Towards A Good Samaritan World

Tuesday, March 08, 2005

Robert Robb argues that "Lifting wage caps dooms real reform." Baloney. Take a look at his argument:

Lifting the wage cap would raise about $70 billion a year. But this is $70 billion currently going somewhere else, in significant part toward providing investment capital. And at present, the only effect would be to increase what the general treasury ultimately owes the Social Security trust fund.


Wait a minute. If revenues from raising the wage cap go into personal accounts, they will be invested in stocks and bonds. Right now, some of that money is going towards consumption. Also, a tax increase will reduce the deficit, i.e. reduce government borrowing. So some people who would have bought government bonds will have to invest it elsewhere.

The claim that lifting the wage cap in order to finance personal accounts would undermine savings and investment doesn't make sense. It would be good politics and, at a time of unsustainable deficits, it would be good policy too.

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