It’s time for liberals to fight back on Social Security! Today, the New America Foundation released a plan that not only declines to endorse any kind of compromise on Social Security that would cut benefits, but proposes that we add a brand new benefit:
We propose to replace most of the country’s current, inadequate, hybrid public and private retirement system with a two-part, wholly public system called Expanded Social Security. Expanded Social Security would have two distinct parts. The first part, Social Security A, would be similar to the current Social Security Old Age and Survivors Insurance (OASI) program, which provides a retirement benefit related to earnings. The second part of Expanded Social Security would be a new universal flat benefit, Social Security B, to supplement the traditional earnings-related benefit that would continue to be provided by Social Security A.
….If we assume that Social Security benefits are maintained at current levels and that there are no additional cuts to the program, we propose to set Social Security B at $11,669 per year for all elderly earners.
How much would this cost? A little over 1 percent of GDP to fully fund current Social Security with no benefits cuts, and about 3.7 percent of GDP to fund the new Social Security B. Altogether, call it about 5 percent of GDP. That’s….a lot. The authors suggest that current Social Security would be fully funded via higher payroll taxes, while Social Security B would be funded by “either general revenues or a new dedicated tax or taxes, which might include portions of a federal value-added tax (VAT).” The chart on the right compares the benefits under current Social Security vs. the NAF plan.
The basic contention here is that old-style corporate pensions are pretty much gone, and 401(k)-style programs are a disaster. So we should just ditch them entirely and beef up Social Security so that it’s a sufficient retirement program all by itself. I still haven’t been able to quite convince myself that 401(k)s are the disaster area that a lot of people say they are, but the evidence on this score is certainly fairly hazy. It’s quite possible that 401(k)s really are failures.
In any case, this is the first serious shot across the bow from the forces who not only don’t want to compromise on Social Security, but want to expand it. I expect to hear a lot more along these lines in the near future.