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April 29, 2005
Progressive Indexing Making Headlines
In his press conference last night, Bush endorsed Democrat Robert Pozen’s idea of progressive indexing in order to help shore up the massive unfunded liabilities of the Social Security system. The basic idea is that instead of having everyone’s benefits grow at the same rate as wages, benefits for higher income workers would instead increase by the slightly lower rate of inflation.
This would ensure that higher income workers would have the same purchasing power with their social security checks as retirees do today, while lower income workers would have greater purchasing power with their checks than today’s retirees.
Here are Bush’s exact words:
First, millions of Americans depend on Social Security checks as a primary source of retirement income, so we must keep this promise to future retirees as well. As a matter of fairness, I propose that future generations receive benefits equal to or greater than the benefits today's seniors get.
Secondly, I believe a reformed system should protect those who depend on Social Security the most. So I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off.
By providing more generous benefits for low-income retirees, we'll make this commitment: If you work hard and pay into Social Security your entire life, you will not retire into poverty.
This reform would solve most of the funding challenges facing Social Security.
How did the press report his proposal this morning?
Here’s the front-page headline from the New York Times:
Bush Cites Plan That Would Cut Social Security Benefits
and here is the headline from the Washington Post:
Bush Social Security Plan Would Cut Future Benefits
Deceptive? I’d say so. David Hogberg has more over at the Social Security Choice blog.
What really gets me about this whole debate is when you realize that Social Security benefits have not always been tied to wages. We actually switched from a system of inflation indexing to wage indexing in 1977. Why you ask? It wasn’t an act of benevolence by the government to give future retirees higher benefits. In fact the exact opposite is true.
Unlike today, in 1977 the inflation rate was higher than the rate at which wages were growing. So the Carter administration switched to wage indexing, as the NYT or Washington Post would say, to “cut” future benefits. But somehow I doubt you would find that fact in a headline of their papers, or for that matter, even buried on the 10th page.
Posted by Peter Mork at April 29, 2005 10:08 AM
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Yesterday I blogged the following:
[The President] said that the benefit schedule would be changed such that poor workers get more benefits for their taxes than "the well ... [Read More]Tracked on April 29, 2005 7:52 PM
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