Thursday, December 09, 2004

A tax hike here, a tax hike there – pretty soon you’re talking real money

There have been a flurry of articles on Social Security lately, probably because it looks like President Bush is serious about reforming the system before it swallows the entire federal budget. The Democrats, showing that they can’t kick their half-century habit of scaring Grandma, have reflexively opposed any meaningful reform while offering no alternatives of their own. Here’s Senate minority leader Harry Reid on “Meet the Press” this past Sunday:

MR. RUSSERT: But, Senator, there are now 40 million people on Social Security. In the next 20 years, there's going to be 80 million. Life expectancy used to be 65 years old. It's approaching 80. If you have twice as many people on these programs for 15 years, you've got to restructure them in some way, shape, or form. What is your solution?
MR. RUSSERT: What is your alternative?
SEN. REID: Tim, all experts say that Social Security beneficiaries will receive every penny of their benefits that they're entitled to--100 percent of them--until the year 2055. After that, if we still do nothing, they'll draw 80 percent of their benefits. I want those beneficiaries after year 2055 to draw 100 percent of their benefits. But this does not require dismantling the program. For heaven's sakes, they're crying wolf a little too regularly here. There is not an emergency on Social Security. We can do this. The president should not try to jam this private accounts in an effort to destroy Social Security.
In the early--when Social Security came before the Congress, who opposed it? The Republicans. And they have a long memory. They've been trying to destroy Social Security for a long time and now they think they have an opening to do it.
Did you catch the alternative? There wasn’t one. Russert persisted in vain:

MR. RUSSERT: Would you look at increasing or raising the age of eligibility? Would you look at means testing? Would you look at any reform?
SEN. REID: Of course. There are reforms that probably can happen in Social Security, and we're not, you know, saying don't even touch it. Let's take a look at it. I said I want people after the year 2055 to be able to draw all of their benefits. And, sure, we'll take a look at it, but don't give the ball to Wall Street.
The Democrats are not going to raise the retirement age, they’re not going to look at means testing, and they’re not going to support a review of benefits. After they’re done berating Republicans for dismantling “the most successful social program in the history of the world” (Reid’s words) they’ll propose another round of tax hikes. Enough already: as I’ve noted before, the payroll tax has been raised 20 times and nearly 80% of American workers now pay more in payroll taxes than income taxes. No matter what the virtues of Social Security, we cannot simply keep raising taxes on young workers, especially since many of them believe they will see a UFO before they see a penny from Social Security. As Rich Lowry pointed out, the X-Box generation may hit a breaking point where they revolt against additional taxes:

As Michael Tanner of the Cato Institute points out, what is more likely to create a revolt against Social Security is ever-higher payroll taxes funding an ever-worse deal for younger workers as they support more and more baby boomer retirees. This is precisely the AARP solution to the program's looming financial problems: Lift the cap on the amount of wages to which the payroll tax applies from $88,000 to $140,000. For the AARP, piling more taxes on people who aren't retired — i.e., working people — is always the best option.
And James Lileks trains his razor-sharp wit to ask “Why are Democrats intent on alienating young workers?”:

Everyone knows the system will explode in a shower of shredded promissory notes at some point. Every year the drop-dead date gets massaged and moved around, but you have a great number of people who read the new Projected Year of Doom, run the numbers in their head, and think: Well, I'll be dead.

The youth of America, however, are suspicious about ever seeing dime one. The youth of America have a hard time putting down the gaming console every four years and making it to the polls, so there's not much hay to be made reshaping the system to reassure them.

But this will change once they marry, spawn and start looking at their own golden years.
The generational war of Social Security is coming: this Ponzi scheme that started out with 16 workers per retiree cannot be sustained when there are only two taxpayers sending the kids’ college tuition to Florida. “Let’s take a look at it?” Do, please.


MaxedOutMama said...


This is a superb post. If the Democrats keep maintaining a purely oppositional stance to attempts to deal with real problems they will keep declining as a party. They shot themselves in the foot on welfare reform, and I'm disappointed in Reid for not even acknowledging the existence of this problem.

Eric said...

Thanks for the compliment. Social Security is one issue I'm really passionate about since the wholesale transfer of wealth from the young to the old cannot be sustained. The Federal government spends something like $10 on people over 60 for every $1 spent on children under 13. (Something like that - I'm working from memory here).