Towards A Good Samaritan World

Wednesday, February 23, 2005


Conservatives HATE the idea of raising Social Security taxes-- see here, for one among many-- but I don't see how they'll avoid it. It's no use getting the reform just the way you like it if the Democrats will just filibuster it. A combination of

-- indexing high-end benefits to inflation rather than wage growth, thus causing all Social Security benefit payments to converge gradually

-- raising the payroll tax cap to $120,000

-- allowing workers to divert, say, 4% of their payroll taxes to private accounts

will combine reform and redistribution. The traditional Social Security will evolve from a faux-mandatory-savings scheme to an explicit soak-the-rich welfare program. Private accounts will step into the mandatory saving role. The poor and the young will get the better of the tug-of-war over resources. But future generations will be spared the inter-generational tug-of-war that is inherent in Social Security.

From the left, Matt Yglesias and Josh Marshall are attempting to shoot down the proposal. Instead, Yglesias has this unappetizing proposal:

If and when Republicans get their collective nose bloodied on this issue and agree to stop talking phase-out and start talking funding gap, then there will be room for compromise. The GOP will put a package of benefit cuts on the table. Then Democrats will owe the world an alternative proposal, focused on keeping benefits generous. Then centrist deal-makers can try and broker a compromise. But that sort of thing requires us to all be talking about the same thing -- preserving Social Security. Right now the Republican plan is to save the village by destroying it.

I don't see why Marshall and Yglesias think that this debate will go their way. Just because it's difficult to ram the Republicans' preferred reform through-- inertia, and all that-- doesn't mean the Democrats' reform would go through any easier. Any closing of the funding gap, in particular, will involve tax hikes, and Republicans can say, quite rightly, that that's against their mandate. There's no sign of Democrats getting elected anytime soon; and if the first thing they did upon being elected was to raise the most regressive tax on the books, they wouldn't stay elected long.

The Social Security system was always a Ponzi scheme, and now the game is up. If the older generations muscle politicians into keeping the old unfair structure of the system, any social compact between the generations is shredded. We love them and are grateful to many of them individually, but collectively they are The Enemy, hell-bent on robbing us blind. We'll become the majority someday. Then it will be payback time.


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