GOP suggest"compromise" SocSec priv accts-just cut bene's for non-low wage

[papau]

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2005/01/10/a_balancing_act/

A balancing act
By Robert C. Pozen | January 10, 2005

<snip>A viable package of Social Security reforms must link the political appeal of personal accounts to the political pain of benefit constraints. The crucial question is: What type of benefit constraint? In my view, the top priority should be to preserve currently scheduled benefits for low-wage workers. They depend primarily on Social Security for retirement income and typically have no other sources of savings for old age like 401(k) plans or individual retirement accounts.

If preserving the benefits of low-wage workers is the top priority, then Congress should reject any proposal to move back normal retirement age -- which is already scheduled to move back to age 67 by 2027. In principle, such moves would apply equally to all levels of wage earners. In practice, moving back normal retirement age to 68 or 70 places special burdens on low-wage earners, since their jobs involve more physical labor than the jobs of high-wage earners. Moreover, given current levels of unemployment, it is unclear if workers over age 67 could readily find jobs.

Similarly, if preserving the benefits of low-wage earners is the top priority, Congress should reject proposals to move completely from wage to price indexing of initial Social Security benefits. At retirement, initial benefits are computed by increasing the career earnings of any worker by the amount wages have risen in the American economy during his or her working career. This is called wage indexing. After retirement, by contrast, Social Security benefits are increased annually in line with the consumer price index. This is called price indexing.

Since wages grow considerably faster than prices, a switch from wage to price indexing of initial benefits for all workers would eliminate the Social Security deficit over the century. However, this switch would be devastating to low-wage earners, who have no other sources of retirement income. The amount of their wages replaced by Social Security benefits would decline from more than 46 percent to roughly 25 percent. On the other hand, middle- and high-earners can cope with benefit formulas that protect the purchasing power of their monthly checks against erosion from price inflation. They already have 401(k) plans and IRAs to supplement their Social Security benefits in retirement.

Therefore, the best approach to benefit reform would be progressive indexing. This means the continuation of wage indexing for initial benefits of low-wage earners; by contrast, the initial benefits of middle- and high-wage earners would be increased by price indexing. The initial benefits of middle-earners would be increased by a blended index composed half of wage indexing and half of price indexing.<snip>


Robert C. Pozen is chairman of MFS Investment Management (a mutual fund management firm owned by Sun Life of Canada) and a former member of the President's Commission to Strengthen Social Security

[Cocoa]

1. framing the debate radically dishonestly

thanks for including his affiliation, it says it all.

This argument takes the private accounts as given, and ignores the controversy (to understate it massively) over those accounts.

[papau]

2. I suspect this is what our Dems - Ried and crowd - will try to sell to us

as the great compromize!

[Cocoa]

3. based on what?

based on Reid's statements, private accounts are off the table.

[papau]

6. Well Baucus will head Soc Sec "negociations" - and ABCNote implies

that a compromise is in the air (granted the ABC folks often repeat Rove planted ideas as if they were their own - and Rove does like to claim victory well before he has it).

In any case Roll Call's Emily Pierce reported that Reid (D-NV) has Baucus (D-MT) doing the lead negotiation on Social Security.


So, do we anticipate Reid/Baucus screwing the aged and the left by pissing on the Democratic Caucus line in the sand, and "reaching across the aisle"?

[JohnnyRingo]

4. I bet for purpose of this "compromise", they'll define low wage as

12k per year and below.
Everyone else will have been expected to put away 20% per week for retirement.

[Ganja Ninja]

5. Here's my suggestion.

Democrats should just abstain from any tampering with Social Security and let the GOP do it all by themselves. The Republicans have a majority. They don't need our help. If it ain't broke don't fix it. If they screw it up then it's on their heads and the Democrats don't have to share the blame. We don't need to lift a finger. This is a GOP initiative. Let the GOP be the GOP and let the people see them for what they are.