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Jewish World Review May 25, 2005 / 16 Iyar, 5765 Ground in Social Security debate shifting in favor of GOPers By Jack Kelly
http://www.JewishWorldReview.com |
The contretemps that's developed over the plan offered by Rep. Robert Wexler
(D-Fla) to fix Social Security's financial problems suggests to me that
President Bush is winning the debate on Social Security reform.
Don't get me wrong. This — like the war on terror — is going to be a long
fight. In the short term, I expect the House of Representatives to pass a
bill which will be filibustered to death by Democrats in the Senate.
But the Democratic "victory" will be Pyrrhic, and the seeds for the ultimate
triumph of the president's ideas will be sown.
Social Security's financial woes can be solved only by raising taxes,
reducing benefits, or some combination of both.
Currently, the Social Security tax is 12.4 percent of payroll on incomes up
to $90,000, half paid by the employer, half by the employee. Wexler would
raise that tax by 6 percentage points — 3 each on employers and employees
— for workers earning more than $90,000.
Democratic leaders have looked askance at Wexler's plan, mostly because
their strategy has been to refuse a plan of their own until the president's
has been rejected, partly because they don't want Americans to know their
proposed fix involves hefty tax increases.
Wexler's is the first Democratic plan to be introduced in the form of
legislation. But Pittsburgh Rep. Mike Doyle has been talking about
something similar, applying the payroll tax to all wages, not just the first
$90,000.
Both Wexler and Doyle would cap benefits for wealthier wage earners, because
if benefits rose along with taxes, the effect on the Social Security deficit
would be next to nil.
Doyle's plan would raise more money — but even if neither had deleterious
economic effects — neither would come close to closing the Social Security
deficit. The Social Security Administration estimates Doyle's plan would
only delay from 2018 to 2025 the year in which Social Security goes into the
red.
But raising Social Security taxes by the amounts Wexler and Doyle propose
would have serious economic repercussions. The Heritage Foundation's Center
for Data Analysis estimates that over the first decade, the Wexler plan
would reduce GDP by $33 billion a year, on average, and reduce employment by
340,000 jobs a year. The impact would be especially severe on small
business owners, who must pay both the employer and employee portions of the
tax.
The medicine Bush is proposing tastes sweet by comparison, and it actually
would solve the problem.
Democratic leaders may object to the Wexler and Doyle proposals more because
they undercut the central argument they've been using against President
Bush's proposal for closing the deficit.
Social Security benefits have been rising faster than the cost of living
because they are indexed to wages, which have been rising, on average, one
percent more a year than prices. The president wants to keep benefit
increases linked to wages for low income workers, but to index them to
prices for middle and higher income workers.
Democrats are against this because, they say, cutting benefits increases for
upper income workers makes Social Security more of a welfare than a social
insurance program, and that in the long run this will diminish support for
Social Security.
"Any high earner who is counting on Social Security for a major part of his
retirement income probably shouldn't be a high earner," said an accountant
at a recent forum in Pittsburgh on Social Security.
Bush proposed personal accounts as a means of cushioning the blow to middle
and upper income workers of tax increases or benefit cuts.
Personal accounts are unpopular with Social Security recipients, who would
not be affected by them, but who oppose any change that does not put more
money in their pockets.
But personal accounts are very popular with younger workers. This is why
Bush will win in the end. The longer the Social Security debate goes on,
the more the ground shifts in favor of the Republicans.
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© 2005, Jack Kelly |
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