President Bush proposes social security reforms that effectively
means-test it:
Under the proposal, first
developed by Robert C. Pozen, an investment executive, benefit cuts
would be imposed gradually on future retirees. The cuts would fall most
heavily on people at upper income levels. The cuts would be less, but
still substantial, for middle-income workers. Low- income people would
suffer no benefit cut at all. Politically, the plan has the advantage,
in the White House's view, of being attractive to moderate Democrats by
making the system more progressive. (Link)
Has Bush suddenly become a redistributionist, soak-the-rich
pinko? I doubt it. Instead, I suspect there may be something else going
on here. William Voegli recently reminded us of what he calls The cynical
idealism behind Social Security:
Wilbur Cohen, who devoted half a century in government to
designing and defending America's social insurance programs, gave his
answer in a 1972 debate with Milton Friedman on Social Security:
"I am convinced that, in the United States, a program that deals
only with the poor will end up being a poor program. . . . Ever since
the Elizabethan Poor Law of 1601, programs only for the poor have been
lousy, no good, poor programs. And a program that is only for the poor-
-one that has nothing in it for the middle income and the upper income-
-is, in the long run, a program the American public won't
support." In other words, people who don't need Social Security
and Medicare are enrolled as beneficiaries for the sake of people who
do. Cohen doubted that people could be persuaded to support
programs to help the poor, but he was confident that they could be
induced to support them.
Since
Social Security long has been the third rail of US politics, maybe Bush
thinks the prospects of serious changes in the program will be stronger
in the long-run if political support for it is weakened. It would be
consistent with suggestions that Bush's real goal in pursuing private
accounts is to expand the investor class, which leans GOP. In other
words, the whole thing could be just another move in a long chess
match.
If I'm right, the nice thing about Bush's plan is that it
forces the Dems to make a tough choice: Do they publicly disavow their
adherence to soaking the rich progressivity as a solution to
income inequality or do they risk weakening long term political support
for their signature program?
Unfortunately, I don't think the Dems are dumb enough to
fall for it. After all, while the
Dems may think the people are too dumb to fend for themselves, the
Dem elites are pretty bright. Or, at least, well-educated. Even Teddy
Kennedy supposedly managed to pick up some learning while drinking his
way through Harvard and Virginia. So they'll probably figure a way out
of the trap. And if they don't, their pals in the MSM will do it for
them.
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