The Taxonomist: Wild Pitch

Late in the evening of St. Patrick's Day, while much of America was out carousing, our hardworking U.S. senators stayed in session. It was time for the Senate to take its first stab at addressing Social Security's long-term financial health since President Bush began his push to restructure the program. The result wasn't pretty.

Did our devoted lawmakers vote to give the program a new infusion of revenues to meet its needs? To reduce future benefits to bring them in line with expected receipts? Or to finally take some steps to solve Social Security's most daunting problem, the government's ballooning debt? No, no, and heavens no. Instead, our fearless leaders voted to increase Social Security benefits, in a way carefully targeted mainly to benefit the best-off retirees.

In its late-night session, the Senate agreed to a budget amendment that calls for boosting after-tax Social Security benefits by an average of 14 percent for retirees with annual incomes greater than $200,000. Meanwhile, three out of four Social Security recipients -- including virtually everyone making less than $40,000 a year -- wouldn't get a penny in added benefits. More than half the added benefits would go to the 8.8 percent of retirees who make more than $100,000 a year, who would get an average annual increase of $1,894 each.

Jim Bunning, a star pitcher with the Detroit Tigers and Philadelphia Phillies in the '50s and '60s, is now the chief Senate sponsor of this travesty. He claims it would put “more money back in the pockets of millions of our seniors for them to spend on things like prescription drugs.” He doesn't mention that the vast majority of seniors would not only get nothing from his plan but would also be called upon to help pay for it.

Bunning's proposal would cost $64 billion over four and a half years. But that's just the beginning. Social Security's actuaries say that over the next 75 years, it would cost a trillion dollars! As Robert Greenstein of the Center on Budget and Policy Priorities points out, that's more than a quarter of Social Security's total projected shortfall over that period.

Technically, the Senate wants to repeal a 1993 law enacted under Bill Clinton, who expanded a means-tested cut in Social Security benefits adopted a decade before during the Reagan administration. The earlier provision had made better-off retirees subject to income tax on up to half of their Social Security benefits, with the resulting savings accruing to the Social Security Trust Fund. Due to Clinton's efforts, the taxable share of benefits now can be as high as 85 percent. At today's income-tax rates, that reduces benefits by as much as 30 percent for the very highest-income retirees.

Means testing was accomplished through the income tax (rather than by a direct benefit cut) mainly because it was the easiest, most progressive way to do so. In addition, some Democrats found it politically attractive to pretend that they were increasing taxes rather than lowering benefits.

The Senate's 55-to-45 vote to increase Social Security benefits for the wealthy was pretty much a party-line affair. Only five Republicans voted no, including deficit hawks Pete Domenici of New Mexico, George Voinovich of Ohio, Lincoln Chafee of Rhode Island, and Olympia Snowe of Maine, plus Ted Stevens of Alaska, who may have other spending priorities. But their wisdom was canceled out by five defecting Democrats, including newly elected Ken Salazar of Colorado, Bill Nelson of Florida, Mary Landrieu of Louisiana, Ben Nelson of Nebraska, and Robert Byrd of West Virginia.

Like Bush's plan to borrow trillions of dollars more to pay for his private-accounts scheme, the Bunning amendment stands in sharp contrast to the responsibility that Congress has historically shown in dealing with Social Security. When the program faced a funding crisis in 1977, Democrats put it back on the road to solvency by boosting Social Security payroll taxes by a third. Six years later, with Republicans in charge of the White House and the Senate, lawmakers followed the counsel of the Greenspan commission and cut long-term benefits by almost as much. You can debate the respective merits of those changes, but they're the reason why Social Security will remain internally solvent through the middle of this century.

Sadly, these days we're led by people whose zeal for serving the well-off is exceeded only by their disdain for the laws of arithmetic. I keep hoping that the voters will eventually wise up.

Robert S. McIntyre is the director of Citizens for Tax Justice.

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