Don’t Cut the Benefits for the Rich Says Kevin Drum
No, really. Well at least don’t cut them like Bush is suggesting.
But that’s not all there is to fairness. Most Americans also intuitively accept the idea that tax rates become unfair if they get too high, no matter how rich you are. They also think it’s unfair to pay taxes and get nothing back. A common sense notion of fairness suggests that Social Security should be progressive but not flat. If you pay more in, you get more out.
That’s what we have today, but under the “Pozen plan” that’s the basis of Bush’s proposal, it wouldn’t be for long. The CBPP estimates that by the end of the century, a low income earner would get back 49% of his wages in Social Security benefits, the equivalent of $8,070 today. A high earner would get back only 9%, the equivalent of $8,100 today.
If there’s a contradiction here for liberals, I don’t see it. I support progressive tax rates, but I don’t support 99% marginal rates. I support the minimum wage, but I don’t support a minimum wage that’s 99% of the median. I support progressive Social Security benefits, but I don’t support a program that gives low earners 99% of the benefits of high earners who have paid much more into the system.
In short, Bush’s proposal is bad because it cuts the benefits for the rich by too much which is rather weird since Krugman is arguing that Social Security is a small part of the rich’s retirement income so they’d hardly notice if it was comepletely eliminated.
Still Kevin might be onto something with regards to the unfairness in the system. Samuel Bowles and Herb Gintis have argued on the same grounds why welfare has been in trouble for the past couple of decades. But this is a very strange position for Kevin to take given that he has come out rather strongly in favor of policies that tend to reduce inequality (here is a sample link, link, link, link). Further, Kevin has advocated in the past raising/removing the cap on income that is subject to the payroll tax as a solution to the problems facing Social Security along with benefits reductions. I presume that he’d keep the benefits the same. Thus, there very well might be a contradiction if we raise/remove the cap on income that is taxed on exactly the same grounds: Some people are paying in alot, but not getting enough in benefits. Further, if the benefits reductions are not uniform this too could run afoul of Kevin’s “fairness criterion”, especially so when coupled with an increase/removal of the income cap. Maybe Kevin just can’t get past his dislike for Bush.