May 9, 2005
Doing the math
Paul Krugman rips into Social Security reform:
Let’s consider the Bush tax cuts and the Bush benefit cuts as a package. Who gains? Who loses?
Suppose you’re a full-time Wal-Mart employee, earning $17,000 a year. You probably didn’t get any tax cut. But Mr. Bush says, generously, that he won’t cut your Social Security benefits.
Suppose you’re earning $60,000 a year. On average, Mr. Bush cut taxes for workers like you by about $1,000 per year. But by 2045 the Bush Social Security plan would cut benefits for workers like you by about $6,500 per year. Not a very good deal.
Suppose, finally, that you’re making $1 million a year. You received a tax cut worth about $50,000 per year. By 2045 the Bush plan would reduce benefits for people like you by about $9,400 per year. We have a winner!
I’m not being unfair. In fact, I’ve weighted the scales heavily in Mr. Bush’s favor, because the tax cuts will cost much more than the benefit cuts would save. Repealing Mr. Bush’s tax cuts would yield enough revenue to call off his proposed benefit cuts, and still leave $8 trillion in change.
Krugman also notes that if the U.S. economy grows as much over the next 50 years as it did during the past 50, Social Security cuts won’t be needed. That, he concedes, might argue for small precautionary cuts now:
But Mr. Bush isn’t calling for small sacrifices now. Instead, he’s calling for zero sacrifice now, but big benefit cuts decades from now – which is exactly what he says will happen if we do nothing. Let me repeat that: to avert the danger of future cuts in benefits, Mr. Bush wants us to commit now to, um, future cuts in benefits.
I’m with Krugman: the plan is an insult to every American’s intelligence.
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