Just Say No to Bush's Social Security Scams by Paul Krugman

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Tue, 01 Mar 2005 08:01:56 -0800

 

 

Krugman: Just say no to Putsch's SS scams

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Just Say No to Bush's Social Security Scams

Paul Krugman, The New York Times, March 1, 2005

 

http://www.nytimes.com/2005/03/01/opinion/01krugman.html?hp

 

President Bush's effort to hustle the nation into dismantling Social

Security as we know it seems to be faltering: the more voters hear about

how privatization would work, the less they like it.

 

As a result, some Republicans are reported to be talking about a

compromise in which they would agree to some kind of tax increase,

probably a rise in the maximum level of earnings subject to the payroll

tax. They would offer to use the revenue from that tax increase, rather

than borrowed funds, to establish private accounts, thereby assuaging

fears about the huge debt buildup that would take place under the

administration's plan. They might even agree to make private accounts an

add-on to traditional benefits, not a replacement.

 

But it would still be a bad deal. Creating private accounts in the

current environment, no matter how they are financed, would be a mistake.

 

First, think about the fiscal implications. We have a huge budget

deficit, largely caused by Mr. Bush's decision to cut taxes while waging

war. Any realistic plan to bring the budget deficit under control will

have to include tax increases, especially if we want to avoid the harsh

cuts the administration is trying to impose on Medicaid and other

essential programs.

 

There may be a place for a rise in the payroll tax maximum in such a

plan: AARP, among other groups, has proposed such a rise as one way to

improve the Social Security system's long-run finances. Devoting the

extra revenue to the trust fund would also reduce the overall budget

deficit.

 

But if the revenue from a rise in the payroll tax maximum was used to

subsidize private accounts rather than to bolster the trust fund, it

wouldn't address any urgent priorities: it wouldn't help the long-run

finances of Social Security, it wouldn't reduce the budget deficit, and

it wouldn't support crucial programs like Medicaid.

 

What it would do, instead, would be to get in the way of any return to

fiscal sanity. After all, raising the maximum taxable income would be a

fairly stiff tax increase for some taxpayers. For example, someone

making $140,000 a year might owe an extra $6,000. And the taxpayers who

would be hit hardest by this tax increase would, in many cases, be the

same people who will face a growing burden from the alternative

minimum tax.

 

As a result, an increase in the payroll tax maximum would make it much

harder to pass other tax increases, frustrating efforts to do something

about the deficit.

 

Furthermore, it's all too likely that any compromise that created

private accounts would turn into a Trojan horse that let the enemies of

Social Security inside the gates.

 

This might happen almost immediately, as a result of the legislative

process. As you may have noticed, moderates don't run Congress. Suppose

that a moderate senator thinks he has struck a deal for fully funded

private accounts that don't directly undermine traditional Social

Security. Almost surely, he would be kidding himself: by the time the

conference committees were done with the legislation, the funding would

be gone or greatly reduced, the accounts would be bigger, traditional

benefits would have been cut, and the whole thing would have turned into

a privatization wish list.

 

Even if that didn't happen, private accounts, once established, would be

used as a tool to whittle down traditional guaranteed benefits. For

example, conservatives would use the existence of private accounts,

together with rosy scenarios about rates of return, to argue that

guaranteed benefits could be cut without hurting retirees.

 

In short, anyone who wants to see the nation return to fiscal

responsibility, wants to preserve Social Security as an institution or

both should be opposed to any deal creating private accounts. And there

is also, of course, the political question: Why should any Democrat act

as a spoiler when his party is doing well by doing good, gaining

political ground by opposing a really bad idea? (Hello, Senator

Lieberman.)

 

The important thing to remember is why the right wants privatization.

The drive to create private accounts isn't about finding a way to

strengthen Social Security; it's about finding a way to phase out a

system that conservatives have always regarded as illegitimate. And as

long as that is what's at stake, there is no room for any genuine

compromise. When it comes to privatization, just say no.

 

--E-mail: krugman

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