President Obama's deficit commission released its preliminary proposals yesterday, which include changes to Social Security. While I can't applaud the commission's broader tax and spending proposals, Democrats should welcome the commission's Social Security options. The Social Security changes include:
1) an increase in the "tax max"--the amount of taxes subject to Social Security taxes;
2)a new, wage-indexed, special minimum benefit for lifelong low earners;
3)an additional minimum benefit for the oldest Social Security beneficiaries, to kick in later in retirement;
4)a slight reduction in the annual cost of living adjustment (COLA);
5)a slight reduction in the benefit formula that will only affect those with higher than average earnings; and
6)a very gradual increase in the full retirement age (FRA) from 67 to 69.
Of these, only the FRA change can be considered as "regressive", but it's by no means a radical proposal, and there are several minimum benefit sweetners to make sure the lowest lifetime earners aren't adversely affected.
But why agree even to these? Because it isn't going to get better. A poorer performing economy means the estimated exhaustion date for Social Security's Trust Fund, currently projected to be 2037, will in all likelihood, only continue to creep closer. And the longer a long term fix is put off, the worse the fixes will need to be. Besides this, we can't know what the political climate will be in six, ten or 18 years. Quite possibly, it could well be worse than today.
This Social Security package would restore long term solvency, go a long way towards protecting it from would-be privatizers, and enhance benefits for the lowest lifetime earners through two new provisions. It also includes a tax max increases, which progressives tend to support. The benefit formula reduction--which some Progressives erroneously liken to "means-testing"--is actually just an extension of the already existing progressive benefit structure. This criticism seems particularly odd coming from progressives who normally want the more well to do to bear the brunt of any Social Security fixes. Progressives can't clamor for higher payroll taxes or higher limits to the "tax max" while simultaneously criticizing benefit reductions that affect higher-than-average earners. In short, this is overall a pretty progressive package of changes to the program, which Progressives and Democrats should support.