New Social Security proposal exposes left-wing hypocrisy - (Bush plan backs Dems into corner!)

At his press conference last Thursday, President Bush added a new “progressive indexing” proposal to his Social Security reform plan that not only largely resolves the program’s imminent insolvency without raising payroll taxes, but also exposes an almost unconscionable hypocrisy in the Democrats’ position on this issue.

At odds for months in this debate has been how future payments to recipients are calculated. Currently, increases are tied to annual wage gains of the workforce. However, it has been argued that if they were indexed to the growth of inflation, or “prices” -- which have typically been much lower than changes in wages -- insolvency would be largely averted.

Unfortunately as this debate has ensued, the Democrats have depicted such a change as being a cut to the benefits of future retirees. As a result, this one issue has become its own “third-rail” as the left has been successful in casting it as thoroughly verboten.

Enter President Bush last Thursday, who in a stroke of sheer genius proposed preserving this form of wage-indexing for only the poorest of Americans, while allowing for a less generous calculation for the more financially successful members of the population.

The brilliance of this strategy is multifold. First, by retaining the more favorable wage-indexing for the poorest 30% of Americans, Mr. Bush has masterfully appealed to the heart of the Democratic Party. In the most recent election, this was by far the largest voting bloc for Senator Kerry who won this demographic by a margin of 63% to Mr. Bush’s 36%.

Consequently, the most left-leaning segment of future retirees should -- assuming the press accurately depicts this proposal -- be less opposed to Social Security reform, for it no longer has any conceivable negative impact on them.

However, potentially more important, this plan would significantly reduce the value of Social Security to the 70% of Americans who are going to see their guaranteed benefits reduced, and would likely make them more interested in the creation of private accounts to make up this shortfall.

Obviously, this is what has Democrats shaking in their boots concerning this new proposal, with prominent left-wing figures making statements so absurd that anyone within earshot must look as aghast as the Aflac duck after Yogi Berra says, “And they give you cash…which is just as good as money!”

Why? Because the Democrats in their desire to preserve the status quo have now been forced to defend the financial rights of the wealthiest Americans as being equally important as those of the poor.

Let’s understand that full price-indexing -- the least generous of the future benefit calculations -- will only apply to citizens making in excess of $113,000 per year. This represents the top seven percent of wage earners.

Therefore, to counter this new proposal, the Democrats have to portray the preservation of wage-indexed Social Security benefits for the wealthiest Americans -- people they regularly depict as being rich enough to absorb a greater tax burden than they currently are -- as being just as important as maintaining such benefits for the poor.

In effect, it’s okay to take money out of this group’s pockets in the form of taxes so that the poor can pay less, but it would somehow be inappropriate to reduce their Social Security benefits so that the poor can continue to receive what has been promised to them.

What makes this even more ludicrous is that this upper echelon of wage earners has the greatest access to other retirement vehicles such as IRAs, 401(k)s, 403(b)s, SEPs, Keoghs, etc. As a result, this is the group that can most afford future benefit cuts, and to suggest otherwise thoroughly undermines the Democratic Party’s long-standing position that the rich have the financial wherewithal to shoulder the highest tax burden in our land.

Which leaves the Democratic Party with only one tenable position to solve the looming Social Security insolvency problem -- raise payroll taxes. Period. They can’t support anything else, for every other option reduces the socialist element of the program.

Whether it’s changing indexing, or raising the age at which one can begin receiving distributions, future benefits are cut forcing retirement planners to utilize other investment options that inherently reduce their reliance on this government program. And, obviously, so would the implementation of private accounts.

As a result, the president with this move has backed the Democrats into an extremely uncomfortable corner that is going to be very difficult for them to navigate out of, for now 70% of the country is going to be given a very distinct choice as to which horse he/she wants to back in this race: Do you want to keep your current wage-indexed benefits and pay more in payroll taxes today and until you retire, or do you want to receive less in guaranteed distributions years from now, but not have your taxes increased immediately?

Which option will the majority of Americans support? Well, Walter Mondale found out twenty years ago that campaigning on a platform to raise taxes is not typically a winning strategy.

Noel Sheppard is an economist and writer residing in Northern California. He welcomes your comments at
slep@danvillebusinesscenter.com.

I don't support indexing benefits, another tax. I have made over the cut off for many years, let me opt out.

I don't care if the poor starve under a bridge as long as I am not taxed to support them. I have paid into this damned thing for many years, I want my money back with interest.

This looks like another bene for for the illegals.

Seriously, the Social Security proposal is the right thinking -- to protect those at the lower end rather than provide for the entitlement of lavish living for the well-to-do, as some notion of misguided justice. It was intended as an insurance program so people in their vulnerable years had a floor supporting them -- and not foster the middle-class notion that retirement should be the fulfillment of every fantasy they've nurtured over the years as their entitlement.

And that's what your newspapers have deluded their readership with -- those false notions of life and reality by blurring the distinction between the true and the false. It is just what "they" say -- and they can cite whatever expert, study, poll they want to support it -- and suppress any information they don't want the public to know.

It's just time for society and culture to take the next step up -- leaving the demagogues at your local newspapers to rant to their groupies still left.

Notice that not a word from either side about removing from Social Security people who were never intended to be there at all? Who have never contributed a single cent?

No discussion whatsoever about the fraud perpetrated by "financial guarantors" of foreign retirees from asia who are brough to the US to sign up for benefits?

It is not just another form of welfare. It is welfare applied to non-citizens!

Let those at the Lower End support themselves. I don't owe them or anyone else anything for my successes in life, Christ said the poor will always be with us.

This is just another socalist power grab, to penalize those that did something with their lives. Before you start complaining about rich selfishness, I was dirt poor as a kid and grew up in the projects, so you can stuff your pity for the useless and non proforming up your a$$, I saw them all as a kid.

I somewhat agree with you. However, it is in keeping with the current political-speak. After all, future benefits are currently being referred to as "unfunded liabilities." As such, there is already calculated a per recipient benefit based upon wage-indexing. If we change the equation so that monthly distributions will be less -- even though it actually is a yearly increase as you stated -- we are indeed reducing the benefits versus what has been promised and calculated for.

Looking at this another way, the current calculus suggests that present contributors will receive about a 1.6% annual return on their investment. If we were to apply price-indexing, this would decline. Wouldn't this therefore be a reduction in benefits?

For instance, I have already received a projection of what my benefits will be when I retire. As I am in the group that would be impacted the most by the president's new proposal, a new statement reflecting this change would illustrate a lower monthly payment than the previous one. Isn't this a cut?

Would you prefer that we instead raise the payroll tax cap so that everyone pays 12.4% of their entire income towards Social Secuirty instead?

Or would you rather prefer that we do nothing, and slowly let the payroll tax go up to 18%?

There is no free lunch. Either take the indexing with a personal account option to increase your earnings, or be prepared to pay even more taxes towards a system that only pays you money once you reach the age of 65-70, and then keeps all remaining money after you die off.

Sunny,

Either you misunderstood my point, or I did a poor job of elucidating it. :-)

I very much support this new proposal, and think it's brilliant. Furthermore, I would much rather have my taxes remain the same today for less benefit in the future.

Actually, I'd rather they got rid of the whole program, but that's not going to happen.

That's why SS is the third rail of politics. I admire the President for trying to tackle this.

SS, by law is not guaranteed. How can I have a cut on something I haven't gotten yet ?

BTW, look at your SS statement. There are asterisks.
People overlook the asterisks. The asterisks have been there for a few years.

I've been telling my wife for years that it would come to this. Those who prepared on their own for retirement (the ants) would take it in the shorts in favor of those who didn't prepare themselves (the grasshoppers).

What I never figured was that the screwing would come from our side....

Thats because the other side is by its nature irresponsible, and thus says.. we don't have to deal with this silly problem of food until the fall.. so lets keep playing.

Funny you should site the tale of the ants and grasshoppers then complain that Reps are schmucks for being the ones that face up to the problem and get to work on it.

Actually, I think the President is quite courageous in putting the issue of SS reform on the table. I'm very much in favor of privatization and removing the government from the business of retirement financing.

But making it easy on the grasshoppers only encourages the irresponsible behavior...

You can take the kid out of the ghetto, but you can't take the ghetto out of the kid.

What is that supposed to mean? I don't understand what you are saying.

Am I supposed to be happy because people became drug addicted, or they became unwed mothers, or they accepted the state as their master, for a few bucks? Am I supposed to be happy because LBJ destroyed the city I lived in?

You have no answers. If you haven't walked the walk, don't talk the talk.

"I don't owe them or anyone else anything for my successes in life,..."

I suppose you also invented the Internet and the freerepublic, grew and picked your own food, refined your own gas, built your own car, cured your own illness, built your own house, raised your wife and kids, etc...

Yeah, I've heard it before. One of the traits I've noticed among those who have much in life is this great sense of gratitude for everything and those who helped them along the way. The trait I don't like among today's liberals, is the great credit they give themselves for everything in life -- as though they created it all
themselves -- and their sense of their entitlement and privilege.

If you owe nothing to anyone else, then you can't have very much. When 9/11 struck, those who would have been most impacted if the world was not made a safer place were all these celebrities to whom all the money in the world could not buy them anything -- like jet travel, not being able to give concerts and performances for fear of a terrorist attack on the assembly. Yet these people are the most ungrateful. They think they ought to be prresident.

Let those at the Lower End support themselves.

Many can't. I agree that in theory, Social Security shouldn't exist at all. In reality, there's going to be some percentage of old people that can't provide for themselves, and doing nothing is not a politically acceptable solution. So I don't have a big problem with a means-tested welfare program specifically designed to keep senior citizens out of poverty. Such a program would be a tiny fraction of the size of Social Security today; an article posted here yesterday noted that 80% of SS payments go to recipients who are not poor. Turning SS into a real welfare program would greatly reduce the taxes needed to fund it; in fact, I'd abolish the payroll tax altogether and just fund it out of general revenue. Take the resulting money you save in taxes, and use that as your private account, with no government strings attached.

Bush's proposal is a very small step in this direction, and the outrage of the left is a pretty good sign that he's on the right track.

I feel extremely frustrated.

We've got as our president one of the best presidents this country has ever had (not perfect, I criticize him on immigration too) but one of the best. And the media is working full time, at 100% full power, day and night, to bury his messages, his programs and his initiatives.

When Bush was running for president, I knew what to do. Contribute as much as I could to the campaign, both in word and deed (money).

But what can I do now? What can we do now?

Now is the time for all good men and women to come to the aid of their party.

But how?

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