Politics & Policy

Saving Social Security’s Dishonesty

The Democratic strategy.

In the congressional debate over repealing the estate (a.k.a. death) tax, Democrats routinely invoked Paris Hilton as an example of someone who wouldn’t be hurt if the government confiscated part of her family’s wealth upon her parents’ death. This was a shrewd bit of class warfare in keeping with the Democratic impulse to tax the wealthy as much as possible. But the Social Security debate now features a new, perverse kind of Democratic class warfare–a struggle to keep as many Social Security benefits as possible flowing into the hands of the well-off.

Maybe Paris Hilton doesn’t deserve her inheritance, but her astronomically wealthy father, Rick, apparently deserves every last penny he can wring from the Social Security Administration when he retires.

Democrats have been twisted into this position by their reflexive opposition to President Bush’s latest Social Security proposal. It would make the system more progressive by continuing to allow benefits for lower-income workers to grow generously, while gradually restraining the growth in benefits (by roughly one percent a year beginning around 2016) for higher-income people. This move would solve most of the shortfall in the popular program’s long-term financing.

Shouldn’t a liberal welcome a proposal demanding sacrifice from the wealthy? Yes, but the two sides in the Social Security debate have different priorities. Bush wants to save (and improve) Social Security. Democrats want to save Social Security’s dishonesty.

Upon the creation of Social Security in the 1930s, Franklin Delano Roosevelt insisted on an elaborate ruse to foster the impression that Social Security is a grand pension fund. Workers send payroll taxes into the system, where the funds are supposedly saved for their retirement, when they get their payments back. Not so. Social Security has always had a strong element of redistribution. The rich and middle class subsidize the retirements of the poor and don’t get the return from the system that lower-income workers do.

Liberals have a complicated relationship with this aspect of Social Security. When they are thinking in policy terms, they welcome it. They call Social Security a safety net, social insurance, an anti-poverty program. But when thinking politically, they borrow from FDR. The last thing they want the public to know is that Social Security is a glorified welfare program, and the more a worker pays in now, the less, on a percentage basis, he gets later.

By enhancing the safety net and squeezing the benefits of those who can afford the pinch, Bush wants to accentuate exactly the feature of Social Security that Democrats prefer voters to ignore. So Democrats are nearly united in opposing Bush’s proposal to make the system more progressive. They scream that Bush would punish the middle class, who would be put on a sliding scale, with the growth in their benefits slowing as they earn higher incomes.

This attack is based on comparing what middle-income earners will get under the Bush plan to their “promised” benefits under the current system. Those promised benefits are merely promised for a reason. Social Security payments will slowly begin outstripping revenues, and everyone’s benefits are slated to be cut automatically. According to the Washington Post, under the Bush plan a worker making $35,000 a year would get a benefit in 2065 that is “11 percent larger than the check Social Security could afford to issue by then.”

If Democrats want to help middle-income workers, Bush has just the proposal: Let them invest a portion of their payroll taxes in personal accounts that will earn a higher investment return than the execrably performing Social Security system. But Democrats oppose that as well, since they worry that these accounts will prove popular and be expanded by future Congresses, thus putting ever-more resources into the hands of individuals instead of government. That is ultimately what they can’t abide.

Better to have even the Rick Hiltons of the world on the dole, so long as it helps preserve the misleading Social Security status quo.

Rich Lowry is author of Legacy: Paying the Price for the Clinton Years.

(c) 2004 King Features Syndicate

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