Sunday, May 08, 2005

Oh, and Wisdom from Charles Krauthammer...

This one is rich.

He starts by saying that the Democrats "lured Bush out onto a far limb on Social Security..." Hello? This was Bush's idea! He chose this issue, thinking he could make it seem like the Democrats were doing nothing while disaster loomed, and it bit him in the backside. Bush didn't get lured anywhere. It's just that his opponents didn't do anything to stop him from wandering into traffic.

Anyway, Krauhammer wants you to know that your benefits aren't really being cut under this plan -- you're just get less money. Actually he can't bring himself to be that blatant so he admits, with a sigh, "Yes, these are cuts, but only in the growth of promised benefits in the future -- based on formulas written in the pre-baby boomer retirement era that so inflate benefits that they are entirely unsustainable. They cannot possibly be paid by the taxes of the fewer workers in the future who will be supporting the many retirees."

Actually this is stupid. Workers today are 5 times more productive than they were during the pre-Baby Boom years. Five times more productive. It means they're creating 5 times the goods and services that workers in the past did. So, really, because individual workers are so much more effective, fewer workers should be able to hold up the Social Security system. If they're not able to do so, it's because wages (and thus the taxes collected on those wages) haven't risen fast enough to justly compensate workers for their new productivity. And who's fault is that?

Anyway, Krauthammer says, the cuts won't be so bad. Krauthammer, for one thing, says that they're only for "Wealthy" Americans. He doesn't mention the Middle Class, or people earning just 20 grand a year. See, he's already using the Brooks trick. It's just Donald Trump who's giving anything up!

Krauthammer then explains, correctly, that the cuts move from changing Social Security increases from growing along with wages to growing along with prices. Wages only grow 1% faster than prices, he says, so it's just a 1% cut. This seems misleading. Wages are a bigger pool than prices. So, 1% of wages is more, in dollar terms than the equivalent of 1% of prices. Remember this shift to price ndexing only works because it reduces the growth of benefits.

It also ignores the reason that we're wage indexed, rather than price indexed, in the first place. The benefits are supposed to keep up with society at large and it's the prevailing wage, more than the prevailing price of goods, that determine living standards. Pretend its 1980 and you've made a dumb agreement with your boss: "give me a raise equal to annual price inflation every year and I will work for you forever and never ask for another thing." Guess what you would have in 2005? A 1980 living standard. Whatever you could have bought in 1980, you could buy now. But, you'd be able to get nothing more. On average, people in 2005 live better than people in 1980. But price indexed you, would be left out.


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