May 03, 2005

Benefit "Cuts" For The Rich...The Horror! The Horror!

Bush has finally come up the first details of Social Security reform, and they include benefit "cuts" for the rich, and a sliding progressive scale-back for those in the middle. The poor would go on with the current schedules.

Naturally enough, Democrats are outraged.
Bush would "gut benefits for middle-class families," House Democratic Leader Nancy Pelosi and Senate Democratic Leader Harry Reid said in a joint statement.

First, an obvious point. Benefits for those on the upper end would not actually be cut, the rate of growth in those benefits would be slowed down. Benefits for the wealthier among us in constant-dollar inflation-adjusted terms would not be reduced one dime from current levels. Benefits for the middle class would not be cut but would increase faster than inflation and thus would still rise in real terms. Benefits for the lower-income would rise as currently scheduled, and maybe even be enhanced.

This is the same shrill screeching we hear all the time about programs being "gutted" when they're actually getting more money than the year before, just not as much as they were previously scheduled for, or as much as they wanted.

Second, why is reducing federal expenditures (in a time of record deficits) on the rich and middle class a bad thing, but raising taxes on them a good thing?

As the mathematics of the Pozen proposal shows, much of the problem with future SS financing involves the steady growth of benefits at rates above inflation, and the effect of the proportion of those increased benefits going to the better-off. By establishing a baseline safety-net "floor" of benefits (as I've argued for here) and reining in the top-end expansions for those with more resources, a good chunk of the problem goes away. This is the mathematical "flip side" of the Democrat argument that the SS problem can be "solved" with "minor" tax increases.

UPDATE: House GOP Plans Social Security Draft

Soon to be seen on as "House GOP Plans Draft". Hey, be sure to get "GOP" and "Draft" together in that headline....nope, no subliminality there.

MORE UPDATE: Bush's Social Security Plan Cuts Benefits

Under Bush's approach, future Social Security checks would increase more quickly for the lowest-income retirees than for everyone else. Though Bush promised that middle- and upper-income retirees would get benefits "equal to or greater than the benefits enjoyed by today's seniors," they would be smaller than what the system is now promising for the future.

See point #1, above. Seems that Pelosi and Reid are writing the headlines for AP now.