Doing Away With F.I.C.A. Isn't Liberal

      Froma Harrop isn't buying Russ Douthat's argument that we should do away with the F.I.C.A. tax and means test Social Security:

Conservatives never much liked Social Security. It's a wildly popular government program that's totally solvent until 2033. It will be easily fixable and by then may not need fixing at all. Doesn't quite fit with the government-can't-do-anything-right talking point. ...

They already tried Plan A during the George W. Bush years. Recall efforts to privatize the program -- that is, let workers put their Social Security payroll tax money into private investment plans. Recall how the boosters tried to sell stocks as a no-lose investment.

The beauty of Plan A was that Wall Street would get its cut, and eventually, the federal government would no longer be obligated to cut Social Security checks. But the public was so protective of traditional Social Security that Plan A crashed even before the stock market did.

Plan B starts with means-testing. It is a clever approach because it expropriates liberal rhetoric about the rich helping the poor. Means-testing would reduce the benefits of the well-to-do while keeping (or raising) them for others. This is an excellent way to destroy the loyalty to the program among our more powerful citizens. The deal could include making permanent the Social Security payroll tax holiday scheduled to expire on Jan. 1 -- in the interests of progressive taxation, of course.

Another counter-idea: The payroll tax holiday was always a bad concept from a true liberal perspective. (President Obama backed it as a stimulus measure.) It's bad because Social Security is an earned benefit. You can't easily take away something people know they've paid for.

So here's the work-around: It makes no sense, writes conservative Ross Douthat, "to finance our retirement system with a tax that ... imposes particular burdens on small business and the working class."

How liberal sounding. How sneaky. Start paying for Social Security out of general revenues and reduce benefits for the wealthy, and what do you have? You have welfare. You know what happens to welfare. ...

By the way, we already have a system for means-testing. It's called the progressive income tax. If conservatives think rich people should pay more, they can simply let marginal tax rates (and the capital gains tax rate) rise. Complicating Social Security with more means-testing and ending the tax dedicated to keeping it afloat would kill the program -- with a smile.

On to Plan C.

You Can Once Again Comment Without Registering

     I have changed the settings on this blog to once again allow comments without registering with Blogger. I am hoping that we are done, for now at least, with the problem of posts by ringers who pretended to be Social Security employees or who made multiple postings to give the appearance that some point of view enjoyed widespread support when it didn't. I hope that now that the election is over, this nuttiness is behind us.

     Of course, I never understood why people had a problem with registering with Blogger. It's not like it takes much time or requires divulging anything as personal as a real name, for instance. It inhibited commenting far more than I thought it would.

F.I.C.A. Is New Deal Machiavellianism?

     From Russ Douthat at the New York Times:

Payroll taxes are a relic of New Deal Machiavellianism: by taking a bite of every worker’s paycheck and promising postretirement returns, Franklin Roosevelt effectively disguised Social Security as a pay-as-you-go system, even though the program actually redistributes from rich to poor and young to old. That disguise has helped keep Social Security sacrosanct — hailed by Democrats because it protects the poor and backed by Republicans as a reward for steady work. 

But the costs of this disguise have grown too great to bear. Whatever its past political advantages, the payroll tax now imposes an unnecessary burden on a stagnating economy. In an era of mass unemployment, mediocre wage growth and weak mobility from the bottom of the income ladder, it makes no sense to finance our retirement system with a tax that falls directly on wages and hiring and imposes particular burdens on small business and the working class.

     First, Douthat is simply wrong to say that Social Security was disguised as a pay as you go system. He's got it backwards. Social Security is disguised but the disguise is that it appears to be a pre-funded retirement system when it is actually a pay as you go system. Douthat spent too much time coming up with the eye-catching phrase, "New Deal Machiavellianism", and too little time thinking about what he was saying.

     Second, Douthat goes on to say that he thinks that it would be a good idea to means-test Social Security. I doubt that idea will go over all that well even with those who generally want the federal government to do more income redistribution.

It's All Very Easy In The Abstract

     Brian Beutler writing at TPM raises an excellent point:

Republicans are coming to terms with the fact that they will have to cede real, higher tax revenues to President Obama if they want to avoid the full expiration of the Bush tax cuts.

But while Democrats have been explicit about what they want from the GOP — a higher top income tax rate on high earners — Republicans have been vague about what they want in return.

When asked, Republicans insist that Democrats will have to accept “structural reforms” to support programs like Medicare, Medicaid, and Social Security if Republicans are to relent on taxes. But neither Democratic nor Republican aides can publicly say what would pass the GOP’s “structural reform” test.

“What do you think they mean by structural changes?” House Minority Leader Nancy Pelosi asked rhetorically at a Capitol press conference last week. ...

Privately, some Republicans hope to return to the kinds of proposals Obama and Boehner nearly settled upon last summer during their failed debt ceiling negotiations — including a higher Medicare eligibility age, and a less generous formula for calculating Social Security cost of living adjustments....

[W]hichever pound of flesh Republicans hope to extract will be politically vital — and it’s why they’re dancing around the issue, and pressing Obama to speak up first.

     Let's say that there is an agreement between the President and Republican Congressional leaders and that agreement includes changing to the chained CPI method of computing the Social Security Cost of Living Adjustment (COLA). "Chained CPI" sounds abstruse but it can be easily and accurately boiled down to "cutting Social Security" for the purposes of a campaign ad. There's no reason for rank and file Democrats in the House of Representatives to vote for this. Republicans who vote for this are sure to face campaign ads attacking them for cutting Social Security. Why would they vote for it? Republican voters get excited about budget deficits and cutting "entitlements" in the abstract but most of them don't like cuts to Social Security any more than Democratic voters do. This could be a tough vote for Republicans in the House of Representatives. No wonder they want Obama to speak up first. 

     I have my doubts that Republicans can muster the votes to pass chained CPI or any other cut in Social Security. I'll be surprised if it happens.

Don't Balance The Budget By Breaking The Disabled

     From an Op Ed by Alex Doolittle and Debra Shifrin in the Seattle Times:

Balancing the federal budget was a focal point of the campaign season leading up to the election. ...

Which cuts should be made is still being debated. Many believe entitlement programs should be on the shortlist, with some politicians targeting the Social Security Disability Insurance benefits program as one of the top contenders of waste and fraud.

Adversaries of the program cite increasing cases of nondisabled claimants receiving benefits as the primary reason for their extreme criticism of what has proved to be a vital lifeline for disabled workers in the United States.

But critics fail to mention key facts. Social Security Disability Insurance cases are on the rise because the baby-boomer generation is getting older and more susceptible to injury and illness, and more women in the workforce today means more women are eligible for the insurance than ever before....

Earlier this year, the National Law Center on Homelessness & Poverty released a report showing that denying Social Security Disability Insurance benefits perpetuates homelessness. The study stated that up to 40 percent of the national homeless community could qualify for Social Security Disability Insurance benefits, but only 14 percent actually receive them. ...

If any cuts to the Social Security Disability Insurance program are approved, people will not have access to the benefits they contributed to while they worked.

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I Actually Agree With A Small Part Of This

     From Lawrence Hunter writing at Forbes:

 ...[T]he larger problem for Republicans is that they are preparing to play Charlie Brown to Barack Obama’s Lucy on Social Security, again.  The congressional Republican leadership is all charged up to cut Social Security in a Grand Bargain with President Obama ... They better beware though; Lucy is just about to jerk the football out from under them, again, and they are going to fall flat on their keisters, again, if they don’t wise up. ...

Mr. Obama has been tempting Republicans with a Grand Bargain on the deficit in which Republicans would concede tax increases on people earning more than $250,000 a year in exchange for the president’s delivering congressional Democrats on Social Security cuts through so-called “reforms” that would cut inflation adjustments (COLAs), means test (cut) the program on the benefits side and transform the flat-rate payroll-tax pension contribution into a progressive income tax by raising or eliminating the annual cap on the amount of earnings on which the payroll tax must be paid. ...

From Mr. Obama’s perspective it represents a great deal. With ObamaCare, the president already has demonstrated his callousness toward old people and a ruthless willingness to sacrifice senior citizens to achieve his political ends.  A substantial majority of old people didn’t vote for him, and now he won’t be running again, anyway.  The so-called Social Security “reforms” being dangled before Republicans are a redistributionist’s dream come true, which is just another demonstration—as if one is required—of why the Republican Party is the stupid party.  But now it’s worse; it makes the GOP the evil party as well. ...

Republicans have become so fixated on their mistaken notion that Social Security is largely responsible for the deficit, and they are so intent on cutting cost of living allowances for current retirees that they are willing to help the president transform Social Security into the world’s biggest welfare program, a major step toward the Democrats’ goal of putting everyone in America on welfare.

Republicans insist on treating Social Security like welfare, and now they want to turn it into welfare in fact. ... The Republican Party wants to stigmatize retirees by treating them like welfare queens ... Worse than the stupid party; worse even than the evil party; the Republican Party has become the brain-dead, zombie party.