CHN: President Proposes Benefit Cuts That are Not Progressive; Plans’ Architect Turns Against Private Accounts
In late April, President Bush unveiled a new version of his proposal to partially privatize Social Security. He endorsed an idea first proposed by investment executive Robert Pozen to introduce sliding-scale benefit reductions that would, according to the President, shield the poor from cuts. Despite the label of “progressive price indexing” that Pozen and his supporters attach to this idea, the cuts are actually not very progressive. They would apply to any retiree who earned more than $20,000, would take a larger percentage of total retirement income from middle-income people than they would from wealthy retirees, and would even apply to people earning less than $20,000 if they receive benefits through the eligibility of a spouse who earns more. Further, the benefit cuts are not voluntary (they apply to all beneficiaries regardless or whether or not they opt to have a private account) and are not necessary to improve Social Security’s solvency. (For more explanation, see the recent CHN Social Security Update).
While weathering these criticisms of his “progressive” proposal, the President this week felt a new blow to his campaign: Robert Pozen, the architect of “progressive price indexing” has turned against the other part of the President’s proposal — private accounts using money diverted from Social Security. According to Congressional Quarterly Today , Pozen said in an interview, “I would advise the President to say that carve-out accounts are no longer required” because they make passage of any bill seemingly impossible. The term “carve-out account” is applied to a private account that would, like that proposed by the President, be funded by money diverted from the payroll taxes that currently fund Social Security.
The President’s proposal includes diverting almost a third of a worker’s payroll tax away from Social Security and into private accounts. Pozen says, “The accounts are just too large” and that more revenue may need to be brought into the program ( http://www.nytimes.com/2005/05/20/politics/20social.html ?).
Meanwhile, the campaign to prevent the partial privatization of Social Security continues to pick up steam. Americans United to Protect Social Security have scheduled a “Take a Stand Campaign” beginning in the Memorial Week Recess to call upon members to state a position on Social Security ( http://www.americansforsocialsecurity.com/index.php?option=com_content&task=view&id=203&Itemid=1 ).