The mushy, corporatist middle at the Third Way has a new plan for "saving" Social Security, which reads pretty much as you would expect: deficit reduction on the back of Social Security forcing people to put their retirement savings in Wall Street's hands. Ah, but it's "saving" Social Security, so it has to be progressive, right? Seriously, does this sound progressive to you?
There are many on the progressive side who believe the Social Security shortfall should be solved through the elimination of the earnings cap on FICA collections. Currently, 6.2% of wages up to a cap of $106,800 are siphoned off from both the employer and employee to provide the bulk of the funding of the Social Security Trust Fund. This wage cap is indexed to overall wage gains.
We have deep concerns about complete repeal. While we support higher taxation on upper income individuals and accept that some of it must be used to bail out entitlements like Social Security, we believe the bulk of increased taxation would be best spent on growth-oriented investments in infrastructure, education, innovation, and the like.
No, much better that taxpayers' hard earned wages go to bailing out banks. Embracing means testing, raising the retirement age, and creating "Plus accounts for young workers to supplement retirement savings," (i.e., partial privatization) aren't progressive goals no matter how Third Way's principles argue otherwise.
You see, Third Way would have us shore up Social Security’s finances with a package that is two-thirds cuts and one-third revenue increases. They must have known this is just a wee bit unbalanced, especially for a capital “D” Democratic think tank like theirs, because they feel the need to justify it throughout the paper. They explain that we need to free up the revenue from Social Security for other purposes:
In a vacuum, we could in theory continue raising payroll taxes to keep up with the baby boom retirement. But those tax and spending decisions affect the entire U.S. economy and budget. Left unchecked, these trends will leave a small portion of our federal budget devoted to education, innovation, infrastructure and national defense, squeezing our badly needed public investments and jeopardizing our security. To avert this coming crisis, Social Security reform must be achieved principally through savings in benefits, not tax increases, as we seek to rebalance the long-term U.S. budget toward investments and economic growth.
Well, there you have it: the massive debt just ties our hands. Even though Social Security does not contribute a penny to the debt, and is forbidden by law from borrowing from the general budget, we need the money that currently goes toward it to pay down the deficit--supposedly so we can increase or maintain spending on other programs. There is apparently some magic line above which taxes cannot rise, and honoring our commitment to American workers no longer fits within that line.
How very Republican of them. Not every idea they put forward is conservative, they moderately suggest a raise in the payroll tax cap and an increase in the levels of "economic" immigration (not, apparently, comprehensive immigration reform), but that doesn't make them or this plan the progressive one they pretend at, particularly when at the same time they lie about real progressives' approach to strengthening the program.
This is just GOP-lite, turning Social Security into a welfare program for the very old and very poor and privatization for the rest, because we know how well stock and real estate investments worked out.