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Republicans will need to resist turning Social Security into a full-blown welfare program.
America’s fiscal need for entitlement reform is pushing the discussion about Social Security inexorably toward “means testing,” a policy both the left and the right have long avoided. Both sides realize that means testing, namely reducing or eliminating payments from the program to higher income senior citizens, would recast Social Security from its current perception by citizens as a retirement program to one of outright redistribution or welfare.
Many Americans see Social Security as a savings plan, albeit a coerced one, and a recent poll by the AARP (which certainly knows how to write poll questions geared to suggest as much approval for the program as possible) shows wide support for Social Security with equally wide skepticism about the program’s future.
The fact that it’s seen as a savings plan, that it has been seen as such for at least a generation despite two Supreme Court rulings that Social Security payroll taxes are not savings, not investment, not insurance, indeed not anything other than another tax levied by government, suggests that means testing in any substantial way will require jumping a substantial political hurdle.
The hurdle has been lowered by the fiscal debacle created under this president and the last one, leaving a substantial subset of both parties ready to attempt to clear it. This despite the political risk implied by AARP’s poll question asking whether respondents agree with the statement that “Everyone who pays into Social Security should receive it, no matter what other income they have.” According to AARP’s results, 83% of Americans agree and “belief in this idea is high regardless of income, age, or gender.”
America has dipped its toe into de facto means testing by making Social Security benefits partially taxable, beginning with the 1983 Social Security Amendments that “include up to one-half of Social Security benefits as taxable income for taxpayers whose adjusted gross income, combined with half their benefits and any tax-exempt interest they may have, exceeds $25,000 for a single taxpayer and $32,000 for married taxpayers filing jointly.” These threshold levels for the taxation of 50% of benefits have not been increased in the 27 years since this tax came into being, even though median household income has increased across the entire range of wage earners since that time.
In 1993, the Democratic Congress and Bill Clinton passed the Omnibus Budget Reconciliation Act — without the vote of a single Republican in either the House or the Senate — which, among other things, raised the taxable portion of Social Security benefits to 85% for those who meet a slightly higher income threshold: $34,000 for an individual or $44,000 for a married couple filing jointly.
But taxing benefits is, and certainly sells politically as, very different from reducing or eliminating benefits based on income.
Historically, conservatives have opposed means testing because it turns Social Security into a redistributive welfare scheme (in addition to the Ponzi scheme that it already is.) The left has generally opposed means testing for the flip side of the same coin: While it has no qualms about income redistribution, it knows that doing so within Social Security is, as the AARP poll results indicate, deeply unpopular.
Unfortunately, the current federal budget disaster could give cover to both sides to turn Social Security into what it was never intended to be and what Americans don’t want it to be, especially if means testing can be done under cover of a more pleasant-sounding name. And that’s exactly what’s coming.
Some Republicans will see means testing as a politically less bad choice than a very large increase in the retirement age (although some increase will certainly be part of a long-term solution for Social Security’s fiscal imbalances). It will also generate less media blowback than trying to squeeze another $100 billion out of domestic discretionary spending, whether defense, education, or even the relatively unpopular Departments of Commerce, Labor, and Energy.
In other words, if there weren’t an historically large budget deficit and national debt to deal with, Republicans would never go along with turning Social Security into welfare, but this time some of them will for fear of being demagogued about other spending cuts.
And once Republicans begin to go along, asking Democrats if they want to use Social Security to further their self-perception as Robin Hood will be as easy as offering candy to a 5-year old. It’s a no-brainer for both to accept, with short-term benefits for the recipients and long-term bills for the adults to pay.
These changes will be made under the name of the “Pozen Plan,” named for Robert Pozen, a former Fidelity Investments executive and Democrat member of President Bush’s Social Security Commission — or at least something very like it. Pozen, almost a decade ago, proposed “progressive indexation” of Social Security benefits: Increase benefits for lower income Social Security recipients based on a national gauge of wages, but for higher income recipients the benefits would be indexed to prices, which rise more slowly.
Even Pozen recognized that this would be a hard sell to conservatives, however, so he included a “sweetener” to the proposal to allow a small portion of a worker’s payroll tax to go into a personal retirement account instead of into the fiscal black hole of Social Security. Pozen proposed 2%, though George W. Bush in his depressingly brief flirtation with free market principles suggested 4%.
Pozen’s plan is an alluringly subtle way to means test, allowing Democrats and anything-but-cutting-more-defense-or-education Republicans to make bogus economic arguments, just complicated enough to confuse most voters, in support of finally achieving the Progressive goal of having the “rich” fund everyone else’s golden years.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?