A proposal from David Brooks is labeled back door privatization by Noam Scheiber. Brooks writes:
We could start by indexing Social Security benefits to prices, not wages, so the system wouldn’t go broke. Then we could give everybody under a certain age KidSave accounts.
So, if I’m understanding this correctly, we’d create private accounts for people and stick a little money in them, then we’d slash Social Security benefits. Finally, we’d allow people to divert their payroll taxes into their private accounts.
When Move On ran its ad suggesting that the Bush proposal would cut Social Security benefits, Factcheck chimed in with its half-truths:
Replacing wage indexing with price indexing would hold that $14,000 benefit constant, adjusting it only for inflation, so that a worker retiring in 2075 would get a benefit with the same buying power as today’s average retiree. That would more properly be called a “freeze” than a “cut.”
Factcheck forgot to say that future generations would be paying more “payroll contributions” in real terms since the Bush plan would maintain that 12.4% deduction, which would be applied to an ever growing real wage base. So the right analysis could easily state: (1) workers would get a lower percentage of their annual working income in the form of retirement benefits, or (2) they would get a lower implicit real return – perhaps negative, or even better (3) the Bush plan represents a back door employment tax increase.
If either Factcheck or Mr. Brooks is interested in an honest discussion – could they please admit that the Bush Social Security plan is nothing more than an employment tax increase to subsidize the General Fund deficits?