just one day stop sending checks, but perhaps the pain of our folly will be more acutely focused enough at some point in the future that people can have a rational debate.
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Ervan Darnell
ervan@kelvinist.com http://www.kelvinist.com
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