With the candidates lining up to support raising the payroll cap on Social Security -- a deeply progressive tax hike that warms my heart -- Paul Starr asks if this is something they've really thought through:
Let's think carefully about this. Do Social Security's problems need to be addressed now by a tax increase? How many tax increases can the next president expect to get through Congress? And what would be the impact of taxing all earnings on the long-term political viability of Social Security?[...]
Given the political resistance to any proposals for increasing taxes, a new president will have to consider carefully whether the first priority for new revenue in 2009 ought to be solving the speculative budgetary problems of the 2040s. A new administration might want, for example, to do something about the 47 million Americans who now don't have any health insurance. Or it might want to make productive investments in education, research, and infrastructure that could help keep the economy growing at more than 1.8 percent a year.
And consider this: Eliminating the cap on taxable earnings in Social Security will change the relationship to the program of people in the income brackets over $97,500, most of whom are not to be confused with plutocrats. Social Security remains a good deal for most of them because it provides income in old age that, unlike private pensions, is indexed for inflation. Even for affluent seniors, this is a form of inflation-risk protection that serves a valuable role in a portfolio of retirement income.
But take off the cap on taxable earnings, and many upper-middle-income people will decide the program is no longer in their interest. If you want to revive the movement toward privatization, eliminating the cap on taxable earnings would be just about the best thing you could do.
That may be true. Or raising the cap could do just about nothing to political support for the program. I'm really not sure. But Paul's certainly right that it requires a pretty bizarre prioritization scheme to make a basically solvent pension program the first of your fights. Indeed, we've seen how starting an administration with fiscally responsible, tough medicine policies, goes. Bill Clinton came in and fought to pass NAFTA and the Deficit Reduction Act, both of which required painful compromises, spending cuts, economic losers. By the time he turned his attention to health care -- which he thought of as the policy of the three which would give back to some of the perceived losers from the first two -- there was no congressional energy for yet another hard sell.
