Dodging the Third Rail
"NOW, I THINK that Social Security is the single most important social program that we have in this country, and I want to make sure that it's there not just for this generation, but for next generations," Sen. Barack Obama (D-Ill.) said on NBC's "Meet the Press" this week. "So that means that we're going to have to make some decisions, and it's not sufficient for us to just finesse the issue because we're worried that, well, we might be attacked for the various options we present."
We couldn't agree more. Mr. Obama and former North Carolina senator John Edwards have suggested one intriguing way of addressing the shortfall between what Social Security is expected to take in and what it has promised to pay out in benefits to retirees and others. They have floated, though without specifics, the idea of tinkering with the cap on wages subject to Social Security tax, currently some $97,500. Removing the cap would more than make up for the Social Security shortfall, but it would also amount to a rather hefty tax hike (12.4 percent, considering both the employee and employer's share of Social Security) on some American workers. So first Mr. Edwards and then Mr. Obama have proposed creating what Mr. Obama described as a good doughnut hole. Under this plan, the current cap would remain in place; there would be a Social Security tax-free zone between that ceiling and much higher wages, perhaps $200,000 or $250,000. Then the Social Security tax, or some version of it, would apply again to wages over that amount.
What Mr. Obama and Mr. Edwards neglect to say is that this would not, by itself, solve the problem. A tax that came back into effect at wages of $200,000 would address two-thirds of the shortfall, currently projected to be $4.7 trillion over the next 75 years; raising the threshold to $250,000 would mean that only about half the shortfall would be addressed. Moreover, the doughnut tax would not achieve one important benchmark; the system would not be on a path to sustainable solvency, with income capable of paying promised benefits over time.
The approach of Mr. Obama and Mr. Edwards is more responsible than that of Sen. Hillary Rodham Clinton (N.Y.), who rather than making tough and politically risky choices about Social Security has retreated to the comfortable refuge of advocating fiscal responsibility and endorsing a bipartisan commission. This is a dodge, not an answer. And it is unwise and unseemly for Ms. Clinton, who surely understands that an eventual Social Security solution will involve raising revenue, to attack a fellow Democrat as a tax-hiker. But Mr. Obama, too, wants to avoid discussing hard choices, such as reducing promised benefits or raising the retirement age, and to act as if the Social Security problem can be painlessly solved with a tax hike on the wealthy. That's understandable, but it also sounds a lot like the kind of "textbook Washington campaign" that Mr. Obama derides, in which "you don't present tough choices directly to the American people for fear that your answers might not be popular."
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