I try to avoid linking to Paul Krugman columns — it’s just too easy; they’re all gems — but today’s column is particularly important. In fact, it’s a complete refutation of a column on the same op-ed page that ran over the weekend.
The newly-hired John Tierney wrote on Saturday that Bush’s plan to cut Social Security benefits on “upper income” retirees is an example of the White House embracing a progressive approach.
Democrats like to portray Mr. Bush as King George or Marie Antoinette. But on Thursday night, when he promised to improve benefits for the poor while limiting them for everyone else, he sounded more like Robin Hood, especially when he rhapsodized about poor people getting a chance to build up assets that they could pass along to their children.
This is foolish on any number of levels. As Kevin Drum noted, Tierney is just making things up when he argues that Bush would “improve benefits for the poor.” As Bush’s approach currently exists, the poor wouldn’t get more benefits, they’d stay the same while everyone else’s benefits would get cut. Not exactly Robin Hood.
But Krugman follows up with a column attacking the very idea that Bush’s tactic is based on a progressive approach to Social Security that targets the rich. It’s not.
It turns out that the middle class would face severe cuts, but the wealthy would not.
The average worker — average pay now is $37,000 — retiring in 2075 would face a cut equal to 10 percent of pre-retirement income. Workers earning 60 percent more than average, the equivalent of $58,000 today, would see benefit cuts equal to almost 13 percent of their income before retirement.
But above that level, the cuts would become less and less significant. Workers earning three times the average wage would face cuts equal to only 9 percent of their income before retirement. Someone earning the equivalent of $1 million today would see benefit cuts equal to only 1 percent of pre-retirement income.
In short, this would be a gut punch to the middle class, but a fleabite for the truly wealthy.
OK, so Bush would really stick it to families in the middle, but at least the poor would be spared, right? Not exactly.
At some point, as Social Security as we know it is fazed out of existence, low-income beneficiaries will find the system has little left for them.
As [Jason Furman of the Center on Budget and Policy Priorities] points out, the Bush plan wouldn’t just cut benefits. Workers would be encouraged to divert a large fraction of their payroll taxes into private accounts — but this would in effect amount to borrowing against their future benefits, which would be reduced accordingly.
As a result, Social Security as we know it would be phased out for the middle class.
“For millions of workers,” Mr. Furman writes, “the amount of the monthly Social Security check would be at or near zero.”
Republican leaders in Congress are anxious to get this into legislative form and force a vote on it this year. Once again, many GOP lawmakers are looking across the aisle and asking, “Why are all those Democrats smiling?”