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Lindsey Graham's Good Idea

By George F. Will
Sunday, March 13, 2005; Page B07

In 1994, when a 39-year-old state legislator was asked in Aiken, S.C., how he was enticing voters to make him the first Republican elected to Congress from that district since Reconstruction, he said: "I'm one less vote for an agenda that makes you want to throw up." Lindsey Graham won, and in 2002, advocating voluntary personal retirement accounts funded by a portion of individuals' Social Security taxes, he won a Senate seat. Now he has an idea that makes some Republicans throw up: Raise the current $90,000 limit on income subject to Social Security taxes.

Republicans who throw up should grow up. Intelligent people can differ about whether Graham's suggestion is economically unwise or politically imprudent. However, it hardly blurs the distinction between conservatism and Bolshevism.

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Social Security

The Social Security tax rate has been increased 20 times in 70 years, and the cap on income subject to the tax is indexed to average wages and adjusted annually. It was $4,200 when Graham was born in 1955, $60,600 when he was elected to Congress and $84,900 in 2002. It is projected to rise to $100,200 in 2008 and $121,800 in 2013.

Suppose it were immediately raised to $162,000 -- a senator's salary -- but not indexed. That would be, effectively, a temporary tax increase. The increased revenue -- $525 billion over 10 years -- would more than cut in half the borrowing required to cover the transition costs during the phase-in of personal accounts.

Graham believes that some borrowing is appropriate to make stakeholders of future generations, which will be the biggest beneficiaries of personal accounts. But substantially reducing the borrowing would deny Democrats the ability to disguise as fiscal responsibility their opposition to personal accounts, which really is rooted in reluctance to enable people to become less dependent on government.

The tax increase from lifting the cap to $162,000 would be paid mostly by Republicans -- but also by the people most able to put substantial sums into the personal accounts that might become politically feasible only by raising the cap. There would be additional recompense for Republicans: American society would become more congruent with Republican values, and more equity-owning citizens would become disposed to vote Republican.

The Democrats' strategy of brute negativism is inherently unstable because it depends on furious hostility to the president's plan from people for whom the plan is irrelevant -- the elderly, all of whom are going to live out their lives under the current system. Because Democrats are counting on confusion among the elderly, Democrats and their media echoes are insisting that they have won the debate and that personal accounts are dead. They know the president probably will win the reform battle if he merely moves the elderly to their proper place on the sidelines during this debate.

The Democrats' implausible contention is that Social Security, a response to the 1930s, needs no serious rethinking, even though in 1935 retirement, as currently understood, was largely a luxury of society's upper crust. And even though Social Security takes income from the working young who are funding family formation -- buying houses, educating children -- to subsidize, in many cases, the long-term leisure and recreation of the not-very-elderly majority of Social Security recipients who could work but choose instead to begin drawing benefits at 62. And even though the age cohort of Americans over 65 is significantly more affluent than the cohorts under 55.

Democrats have no reform ideas, but they have a slogan -- "Fix it, don't nix it." The spectacle of adults chanting such childishness is embarrassing, especially because their chant mimics their recent slogan about the government's system of racial preferences, "Mend it, don't end it," which meant: Change nothing.

Republicans of the "starve the beast" inclination -- those who aim to slow government's activism by reducing government's revenue -- might relish the thought of Social Security's rendezvous with 2011. At that tipping point, the Social Security surplus begins to shrink.

Today the government is partially funded by that surplus of Social Security tax revenue over outlays, a fact disguised by politicians talking rot about Social Security being an "insurance" program with a "trust fund" in a "lock box." But between 2011 and 2016, Social Security outlays will exceed revenue by $32 billion, and the sums will rapidly increase during the cascading retirements of baby boomers. These sums must result in increased borrowing, or cuts of other government activities, or both.

"Starve the beast" Republicans can live with this. But what are Democrats thinking?


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