Responsible Demagoguery

Matt Miller editorialized in NYT You'd never guess from the Democratic hysteria that President Bush's plan to "progressively index" Social Security is an idea we liberals may one day want to embrace.

But you will never get a chance, because too many recorders are recording the Democratic response to those ideas now.

So farsighted Democrats who want to (1) win back power and (2) use that power to fix big problems should quit carping about Bush's evil "cuts" and punish him instead with what I call Responsible Demagoguery: harsh politics that leaves sound policy intact. Why do I say this? Start with this poorly understood fact: Under today's system of "wage indexed" benefits, every new cohort of retirees is guaranteed a higher level of real benefits than the previous generation. Workers retiring in 2025, for example, are scheduled to receive payments 20 percent higher in real terms than today's retirees. Today's teenagers are slated to get a 60 percent increase. When Democrats cry about "cuts," they mean trims from these higher levels.

Dems always scream cut when it is just not as much as they wanted to spend.

A Democrat might ask: Why would we ever change this way of calculating benefits, other than from some Scroogelike desire to slow the rise in future benefits? Well, we probably wouldn't think about it if we weren't on the cusp of the biggest financial crunch in American history. But we are.

Precisely what GWB has been saying.

And with the baby boomers' retirement looming, Democrats need to think beyond Social Security alone to think intelligently about achieving progressive goals. Indeed, if you care about social justice and economic growth, the big policy question for the next generation is this: How do we square the needs of seniors with the needs of the rest of America, at levels of taxation that don't strangle the economy? Those who say today's Social Security structure is sacred are arguing that our top priority - before we even consider anything else - must be to guarantee that every senior will enjoy real benefit increases in perpetuity. But why is this fair or wise when there is no "trust fund" for the 45 million uninsured, or for the working poor or for poor children?

If by "trust fund" you mean what supposedly exists for Social Security, there is no money in it either.

Those who say "hands off Social Security," but who (like me) want government to spend big money on these other needs, are implicitly saying that taxes as a share of G.D.P. will have to rise sharply.

Today, thanks to Bush's misguided tax cuts, federal taxes are around 16.5 percent of G.D.P., lower than at any time in 50 years. Even Newt Gingrich admits that taxes must rise as the boomers age. But to pay for a fuller progressive agenda while leaving Social Security and Medicare untouched (and without running crazy Bush-style deficits), federal taxes would need to rise past late-Clinton-era levels, 21 percent of G.D.P., toward something like 28 percent by 2030. Maybe that makes sense.

Only if you want to destroy the economy.

Or maybe it will mean a descent into tax-induced sloth. Or maybe talking about such levels of taxation in the U.S. is a political fantasy. The point is that Social Security is not something to fix in a vacuum. Once Democrats adopt this broader vision, they may find they're open to fair trims in future benefits as part of a blueprint that sustainably pursues progressive goals for all Americans, not just the elderly.

We know Democrats aren't making sense here because their chief argument is that "progressive indexing" (to prices, not wages) would cut retirement incomes too deeply by 2075. This may be true. But it's a little like worrying that Captain Kirk's phaser may malfunction in that year as well. By 2075, for all we know, genetically engineered seniors may be living in retirement utopias on Jupiter. Or people may be fit and routinely working at age 90. A million things will have changed, just as Social Security's benefit design has changed in the past. If, instead, you look out 20 to 30 years, the benefit trims consistent with Bush's idea are modest (and for low earners, unchanged). If there's a problem, 76 million stampeding boomers will make sure politicians fix it. This isn't a case for joining hands with Mr. Bush; it's a case for keeping political opportunism and policy conviction separate in the Democratic mind. Responsibly Demagogic Democrats will blast Bush for wanting to borrow fresh trillions to create dubious new private accounts.

Borrowing is not required. Bush's proposal just moves 30% of the FICA tax to someplace where congress can't steal it.

But they won't dis "progressive indexing" on the merits, even though it's a juicy gazillion-dollar pseudo-"cut." I know this is asking a lot. Republicans didn't demagogue responsibly when they caricatured Hillarycare as "socialist" back in the 1990's. But being a Democrat may mean being a little better even when you're bad.

Michelle Malkin blogged Kudos to Matt Miller for telling the truth about President Bush's Social Security indexing proposal

Matthew Yglesias blogged The other thing is this putative tradeoff between preserving Social Security and taking care of the poor kids for whom there is no trust fund. There is, in fact, a trust fund for today's kids. It's called "the Social Security trust fund."

It just does not have any money.

The interesting thing about people is that they get older; today's children are tomorrow's old people. Bush isn't proposing cutting benefits on today's old people to give money to today's children. He's proposing cutting benefits on tomorrow's old people (i.e., today's kids) in order to give more money to today's rich people.

That is total stupidity. The 30% is going to personal accounts for either tomorrow's old people to have when they retire, whether or not Social Security is still around.

You can find a full diagnosis of the Kotlikoff Syndrome, which appears to have infected Miller, back on Talking Points Memo during my guest-blogging days. The thing Miller is supporting doesn't do what he seems to think it does.