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Tuesday, April 26, 2005

Social Security Politics

William Voegeli writes about the Social Security debate:

We know at least two things about the Democratic Party. First, it is preoccupied with economic inequality. Implying that the middle class had somehow vanished, Sen. John Edwards campaigned for a year with a showcase speech about two Americas, 'one for people who are set for life, [who] know their kids and their grandkids are going to be just fine; and then one for most Americans, people who live paycheck to paycheck.' Second, it is unyielding in its defense of Social Security--a defense that rejects the idea of reducing by a penny the pension checks the government sends to Warren Buffett. (Twenty years ago Paul Kirk, then chairman of the Democratic National Committee, suggested publicly that the party ought to consider means-testing Social Security benefits. He was forced--before the end of the day--to issue a statement of regret for even mentioning the subject.) To make sense of this apparent contradiction is to make some sense of the ongoing debate over Social Security and the meaning of modern liberalism. One can begin by imagining a government program to prevent poverty among the aged, one that would be both simpler than Social Security and more aligned with liberals' desire to tax the rich and help the poor. It would derive its revenue from the progressive income tax rather than Social Security's regressive payroll tax. It would pay its benefits according to individual need. And for the majority of people who--John Edwards notwithstanding--are neither rich nor poor, it would devise incentives and requirements that would encourage them to provide secure retirements for themselves from pensions and savings. What's wrong with such an approach? 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. There is cynical calculation in Cohen's position, and also some idealism. Chris Suellentrop, a political writer for the webzine Slate, captures the former when he says, 'Liberals are willing to keep paying rich people Social Security in the hopes that the payments will keep those rich people from figuring out that Social Security is a redistributive transfer program.' The scope and complexity of Social Security--not one American in a thousand grasps the arcane formula that relates retirement benefits to lifetime earnings--reflect something more than the old line about a camel being a horse designed by a committee. There is method in the madness of social insurance, and the madder its programs the more methodical its politics.
Read the whole thing, you won't be sorry. I would be especially interested to see any responses on this by those who favor Social Security as it is. IF you think Voegeli is wrong about this stuff, I would like to know why and what your reasoning is.


Blogger honestpartisan said...

I actually think he's right in a lot of ways, although I don't really have a problem with it. Social Security was supposed to be insurance against being destitute when you retire. Because of that, the system is designed to pay out benefits progressively despite the fact that the FICA tax is regressive; the lower your income is, the greater percentage of your income you receive in benefits when you retire.

A social insurance program like this is going to be demonstrably more politically feasible than a means-tested welfare program. What's interesting is that this was a great debate among liberals in the '80s, between neoliberals at the Washington Monthly, for example, who didn't think that affluent retirees should get Social Security benefits, and traditional liberals like the ones who started the American Prospect, who thought that turning Social Security into a welfare program would doom it.

One compromise that was reached and (I think) implemented was to tax Social Security benefits as income for affluent retirees. I'm not sure about the specifics of that, though.

The progressive nature of the disbursal of Social Security benefits and progressive taxation of such benefits strikes an acceptable compromise to me between the political imperative to maintain the most successful poverty-elimination program in U.S. history and the fiscal reality that government dollars are best spent on the problems that really need addresing.

4/28/2005 03:25:00 PM  
Blogger Dave Justus said...

Has social security elimated any poverty?

We always here about the poor Seniors who only have their social security check and can't make ends meet.

Conversely, I don't think it wrong to assume that those seniors who have enough have less because of their lifetime social secuirty contributions than they would have otherwise.

4/29/2005 02:13:00 PM  
Blogger honestpartisan said...

Social Security payments of course depend on your lifetime contributions, so some Social Security recipients are indeed poor. But a lot less are poor because of Social Security by most measures that I've seen. Before Social Security, seniors had the highest rate of poverty for any age group; now they have the lowest.

I've read this a few places before, but I don't have sources right off the bat. If you want, I can try to locate the sources I saw for this.

4/29/2005 02:30:00 PM  

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