Citizen Journal

1. "[N]ew savings incentives -- sometimes called add-on accounts -- would be created outside the current Social Security system." If the money for personal accounts doesn't come from payroll taxes, where will it come from? New taxes. That defeats the purpose. It worse than defeats the purpose.

2. "Democrats have privately expressed a willingness to accept benefit cuts and hand Bush half a victory rather than be seen as blocking needed changes." Good, but...

3. "Most changes will be aimed at higher-income retirees, but total benefit cuts will be much less steep than Bush has suggested. For example, Social Security now replaces about 35% of the average wage of workers earning $60,000. Trimming that to, say, 32%, would fix about 10% of the problem." The replacement rate will be reduced by 3%? Worthless. Pathetic. Terrible. The upper-middle-class and the affluent shouldn't get any benefits. Paying a government benefit to the affluent is an inappropriate use of taxpayers' hard-earned dollars, and especially of the revenues of the payroll tax, the most regressive tax on the books. This is the worst news. A travesty.

4. "Lawmakers could also adjust benefits to reflect rising life expectancy or speed up the shift to a retirement age of 67, which will now be reached by 2027." Good.

5. "To close the rest, Congress will raise taxes. Bush has carefully left the door open to imposing the Social Security tax on salaries above the current $90,000 cap. The most likely change: taxing wages up to $140,000." Most CJ readers will disagree with me, but I support this. If the Senate weren't such spendthrift scoundrels, or if Bush would veto veto veto their proposterous porkbarreling, we might be able to afford the Bush tax cuts. As it is, we can't. And while taxes are bad for the economy, deficits are worse. To repeal the tax cut by the back door, by raising the payroll tax cap, is better than repealing it by the front door.

But this represents a major concession, and we should get something in exchange-- such as big benefit cuts and personal accounts.

This presents a nasty dilemma. The deal would still be a baby step in a mostly-right direction. If we could somehow get the Republican leadership to sign the deal and then belittle it, to call it a piece of junk and a failure which left behind a major problem, then I'd say sign it. But they would call it a success, and America might get the message that the problem had been solved, and it would be harder to bring the issue up again in the future.

I say: Demand Pozen-style progressive indexation and carve-out accounts. If the Dems filibuster, or if enough Republicans back out to sink it, let it go down to defeat. Hand the Democrats a victory, and hope that it turns out to be a Pyrrhic one when the red ink comes knocking. The Bush version of Social Security reform delivers nothing but advantages to lower-income people and most minorities. It's pure gain for them. Let's bet on them being smart enough to figure out where their bread is buttered. (Hat tip: Kos, who doesn't like it either.)