Sunday, May 08, 2005

Means-Testing Social Security Could be Right Move for Democrats

The usually even-tempered David Brooks has taken it upon himself to blast Democrats for what he sees as their duplicitous reaction to President Bush’s Social Security means-testing idea. Brooks says:
By embracing the progressive indexing of Social Security benefits, the president has asked us to make a shared sacrifice for the common good. He's asking middle- and upper-class folks to accept benefit cuts so there will be money for the people who are really facing poverty…

So how has the St. Francis of Assisi wing of the Democratic Party responded to Bush's challenge? Does it applaud him for doing what it has spent the past years telling him he should do? Of course not.

The Democratic leadership has dropped all that shared sacrifice talk and started making demagogic appeals to people's narrow self-interest. Nancy Pelosi cries out that Bush's progressive indexing idea means "cutting the benefits of middle-class seniors." Representative Sander Levin protests it "would result in the biggest benefit cut in the history of Social Security."…

[The Democratic Party] doesn’t feel any responsibility to come up with positive alternatives. Its main psychological need is to be against its nemesis at all costs. If the governing party steals one of its ideas, it will oppose that idea.

First, Brooks is overreacting. It has been barely over a week since President Bush suddenly tossed means-testing into the debate. And the White House has yet to release any real details on what exactly it is that Bush is proposing. The Democrats should not have been so quick to condemn the idea, but nor should they be expected to immediately embrace it.

Nevertheless, Brooks, under all his overwrought rhetoric, has a point. Means-testing has been a solid, moderate idea for years. In fact, John Kerry often mentioned in his campaign that he would support some modified types of means-testing.

For example, on NBC News’ Meet the Press, April 18, 2004, Kerry said to Tim Russet:
You and I earn a lot of money. We're very lucky. If you live to be 85, Tim, do you think it's right that somebody who earns $30,000 a year after you've gotten all your money out of Social Security, after you've gotten everything and more than you paid is paying you money? I think there are plenty of ways to look at things.

Earlier this year, there was even a bi-partisan Social Security bill introduced in the House by Representatives Jim Kolbe (R-AZ) and Allen Boyd (D-FL). H.R. 440 proposed means-testing, as well as voluntary private accounts. It was predictably denounced by both parties, but it did garner a fair amount of debate here inside the Beltway.

The point is, means-testing is not a new idea and it is not a radical one. It has received support from Democrats in the past and it really is one of the more interesting ways to save Social Security. So why are Democratic leaders acting as if the idea is tantamount to destroying the program?

Hopefully, a brave, centrist Democrat in the Senate can team with Rep. Boyd and propose a plan that implements some form of means testing. Instead of blindly opposing the idea, Democrats should embrace it and make it their own. They should see if the President is really serious about making the hard choices necessary to fix Social Security. Brooks says Bush called the Democrats’ bluff. They should call his right back.

UPDATE: We discuss the problems of means-testing here.


At 5:47 PM, Anonymous Anonymous said...

I think that the progressive indexing could put the Democrats in a difficult position theoretically. OTOH most people won't want a benefit cut. THe strategic reason for opposing it is what Paul Krugman pointed out: if you make SS a program for the poor then it becomes that much more easy to get rid of it. I should point out that progressive indexing and means testing are somewhat different. Most means testing proposals base decisions on your actual retirement income. So under a means testing system Paul Newman or George Bush Sr wouldn't get SS benefits. The Pozen plan indexes benefits according to wages earned over your lifetime. This will probably be a fair indicator of retirment income but will not always be.
Besides this I think that there is a real philosophical reason for the Democrats to oppose progressive indexing. President Bush has been selling his plan as all about choice. THey have said all along that participation in private accounts will be voluntary. Under the progressive indexing plan however participation in the plan would be effectively mandatory for those making over a certain amount of money because they would not be receiving as much SS benefits.
THere are also practical problems that I think Pelosi is right to point out. I think Pozen and Bush are perhaps too optimistic about the ability of Americans to earn enought hrough private investments to retire on. 25K (the amount above which benefits start to be reduced) is not that much and I think its quite possible that working class and lower middle class people will see thie retirement income drop under this plan.


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