David Leonhardt has an interesting column that talks about the top economic advisors to the leading presidential candidates. He concludes by listing the things that he thinks that they could all agree on. One of the items on this list is that Social Security benefits would be reduced for high earners "to shore up the program." Well, if these advisors are familiar with arithmetic, they probably would not go this route, because they would know that the benefits that go to high earners are sufficiently small that you can't get enough money out of them to really make much impact on the program's finances. For example, suppose we define "high earner" as someone with average lifetime earnings of more than $50,000 a year. This would be about 10 percent of the people in the program. The average difference between the benefits received by this high earner group and people who averaged $50k is about $3500 a year. Since we probably won't design a structure in which you get less benefits the more you earn, let's say that we take back $2,000 of this $3,500. This would get us about $8 billion a year at present ($2000 multiplied by 4 million higher earners). This is less than 2 percent of SS annual payout. In order to save 2 percent of Social Security's annual payout, you would have angered a lot of people who are very influential and created a system that gives them a real low return on their SS. I don't think that smart economic advisors would do this. Of course, when it comes to cutting SS benefits, dishonest economic advisors (who may or may not be smart) often do things like defining $30,000 a year in wage income as being the cutoff for "high earners." This makes it possible to get more money by cutting benefits, but it also makes voters furious at dishonest politicians. We'll see about this plan. It is too bad that Leonhardt doesn't think that the smart economic advisors could agree on pay as you drive auto insurance -- it seems like a costless way to reduce greenhouse gas emissions would be a no-brainer. It's also too bad that they are all protectionists when it comes to jobs like their own -- no removal of barriers for highly paid professional services. As hotel heiress Leona Helmsley said about taxes, free trade is only for the little people.
-- Dean Baker