Last week, Phillip Swagel wrote a
piece in his Economix column in the New York Times saying that there should be no problem getting an agreement to rescue Social Security from long term doom. Liberals want to increase benefits for the poor. Conservatives are willing to increase benefits for the poor as long as benefits for the wealthy are reduced. So, hey, no problem, let's just do what the conservatives want and everybody will be happy. The column was so silly in my estimation that I didn't bother to link it here.
Swagel
writes this week to say that he just can't understand why people don't like his proposal. He notes that liberals seem to like eliminating the cap on earnings covered by the FICA tax as a solution to long term Social Security funding but, somehow, he just doesn't like that. He blows off the concerns of liberals that cutting benefits for the wealthy would undermine public support for Social Security as something that just doesn't interest an economist like him. Really? I thought that economists realized that politics was an inherent part of economic policy. More important, Swagel blows off the idea of lifting the FICA cap since as far as he's concerned lowering benefits for the wealthy would have the same "lifetime" effect as raising the cap. That notion is ridiculous. Lowering Social Security benefits for the wealthy would have little effect on the wealthy, the 1% and above, since Social Security benefits will never be more than a tiny percent of their retirement income. Lifting the FICA cap, however, would have a significant effect on the 1% since the FICA tax would cover all of their salary income. In any case, there's no way of balancing the books long term by cutting benefits for just the wealthy. The cuts would have to extend way down the ladder, especially if you're increasing benefits for the poor. Dramatic benefits cuts are politically impossible, no matter who's in power in Washington. Lifting the FICA cap is impossible only so long as Republicans control the White House, the Senate or the House of Representatives and that's not going to last forever.
Really, Swagel, if raising the FICA cap and cutting benefits for the wealthy have the same "lifetime" effect, what's your problem with raising the FICA cap? You never explain this.