Rational Action

• Most americans know soc sec has problems (~1% think it’s perfectly solvent)
• But they are ambivalent about privatization (~50-50 split)
• Bush is convincing them to accept privatization plan
• Party must adapt
• Republicans are owning the media
• Response from traditional demcrats has been weak. They didn’t get the message out
• Bright spot: the blogs! Have provided very balanced debate
• www.ThereIsNoCrisis.com - but can Dems fight privatization by coming up with something better?
• Dems are working against the current if they try to combat Bush plan with no plan
• people know the system isn’t solvent
• Dems can propose their own plan and take advantage of privatization ambivalence
• Evidence that Bush is owning the debate
• people thinking that privatization will fix the problem
• without a wide conception of “the problem” it won’t
• Congress has a whole bunch of tools to fix the problem, Dems MUST start emphasizing them
• “Indexing” - determines the benefits a generation receives, based on how much that generation pays in
• Wage indexing
• one generation supports another
• pays in benefits from its own wages, but gets benefits “up-valued” based on the wages of the next generation.
• the problem: it assumes a constant ratio of workers-to-dependents
• as people live longer, ratio drops, resulting in overpromises
• Price indexing
• one generation pays for itself, gets back the same benefits it puts in
• Not dependent on worker-to-dependent ratio
• When the current system is changed to price indexing, it generates huge surpluses.
• (One generation “pays for another”, but the payout is only what the earlier, poorer generation “put in”.)
• Bush wants this indexing, and will use the surpluses to ultimately pay for the borrowing for his private accounts.
• What Bush isn’t saying: indexing fixes the problem, NOT THE PRIVATE ACCOUNTS
• Since the Dems don’t want private accounts, they can change the indexing to somewhere between prices and wages, maximizing benefits
• Other tools…
• Raise the retirement age slightly
• 1 year every decade?
• Must act soon! People are planning their lives around this
• Can help to keep worker-to-dependent ratio stable
• Benefit phase-in / Increase progressivity
• Workers start receiving benefits at the same age, but not full benefits
• (Is this a real plan?)
• Or reduce benefits paid out to the rich, (while increasing benefits to poor?)
• Increase revenue
• Gov’t employees don’t pay social security!
• Social security tax (FICA) is highly regressive: poor people pay a greater percentage of their income to it
• 6% by both employer and worker on income up to $90k, right now. after that, nothing!
• Make FICA apply to higher levels of income, or unearned (e.g. capital gains) income
• Can help us to stave off benefit cuts
• Maybe not the best strategy for the dems? Similar to John Kerry’s tax plan

This entry was posted on Thursday, January 20th, 2005 at 5:04 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.