Sunday, May 08, 2005


Charles Krauthammer Sets The Record Straight on Bush, The Democrats And Social Security Reform

As usual, the democrats have done nothing but obstruct and object without offering any alternatives. Bush has now offered at least four plans for keeping Social Security solvent - the democrats have offered none. Not only is their claims that there is nothing to worry about now with Social Security laughable, it goes right in the face of claims made by Clinton on other high ranking Democrats just five years ago. In order to seem less obstructionist, the democrats claim they are willing to negotiate - but only if personal accounts are off the table. I'm not sure what the dems think 'negotiation' means but demanding that one of the cornerstones of the Bush plan be thrown out before talks begin is no type of honest or genuine negotiation.

Krauthammer points out that all the proposing so far has been by the president and received by an obstinate left:
To be sure, the president started all this on his own, first proposing personal accounts. Democrats objected that this did nothing about the really important issue, namely solvency. So Bush offered five solvency alternatives in his State of the Union address (four first proposed by Democrats) and welcomed any other ideas. The Democrats answered: "You go first." On April 28 the president did go first, proposing a remarkably progressive reduction in the rate of growth of benefits.

The Democratic leadership, supported by misleading headlines around the country, denounced these "cuts" as the work of a party that never did believe in Social Security and now wants to kill it.

The dems are in such a knee-jerk reflex mode against everything Bush proposes, they do not even realize he has proposed a system where the rich pay more and get less back:
Yes, these are cuts, but only in the growth of promised benefits in the future -- based on formulas written in the pre-baby boomer retirement era that so inflate benefits that they are entirely unsustainable. They cannot possibly be paid by the taxes of the fewer workers in the future who will be supporting the many retirees.

To simplify somewhat, the amount of your first check upon retirement is based on your average wages during your lifetime. Then a formula adjusts that number to wage inflation -- which generally amounts to price inflation plus about 1 percent annually. The Bush proposal is to preserve this ever-increasing, ever-compounding benefit formula for poorer Americans, while gradually phasing out the extra 1 percent as you move to wealthy wage earners.

No one gets cut -- either in nominal or real dollars. Everyone gets at least as much or more than any retiree today, with the poor getting progressively more every year.

So everyone continues to get an increase in their benefits. The wealthy do not get as much of an increase but continue paying the same social security taxes. The poor and middle class get the same increase as always.

Don't be fooled by the word 'cut'. Remember that in Washington D.C., if a plan calls to double funding of a project every year and then a decision is made to only increase the budget by 80% - this will be decried as a cut, despite the fact this means a one million dollar budget would still increase by $800,000.00. To be sure, this is not a cut to the average citizen.

Finally, as to the solvency question: while the democrats want you to put your head in the sand and not worry about the impending doom, the problem is closer than we may think:
And Democrats have a wonderful smoke screen. These "cuts" are not only destructive but unnecessary, they claim, because the insolvency does not kick in until sometime in mid-century -- the Democrats' latest comically precise number is 2052 -- when the "trust fund" runs out. (So much for their month-ago concern about solvency.)

But things are worse than that. The fiscal problem starts to kick in not in 2017 but in 2009. The Social Security surplus, which Congress happily spends every year, peaks in 2008. Which means that starting in four years (and for every year thereafter) a budgetary squeeze begins, requiring new taxation or new borrowing.

If in 2010 tax revenue and spending remain exactly the same as in 2009, the Treasury will not end up with the same size deficit. It will end up with a larger deficit, because the amount of money it was receiving free and "borrowed" from the Social Security surplus will have shrunk.

That surplus shrinks from its peak in 2008 to zero in 2017 and goes negative after that. That is a very serious fiscal problem that starts not in 50 years, not even in 12 years, but in four.

This is a huge problem. Yet not one plan, proposal or suggestion by the lefty democrats. Instead they are filibustering in the congress and using scare tactics with the elderly and poor citizenry to block this necessary reform. We can only hope that the obvious politics of obstruction are noticed by Jane and Joe voter.

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