A basic feature about Social Security that seems
to be under-appreciated is that it is already
'means-tested' to a degree. It's not an either/
or proposition. First of all, the benefit formula
is redistributive, which is the same thing for
practical purposes as 'means-tested.' It just
happens that "means" is defined as past
earnings, not present earnings or present
income. Second, SS benefits are taxed under
the progressive personal income tax. Third,
although nobody here may believe it, the payroll
tax is progressive up to the ninth income decile,
according to CBO estimates of past years (when
CBO was a more reliable institution than
presently). Fourth, we have an Earned Income
Tax credit, the base for which is the same
as that for the payroll tax, so there is already
an offset to the payroll tax for those with incomes
below $30K or so. Fifth, Medicare is 'super-progressive'
in the sense that the same substantial benefit package
goes to all who qualify, irrespective of their past
earnings.
>From this standpoint, allowing
SS beneficiaries who work to keep more of their
benefits should not be such a big deal. Note
that in Rorty's personal example, he said his
benefits of $1,600 per month would be reduced
to $1,000 after taxes. This reflects a marginal
tax rate of 37.5 percent, which is not so awful.
Getting rid of the earnings
limitations has not been a major part of the debate,
it has nothing to do with privatization, and it has
been a bi-partisan cause. It is wrong to depict
this as some reactionary idea that the Dems are
caving on. The late Robert Eisner, our most staunch
mainstream liberal in defense of Social Security
(author of "Social Security: More, Not Less"),
argued strongly the earnings test.
Any implication in the Rorty column that Soc Sec
should be means-tested is weak at best.
I am glad to see everybody against means-testing.
But consistency would dictate that you should then
stop criticizing the 'regressive' payroll tax.
It's not as if high-income people can't see the
commonality between means-testing benefits and
taxing salaries over the $76,200 cap.
Another fact is that the SS estimates arise from
the economics profession, not from politicians.
The Repugs were scarcely aware of these until
relatively recently, when they thought they could
use the projected shortfalls to attack Medicare.
They failed miserably. Clinton used "protecting
Medicare" (i.e., paying down unrelated public
debt) as a weapon against big tax cuts. Big
tax cuts are dead, at least for the time being.
The source of these projections is the Brookings/
Urban Institute/AEI combine. In other words,
mainstream neoclassical macro-economics. It is
from these economists -- centrists like Henry Aaron
and Charlie Schultze -- that the deficit panic
first arose. The only cross-current in this has
been the Brookings opposition to privatization
(arguably on the grounds that it would reduce
net national saving, their be-all and end-all).
Re: NN:
" . . . If people can keep working, yet pick up their full social security
check, how is this different from a government 401K plan? . . . "
Because Soc Sec is defined benefit, unlike 401K's.
Privatization is about defined contribution, by
and large. Alleged higher returns are the bait
for privatization.
" . . Worse, if this reform encourages a lot more upper-income folks to keep
working into their late 60s, it will create broader political support for
increasing the retirement age, . . . "
Not necessarily. If you can get benefits and work after
the "retirement" age, you should want to lower the retirement
age, not raise it.
Finally, weep not for Louis. As it is he barely reaps a
fraction of what he sows.
And now I will retire.
mbs
