Fellow Golden Agers: A young, rising liberal luminary of the profession, Alan Krueger, has a column in the Washington Post this past Monday proposing to index Social Security benefits to wages. His justifications include: doing a true cost-of-living index is too difficult; indexing benefits to wages is fair because retirees' well-being ought to move in tandem with that of workers paying into the system; wage indexation will save money, buck up the trust fund, and reduce the Federal budget deficit; benefits ought to track current wages because wages finance benefits. I was horrified and revolted by these arguments and will be trying to place a letter to the editor. My basic points would be: there is nothing necessarily fair about tracking benefits to wages; in a social insurance context, what is fair is relating benefits received to contributions made, and the latter has nothing whatsoever to do with wages of those who work during the older worker's retirement; wage indexation is a regressive formula for reducing real purchasing power across the board without regard to the beneficiaries ability to pay this implicit tax; if Social Security is regarded as either retirement or wage replacement insurance, then what matters is the purchasing power of the benefits; if economists cannot devise a reasonable cost-of-living index they ought to serve Jim Jones Kool-Aid at the next AEA plenary; there are plenty of other ways to tidy up the trust fund; and deficit reduction is a crock. I would be interested in any comments, provided the word "POMO" does not appear in them. A copy of this note is posted in PKT. MBS =========================================================== Max B. Sawicky [EMAIL PROTECTED] Economic Policy Institute 202-775-8810 (voice) Ste. 1200 202-775-0819 (fax) 1660 L Street, NW Washington, DC 20036 Opinions above do not necessarily represent the views of anyone associated with EPI. ===========================================================
