If a Democrat falls in the forest and the liberal media doesn’t report it, does it make a noise? Predictably, we’re still waiting to find out.
On Monday, Florida congressman Robert Wexler broke ranks with fellow Democrats by offering a plan to reform Social Security. Amazing! After months of party-line stonewalling, Wexler made a gesture of bipartisanship. And yet there hasn’t been one solitary word about it in the “paper of record,” the New York Times.
This is big news. Why the silent treatment from the liberal media?
Could it be the liberal establishment is hoping that if they pretend Wexler’s initiative doesn’t exist, it will just go away, allowing the Democrats to get back to business as usual by boycotting President Bush’s efforts at reform? Or it could be that Wexler himself is seen as a bit of a liability at the moment, as it has been revealed that he is among the biggest recipients in the House of Representatives of lobbyist-paid travel (the same thing Democrats are persecuting Tom DeLay for, although DeLay has done less of it)?
More likely, the reason for the media silence is that the substance of Wexler’s Social Security reform proposal is an embarrassment to the Democratic party. You see, Wexler’s proposal consists of just one element: raise taxes — 6 percent on anyone making more than $90,000 a year. Yes, normally Democrats aren’t embarrassed about wanting to raise taxes. But in the case of Social Security, higher taxes carry some special problems.
First, Social Security is already running a surplus — it takes in more in taxes each year than it will pay out in benefits (it will do so until 2017). Raising taxes today will just make that surplus larger. That’s a problem because that surplus isn’t being saved for the sake of the system’s future needs. The so-called Social Security Trust Fund uses the surplus to buy special-issue Treasury bonds — which is to say, it hands the surpluses over to the federal government to spend.
The federal government is not itself doing any sort of savings in order to retire those bonds when they come due. So when they inevitably come due decades in the future, taxes will have to be raised again. That’s right — the more taxes are raised now, the more they’ll have to be raised again in the future.
Second, even blithely assuming that today’s tax revenues could somehow be saved toward future Social Security benefit payments, is Social Security as we know it really something we want to raise taxes for? Aren’t there other priorities? For instance, the Democrats have been fond of saying that Medicare is in a bigger fiscal crisis than Social Security — and they’re right about that. And of course they have a long wish list of federal initiatives all requiring higher taxes.
It comes down to a penetrating question posed by economist Michael Boskin:
. . . why would we want to raise taxes on well-off workers to fund higher benefits to well-off retirees?
But wait — isn’t Social Security supposed to be a program designed to keep the elderly out of poverty? No: That’s what the Democrats are always saying, but the reality is that everyone, rich or poor, gets Social Security benefits. Visualize this: At this very moment Warren Buffet receives Social Security benefits.
Instead of raising taxes, President Bush has proposed the idea of “progressive price indexing” of Social Security benefits. The idea is to cut back the rate of scheduled benefit growth for the highest wage earners, while increasing the growth of payable benefits for the lowest wage earners. The combination of the two goes a long way toward restoring fiscal balance to the program, preserves and enhances the safety net for the neediest, and addresses Boskin’s question about taxing the well-off to provide benefits for the well-off.
For all that, the Democrats are attacking the idea of progressive price indexing as an attempt to slash benefits for the middle class. But that’s simply a lie. According to Social Security Administration models, for the middle 20 percent of average lifetime wage earners — surely that defines the “middle class” — progressive price indexing would increase benefits payable in 2050 from $1,208 (in 2005 dollars) to $1,380. And that doesn’t even include the additional increase in benefits that would accrue from investing in personal accounts. And the benefit improvement is even greater for workers below the middle class.
The Democrats are ignoring those figures. Instead, liberal think tanks (like the Center for Budget Policy and Priorities) and liberal pundits (like Paul Krugman) are focusing on the purportedly middle-class $60,000 wage earner, whose benefits — they claim — would be lower under progressive price indexing. The claims are false, because these opponents ignore the fact that, under current law, benefits will automatically be slashed across-the-board after 2041 when the Social Security Trust Fund’s assets are depleted.
And the Democrats’ claims are false because $60,000 in Social Security wages is anything but middle class. Remember, your wages used for calculating Social Security benefits are an average of your 35 best years. If that average is $60,000, chances are it included a number of years when your earnings were considerably less. With that in mind it should be no surprise that, according to the Social Security Administration actuaries, only 15 percent of Social Security beneficiaries have $60,000 or more in average earnings. Yet Democratic House minority leader Nancy Pelosi calls such people “solidly middle class.”
So what’s up with the Democrats? President Bush’s plan for progressive price indexing enhances benefits for the true middle class and below, and moves Social Security a long way back toward solvency. Why do they want to tax the well-off to fund benefits for the well-off?
Simple — this has nothing to do with Social Security at all. They’re against Bush’s idea simply because it’s Bush’s idea. And they’re in favor of raising taxes for the same reason Willie Sutton robbed banks — because that’s where the money is.
Congressman Wexler had the courage to come out and say it. But if the liberal media gets its way, you won’t hear him at all.
– Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your visit to his blog and your comments at firstname.lastname@example.org.