Thursday, February 24, 2005

Social Security compromise

What should Democrats do to fix Social Security? Should we compromise with the more moderate Republicans and fix the insolvency problem? That's a toughie. You see, there is no actual way of knowing if there is a $3.7 trillion shortfall until it's been 75 years. The projections, while not seemingly wildly inaccurate, are assumptions about something far off into the future. We don't know how many people will be born over that period or how many workers wil be paying into the system in 30 years, so making huge changes to a system that works just fine is a really bad idea. But there is a projection of red-ink, and there has been for quite a while now, so there is probably something to it. So what to do? The Washington Post today outlined some of the compromise programs out there. One of the best is probably also the most politically palatable.

More attractive has been the ultimate "tinkerer" plan from Robert M. Ball, a former Social Security commissioner. Rep. David R. Obey (Wis.), the ranking Democrat on the House Appropriations Committee, has made Ball's plan his own, and its nip-and-tuck approach to the problem has influenced the stance of AARP, the powerful retirees' lobby.

Ball would take four initial steps: lift the cap on taxable wages to 90 percent of all earnings, or about $145,000; slow annual cost-of-living benefit adjustments; cover newly hired state and local government workers; and dedicate all inheritance taxes levied on estates worth more than $3.5 million to Social Security.

Those steps would ensure full Social Security benefits through 2078, the Social Security actuary concluded. If funds should fall short, Ball would fill the gap through slight increases in payroll tax rates.

Not a bad approach, eh? Tinkering is exactly what is required to keep the system tuned and running smoothly. Every time a new projection comes out, we can adjust to match. It's flexible and it's smart. Plus, some of the things proposed, like raising the payroll tax cap, are in vogue at the moment. So I give this a good chance of passing.

But the conservatives, that's another approach all together. They are hell bent on destroying Social Security. They even like to chant it. A group of them were caught by CNN doing just that outside of Sen. Rick "Man on Dog sex" Santorum's conference on Social Security "saving". It's a farce to call it reform and saving when you're goal is to destroy and gut the program. I might even venture to call it lying.

The craziest plan:

The ultimate private-account plan belongs to Peter J. Ferrara, a longtime advocate of Social Security's partial privatization. Under Ferrara's approach, adopted by Sen. John E. Sununu (R-N.H.) and Rep. Paul Ryan (R-Wis.), and also by such activists as former House speaker Newt Gingrich and conservative organizer Grover Norquist, personal accounts would average 6.4 percentage points of the 12.4 percent Social Security tax, considerably larger than Bush's proposed 4 percentage-point diversion.

Like the Bush proposal, Ferrara would offset contributions to voluntary private accounts with equal cuts to workers' base Social Security benefit -- what workers see as a monthly, guaranteed check. But under Ferrara's plan, the accounts would be so big that participating workers beginning their careers this year could expect to have no basic Social Security benefit left by retirement, according to a Social Security actuarial analysis.

On the plus side, Ferrara says, the accounts would grow so quickly that they would more than make up for the lost benefit, disputing a contention shared by the White House that personal accounts alone cannot solve Social Security's problems.

On the downside, the accounts would cost nearly $7 trillion over 75 years, almost twice Social Security's cash deficit over that period. That's because diverting such a large percentage of payroll taxes to private accounts for future retirees would leave the government short of the cash it needs to pay current beneficiaries.

Yeah, good job saving Social Security Ferrara. Not to mention the $7 trillion dollar price tag. What the hell are these people thinking? In what dimesnion does any of this make sense? You'll own the account (not really) and your descendants for 10 generations will own the huge freakin' debt!

There is an accompanying graphic that shows how these plans all stack up to each other, and to Bush's proposal, which technically hasn't been released yet. The best plan on the board doesn't have any Congressional support so far, and I don't really expect it to. So, our compromise has to be the "tinkerer" plan.

See, I can compromise.


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