Re: Democrats and the inflation-indexing of Social Security benefits for upper-income voters, Ryan Lizza wrote the following for The New Republic in April of 2005:
Whereas the White House originally wanted to move from full wage indexing to full price indexing–that is, from a formula that uses the increase in wages to determine benefits to one that uses the much slower increase in prices–Pozen would simply blend the two systems. The benefits for low earners would stay pegged to wages, while benefits for high earners would be pegged to prices. Benefits for earners in the middle would be determined by a formula that combines both wage and price indexing. It’s called progressive indexing, and, in a nutshell, that is what Pozen, the White House, and some in the press believe will break the Social Security logjam.
But this is a comically ill-informed reading of the political situation. Democrats believe that private accounts are the thin end of a wedge to destroy Social Security. Asking them to support private accounts in exchange for adding a little progressivity to the Social Security benefits formula is the equivalent of Democrats in 1993 asking the GOP to support Hillarycare in exchange for, say, a small capital gains tax cut.
And, even if Pozen’s indexing plan weren’t coupled to private accounts, it would be anathema to liberals. As Jason Furman of the Center on Budget and Policy Priorities explained in a recent analysis, the long-term effect of progressive indexing would be to turn Social Security into a welfare system and erode support for it. While there is now some wealth redistribution inherent in Social Security, there is also a relationship between how much one contributes to Social Security and the benefits one receives upon retirement, a linkage that is the linchpin of the system’s near-universal support. Under the Pozen plan, benefits for high and middle earners would, over time, be drastically reduced, while benefits for low earners would hold steady. The entire benefit structure would be flattened, turning it into a wealth-transfer system from rich to poor and shattering the system’s political popularity. [Emphasis added.]
That is, the case against progressive price indexing is rooted in a desire to preserve the long-term political viability of Social Security, a core Democratic commitment. Furman’s analysis can be found here.
Suffice it to say, progressive price indexing has not been embraced by many Democratic congressional candidates over the intervening years.
