In my new column for the Financial Times, I try to restate the case for reforming Social Security:
Barack Obama has upset a lot of Democrats by bringing social security back into presidential politics. Paul Krugman of The New York Times is leading the charge. In Mr Krugman’s view, following the administration’s clumsy and aborted effort to reform the system – Democrats would say destroy it – leaving well alone makes best political sense. Mr Obama, sounding like a fiscal conservative, warns that retiring baby boomers are pushing the programme into the red and something must be done. He is, says Mr Krugman, being played for a fool.
Mr Obama’s fix, other things equal, ought to appeal to Democrats. He wants to raise or even abolish the upper earnings limit for the social security tax, at present just under $100,000. This would add six percentage points to the top marginal tax rate, even before you add in the promised unwinding of the Bush administration’s tax cuts. In a televised Democratic candidates debate, Hillary Clinton distanced herself from this “trillion dollar” tax increase on the “middle class”. Mr Obama underlined his point by saying that only the richest 7 per cent of taxpayers would be affected, and that is not the middle class.
We will see how this plays out. Democrats who would generally be in favour of unwinding the Bush tax cuts, abolishing the earnings ceiling on the social security tax and finding a few other ways to raise taxes on the rich, are mainly concerned to keep reform of social security off the agenda. It does not need fixing, they say, it is not broken. Any deviation from that gives Republicans an opening to renew their assault on one of America’s finest social-policy achievements. Why go there?
You can read the whole column here.