Krugman: A Gut Punch to the Middle

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" Zepp " <zepp

Mon, 02 May 2005 05:18:34 -0700

[Zepps_News] Krugman: A Gut Punch to the Middle

 

 

 

 

<http://www.nytimes.com/2005/05/02/opinion/02krugman.html?hp>

A Gut Punch to the Middle

By PAUL KRUGMAN

 

Published: May 2, 2005

 

By now, every journalist should know that you have to carefully check

out any scheme coming from the White House. You can't just accept the

administration's version of what it's doing. Remember, these are the

people who named a big giveaway to logging interests " Healthy Forests. "

 

Sure enough, a close look at President Bush's proposal for " progressive

price indexing " of Social Security puts the lie to claims that it's a

plan to increase benefits for the poor and cut them for the wealthy. In

fact, it's a plan to slash middle-class benefits; the wealthy would

barely feel a thing.

 

Under current law, low-wage workers receive Social Security benefits

equal to 49 percent of their wages before retirement. Under the Bush

scheme, that wouldn't change. So benefits for the poor would be

maintained, not increased.

 

The administration and its apologists emphasize the fact that under the

Bush plan, workers earning higher wages would face cuts, and they talk

as if that makes it a plan that takes from the rich and gives to the

poor. But the rich wouldn't feel any pain, because people with high

incomes don't depend on Social Security benefits.

 

Cut an average worker's benefits, and you're imposing real hardship. Cut

or even eliminate Dick Cheney's benefits, and only his accountants will

notice.

 

I asked Jason Furman of the Center on Budget and Policy Priorities to

calculate the benefit cuts under the Bush scheme as a percentage of

pre-retirement income. That's a way to see who would really bear the

burden of the proposed cuts. 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.

 

Beyond that, it's a good bet that benefits for the poor would eventually

be cut, too.

 

It's an adage that programs for the poor always turn into poor programs.

That is, once a program is defined as welfare, it becomes a target for

budget cuts.

 

You can see this happening right now to Medicaid, the nation's most

important means-tested program. Last week Congress agreed on a budget

that cuts funds for Medicaid (and food stamps), even while extending tax

cuts on dividends and capital gains. States are cutting back, denying

health insurance to hundreds of thousands of people with low incomes.

Missouri is poised to eliminate Medicaid completely by 2008.

 

If the Bush scheme goes through, the same thing will eventually happen

to Social Security. As Mr. Furman 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. "

 

So only the poor would receive Social Security checks - and regardless

of what today's politicians say, future politicians would be tempted to

reduce the size of those checks.

 

The important thing to understand is that the attempt to turn Social

Security into nothing but a program for the poor isn't driven by

concerns about the future budget burden of benefit payments. After all,

if Mr. Bush was worried about the budget, he would be reconsidering his

tax cuts.

 

No, this is about ideology: Mr. Bush comes to bury Social Security, not

to save it. His goal is to turn F.D.R.'s most durable achievement into

an unpopular welfare program, so some future president will be able to

attack it with tall tales about Social Security queens driving Cadillacs.

 

E-mail: krugman

--

Election 2004

The Triumph of the Swill

 

 

" The National Government will regard it as its first and foremost

duty to revive in the nation the spirit of unity and cooperation.

It will preserve and defend those basic principles on which our

nation has been built. It regards Christianity as the foundation

of our national morality, and the family as the basis of national

life. "

Adolph Hitler, My New World Order,

Proclamation to the German Nation

at Berlin, February 1, 1933

 

 

Not dead, in jail, or a slave? Thank a liberal!

Pay your taxes so the rich don't have to.

 

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