EVERYONE'S GOING TO BE "RICH":

Social Security blues (Robert Novak, March 3, 2005, Townhall)

Sen. Lindsey Graham, a first-term Republican senator from South Carolina, has taken the lead in searching for a bill that would attract a few Democrats who are essential for passage. Three months ago, he proposed raising above $90,000 the amount of individual income subject to the Social Security payroll tax in order to pay "transition costs" for personal accounts. That brought down the conservative house on Graham for "negotiating with himself."

Many things have happened since then. Bush said that raising the tax cap is on the table. Graham's package is a work in progress, including a cut in the payroll tax rate from the current 12.9 percent to 11.9 percent to accompany raising the cap above $90,000. He would also change the indexing for Social Security benefits to the inflation rate, replacing the much faster rising wages -- a 30 percent cut in benefits. All this will be necessary eventually to save the system without even adding personal accounts. For now, such personal pain would make possible the pleasure of using 4 percentage points of the payroll tax for personal accounts.

I find some Republicans who denounced Graham three months ago have moved closer to him. Indeed, some would reduce benefits more than he does in the upper income brackets. Others would establish a means test to end benefits for the rich. All this would establish a graduated Social Security system that might please some Democrats sufficiently to sell them on personal accounts.

This has always been the ace in the hole, though folks don't seem to grasp it: any system that combines personal accounts and means-testing effectively ends SS.

Posted by Orrin Judd at March 3, 2005 12:00 AM