|
Wednesday, January 05, 2005
Option 2 "Makes Sense" to Frist But Risks Cuts In Benefits
In 2001 Bush appointed a commission to look at social security, and this commission came up with three proposals. One of the proposals, called Option 2, is currently receiving a lot of attention on Capitol Hill, with Bill Frist recently stating that "[It's] on the table, and it makes sense to me." Option 2 would link future social security benefits to increases in inflation over a worker's lifetime, rather than wages.
One of the major problems with this proposal is that in our economy wages rise faster than inflation. According to this Washington Post article, the new benefits formula would "stunt the growth of benefits, slowly at first but more quickly by the middle of the century." While the proposal would work towards solving the problem of social security's long term deficit, the program does not show signs of reaching the level of "crisis" that many in the government are claiming. In fact, as Krugman points out in a New York Times column, if these proposals are put in place it "will do nothing about the real fiscal threat and will instead dismantle Social Security, a program that is in much better financial shape than the rest of the federal government."
These overhauls would also come with a stinging cost to future retirees. The average middle class worker retiring in 2022 would see a benefits cut of 9.9 percent, while in 2042 benefits would fall by more than a quarter. These cuts would be detrimental considering that over the past 60+ years the social security program has done more to stave off poverty than any other program.
In a recently released report, the Center on Budget and Policy Priorites highlighted the fact that other policies embraced by this administration will end up costing the country a lot more than the social security shortfall in the future, particularly the cost of Bush's tax cuts and Medicare prescription drug benefits. The report can be found here.
Posted by Becky Lewis
|