AARP has just proposed closing part of the long-term Social Security shortfall by raising the cap on income subject to the Social Security tax from its present
ceiling of $90,000 to $140,000.
In other circumstances, this might be a good idea. In the present political context, it's just not smart politics.
AARP, which is adamantly opposed to privatization, has been convinced by its pollsters that "you can't beat something with nothing." But there's an even truer rule
of politics, namely: When your opponent is doing himself in, just get out of the way.
George W. Bush's privatization plan is falling of its own weight. This is not the time to complicate things.
Moreover, a big part of the opposition campaign has been based on debunking the Bush claim that the system is in crisis. Polls suggest that Bush is not making much headway with the crisis theme.
By proposing this large and visible a tax increase, AARP just lends credence to the crisis-mongering. Indeed, according to AARP's statistics, this large tax hike would close only 43 percent of the shortfall, which suggests that the shortfall must be enormous.
But Congressional Budget Office numbers indicate that the real shortfall is modest and manageable -- an average of less than half of 1 percent of GDP over 75 years.
AARP's polls show that if you ask people how to fix Social Security, raising the cap on taxable income beats cutting benefits or putting the government deeper into
debt. But AARP doesn't go far enough. Restoring the pre-Bush tax code on the top one percent of taxpayers would be more than enough to fix the entire shortfall.
And that kind of tax hike, which affects only about one million multimillionaires (who don't need Social Security at all), is far better politics than a steep payroll tax
increase on the much larger upper middle class.
Also, this AARP proposal resembles one by South Carolina Senator Lindsey Graham, who proposes a similar increase in the payroll tax -- to finance privatization.
Having a major opposition group embrace the idea increases the risk of a bipartisan "grand compromise" that uses some of the proceeds to underwrite privatization.
The time will certainly come when we should revisit how Security is financed. In that context, raising the cap and adding a big exemption at the bottom would make
the currently regressive payroll tax more progressive.
But that's a reform for another day, maybe when Bush's commission on tax policy reports, next fall. Now is not the time for a big hike in payroll taxes, even a
progressive one, when the risk is an unintended boost to the privatizers.
A lot is riding on AARP, the best-funded of the opponents to privatization. AARP sure screwed up the Medicare drug benefit fight. This time, they had better get
their tactics right.
Robert Kuttner is co-editor of The American Prospect.