It's Too Early To Talk About Benefit Cuts

Sorry I can't link to this, but The Wall Street Journal keeps most of its content for paid subscribers only: Today, Robert Pozen defending his aggressive plan to means test Social Security on the Journal's Op-Ed pages. I was surpised by a few of his statements, which I'll summarize and respond to.

First, he says that his plan doesn't involve cuts in benefits. It does, of course, promise smaller payouts than the current plan promises, but, he argues that the current plan can't make good on its promises anyway. His plan, he says, pays out more than a bankrupt Social Security system will be able to.

This point completely messes up the debate. What our politicians should be doing is figuring out a way to meet the current system's obligations and promises. It's frankly too early in the discussion to just accept that the current system can't be saved with all promises intact and we're only hurting ourselves to accept Pozen's proposal right away.

One proposal would be to simply tax earnings over $90,000 a year the way earnings below $90,000 are taxed, creating a Social Security flat tax, of sorts. I'd go with a progressive system and actually cut the rate on earnings below $90,000 a year and put in a slightly higher rate on earnings above. One of Pozen's objections to any sort of tax increase on higher wage earners is that it's somehow unfair to the rich. But I'm not sure how it's more unfair than Pozen's plan, which cuts benefits for everybody making over $20,000 a year.

But, fine, leave the tax system the way it is and simply make Social Security a more important part of the over-all budget. If you think about it, it's amazing that we found $200 billion for foreign occupations and found money for big Pentagon budget increases but that we somehow can't afford Social Security. And what's been the effect of our military spending anyway? It's created an international mood of fear that has driven oil prices (along with toehr commodities) through the roof and stagnated our economy, which would otherwise be in recovery. Since the best fix for Social Security is higher productivity, higher wage growth, and a growing economy, this problem really can't be separated from the problem of the budget at large and the problem with the budget at large is... priorities.

This is a crucial moment in a young debate. If the public accepts, at this point, that benefit cuts are proper and inevitable, then those cuts will occur. But we don't have to accept that, yet. We might not ever have to accept it. I, for one, would like to see the government justify the rest of the budget before we go any further. There are probably a lot of Pentagon programs that could be safely cut and then injected into the Social Security system in order to shore it up. Why don't we talk about that and then we can talk about benefit cuts?