"Progressive Indexation". President Bush is moving toward compromise on Social Security reform, toward means-testing of sorts and raising taxes on the rich (both of which I have long advocated) as the combined cure for the Nation's retirement system.

Under the proposal, the first embraced by Bush, benefits to low-income people would remain tied to wages and stay the same. Future benefits for wealthier people would be limited by tying growth in benefits to prices rather than wages.

The benefits of middle earners would be based on a combination of wage and price indexing, and since wages grow more quickly than prices, critics say they would see their benefits curtailed.

The White House said this "progressive indexation" approach -- first proposed by a Democratic expert Robert Pozen -- would close the long-term deficit of Social Security by more than 70 percent.

White House officials said Bush was open to a variety of options -- from raising the cap on Social Security taxes paid by high-income earners to upping the retirement age -- to bridge the remaining 30 percent gap.

Alas, what Bush proposes is still highly unjust. He would continue to permit the super-rich to receive Social Security! Moreover, I have heard nothing but talk about raising the cap on the income that is subject to FICA taxation, not removing it entirely so that the rich and super-rich will have to pay FICA on every dollar they earn, just as the poor and middle-class pay FICA on every dollar they earn.
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I suspect, tho I have not yet seen any estimate from economists, that simply requiring everyone to pay FICA on every dollar they earn would permanently solve the Social Security funding problem.
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Plainly if merely indexing benefits differently without raising the cap would close 70% of the gap, eliminating the earnings cap entirely should not just eliminate the remaining 30% but indeed leave us rolling in dough! — as could either produce a lowering of the FICA tax rate for everyone now paying it or help pay down the national debt. By contrast, the proposal to divert part of payroll taxes to private accounts would starkly increase the national debt.
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Moreover, the rich and super-rich don't need government payouts, so shouldn't receive any. The name of the program is "Social Security", not "welfare for the rich". They who are already secure should not be snorting at the public trough, and should be ashamed of themselves for even suggesting they have the right to take away some of the benefits of the poor and lower middle class so they can receive money they don't need. If we completely eliminate from Social Security rolls people who, without Social Security, have income of $35,000 a year or more (the specific cap being open to discussion), they shouldn't receive a dime from Social Security. And even then, what they receive should be only enuf to bring them up to that cap, not over it.
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In short, Bush is moving in the right direction, but has much to improve. He should read my discussion of the issues of human justice in Social Security reform, as set forth in the entry to this blog of March 17, and then adopt everything I propose. That would fix everything.
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(The current U.S. military death toll in Iraq, according to the website "Iraq Coalition Casualties", is 1,574.)
- posted by L. Craig Schoonmaker @ 4:08 PM