Let me build on Prof. Blanchard's post. The benefit of staying up way too late (highly successful pancake feed at Northern tonight) is I am already reading Tuesday's Wall St. Journal opinion page. There is a piece there by the main architect of the "progressive" plan put forth by President Bush the other night. No, it's not from Heritage or Cato, but from Robert C. Pozen, who is identified as the chairman of MFS Investment Management. No idea who that is. Let us remember what this plan suggests. Everybody will get a cost of living adjustment. Lower income workers will continue to get a COLA based on average wage increase, which greatly overestimates the cost of living. Middle and high income people would have a COLA more reflective of the CPI, not wages, although never dipping below CPI and thus keeping up with inflation. The "cut" in benefits is one of those Washington cuts; i.e., one that isn't really a cut. A reduction in expected increase is called a "cut" even though the cost goes up. It just isn't going up as fast as we originally planned, and thus some say we are "cutting" this or that program. So, far from "robbing working people of the money they have paid into the system," the plan is biased against higher income people and in favor low income. That, friends, is what progressive means. Liberal used to be in favor of that. The higher the income, the smaller the COLA the recipient gets. Also (must I make this point again?) you are not getting out of Social Security what you paid in, which is what CCK suggests. Almost everybody ends up getting more than they paid in. That is the problem! If we just got out what we paid in, there would be no deficit. On benefit cuts, Mr. Pozen argues:
Let us take as an example a medium-wage worker who will earn $47,000 in 2012 when progressive indexing will first be implemented ($36,500 in 2005). The critics have already proclaimed that such a worker retiring in 2045 at age 65 would receive 16% less under progressive indexing than scheduled benefits--$16,417 rather than $19,544 per year. Is this reduction from the schedule a "benefit cut"? If Congress does not enact Social Security reform, the system will default in 2041 and benefit levels will automatically be reduced by roughly 27% for all workers by 2045. So judged relative to payable benefits, the $16,417 received by the median-wage worker in 2045 would actually be an increase in benefits. That sum represents $2,150 more in Social Security benefits than the $14,267 that the system can afford to pay in 2045 absent major reforms.
Clean Cut Kid, like congressional Democrats, can offer no suggestion. In fact, it seems all he can offer is " keeping Social Security as close to possible in its current state." As Prof. Blanchard quotes Michael Kinsley, everybody, and I mean EVERYBODY, knows that at some point the expected benefits of Social Security must be cut or taxes must be raised. What is your plan, Democrats? It has been said that the politician worries about the next election, the statesman about the next generation. Where are the Democratic statesmen when it comes to Social Security? I suggest readers take in the Pozen piece and if they have intelligent criticisms, I'd love to hear them.
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