CNN Money's Plan to Save Social Security: Raise Taxes, Soak the Rich
Jeanne Sahadi at CNNMoney.com has finally realized Social Security needs urgent reform - and by reform, she means going after the wealthy, of course.
On Monday, Sahadi reported on news from the Congressional Budget Office that Social Security is dipping into savings already this year and will not be able to meet its obligations by 2037. That's at least 15 years earlier than what the CBO had predicted during the last administration, and with 27 years to go it's entirely possible the deadline will move again, especially if the current recession persists.
But Sahadi wasn't worried. In fact, she began her piece by saying "it should be a snap" to rescue the program from bankruptcy.
After blissfully assuring readers that Social Security will be fine for another 27 years, Sahadi offered three easy-peasy steps that could be enacted over time to make the program solvent. Sadly, those three ideas were all too predictable:
Raise the age limit, ration benefits paid out to the rich, and remove the cap on taxable income to exact more revenue from - you guessed it - the rich.
This genius strategy was touted as the "well known" plan put forth by America's experts. Yes it sounded exactly like the plan they come up with for everything else, but they swore it would work for this. They even had a nonpartisan think tank to recommend it:
Reforming Social Security is still a hot-button issue. But relative to other measures needed to stabilize U.S. debt, it should be a snap.
"They could begin with Social Security, which oddly enough has gone from being the 'third rail of American politics' to the low-hanging fruit," wrote Robert Bixby, director of the Concord Coalition, a nonpartisan, grassroots deficit watchdog group.
Ah the good old Concord Coalition, which is so grassroots it was founded in 1992 by a bunch of beltway insiders who hobnob with presidential administrations.
On Monday, a Concord Senior Economist appeared in the Christian Science Monitor to push for a Value Added Tax on Americans - not as a reform measure to replace the current mess, but as an extra burden placed on top of everything else. A few weeks before that, Executive Director Robert Bixby insisted that "the only solution" for America's debt was a tax increase combined with less spending.
That's a sample of this "grassroots" watchdog group's typical reaction to fiscal issues.
And that was the formula offered to CNN Money as the way to save Social Security:
The menu of options for making Social Security solvent is well known.
Increasing the retirement age: One option that gets a lot of buy-in from policy experts is a slow increase in the retirement age at which one may collect full Social Security benefits. Today, it's 66, and it is scheduled to increase to 67 by 2027.
This idea initially sounded reasonable, as most people concede it will be inevitable at some point in the future. But the second suggestion got a bit dicey:
Reducing growth in benefit levels: Another measure that has gotten a lot of attention is "progressive indexing." Such a measure would not affect the promised benefits for lower income workers but would lower future benefits for middle- and high- income workers relative to what is currently promised.
Under progressive indexing, the Social Security benefits of higher-income workers would be indexed to inflation rather than to wages, as is currently the case. That would have the effect of reducing benefits from their current promised levels because inflation tends to grow more slowly than wages.
Progressive indexing is essentially the same idea as a progressive income tax: the more you earn, the less you get to keep. High income citizens would see their benefits tied to a stricter index, meaning cost of living increases would be harder to come by, while low income citizens would be given more generous raises.
Who would continue to pay for those raises? Wealthy young workers, naturally:
Raising the payroll tax: There is also the option of increasing the Social Security payroll tax rate on wages or raising the cap on how much of wages is subject to the payroll tax (currently it's the first $106,800).
So even though your benefits would be capped and subject to meager inflation increases, the amount seized from your paycheck won't have such restrictive caps. Pay more taxes, get less out of it.
Nowhere in Sahadi's entire report did she entertain conservative ideas such as privatizing any portion of Social Security. President Bush's reform plan in 2005 was completely ignored, as was Congressman Paul Ryan's (R-WI) who advanced a similar proposal in February. Readers would get the sense from Sahadi that a tax-and-ration plan is the only idea that exists.
Of course, for Sahadi to give ear to those ideas now, it would signal a major change in her reporting. Back in 2005 when Bush introduced his plan for partial privatization, Sahadi did everything she could to undermine it. First she insisted the program was not in dire trouble, and then she attacked privatization as a bad idea.
Check out Sahadi all over President Bush's reform plan on January 12, 2005:
The debate over Social Security is well under way, with President Bush Thursday giving guidelines for addressing what most acknowledge will be a shortfall in the program's funding in 40 or so years.
The president and some others support overhauling the system by partially privatizing it by giving younger workers the option of creating personal accounts and diverting some of their Social Security taxes to fund them.
But critics say the current proposals are dangerous. And some argue that it's wrong to characterize the eventual shortfall as a crisis.
CNN/Money will be covering the Social Security debate on an ongoing basis. This week, we're mapping out some of those critics' arguments.
Not only is Social Security not in crisis, it is as financially sound as ever, according to the liberal Center for Economic and Policy Research, run by Mark Weisbrot and Dean Baker, coauthors of "Social Security: The Phony Crisis."
The drumbeat continued for Sahadi on February 3 of that year, when she reported it was "not necessarily accurate" to claim the program would be bankrupt, and that President Bush "may have overstated" the scope of the problem.
In 2007, financial projections began to sour, but by then the media had succeeded in forcing President Bush to drop his reform plan. On March 15, 2007, Sahadi wrote this little gem:
With an expected swell in benefit-eligible retirees in the next 20 years, increased life expectancy, and a Social Security trust fund the government may have to go into debt to repay, actuaries and pension experts have been calling for changes to bolster the system's long-term funding. It's a debate that has been put on hold for now.
For those in their 20's, 30's and 40's, you can bank on this: whatever changes are decided, you'll either end up paying more for the benefits promised or you'll receive less of them, or, possibly, both.
How things changed in less than two years. And how convenient the debate was "put on hold" with no explanation as to who was responsible for doing that. With no retrospection into her past reporting, Sahadi flippantly told young readers that the damage was done and their futures would be bleaker.
Almost exactly one year later, on March 25, 2008, Sahadi started pressing the panic button:
Treasury Secretary Henry Paulson, saying that Social Security is "financially unsustainable," called Tuesday for quick action to keep the system strong and released a report detailing the program's funding shortfalls.
The federal government will have to start paying back what it owes the Social Security trust fund in 2017 so the program can continue paying 100% of benefits. By 2041, if the system is left unchanged, Social Security will only be able to pay out 78% of benefits promised to future retirees.
Now in 2010, that all-important tipping point is projected to happen in 2037. That's a window of 15 years that evaporated in the span of one administration.
It is encouraging that the writers at CNN Money have finally caught on to the coming fiscal disaster. But five years later, the aversion to privatization remains as strong as ever, and with Democrats in charge of Washington, that debate will be "on hold" for some time to come - which is exactly what CNN Money was behind all along.