Krugman on Progressive Indexing

Thank you President Bush. This is beautiful.

The important thing to understand is that the attempt to turn Social Security into nothing but a program for the poor isn’t driven by concerns about the future budget burden of benefit payments. After all, if Mr. Bush was worried about the budget, he would be reconsidering his tax cuts.

No, this is about ideology: Mr. Bush comes to bury Social Security, not to save it. His goal is to turn F.D.R.’s most durable achievement into an unpopular welfare program, so some future president will be able to attack it with tall tales about Social Security queens driving Cadillacs.

It is simply impossible to square Krugman’s worry with the idea that Social Security is supposed to provide “old age insurance.” If we understand insurance very loosely as anything that mitigates the harm caused by a financial loss, or simply by the lack of adequate finances, then a means-tested welfare program for the elderly poor would serve this “insurance” function quite effectively. It would also achieve a much more progressive redistribution of wealth, normally a liberal desideratum.

Social Security reactionaries like Krugman often talk out of both sides of their mouths, on the one hand touting the democratic popularity of Social Security, and on the other hand throwing a fit if the mirage of pointless middle-class to middle-class transfers is exposed for what it is: an illiberal and indefensible manipulation of voters by the political class. What’s Krugmans complaint here? That once we throw back the curtain on American old age assistance, and expose Social Security for what it is, a Rube Goldberg device designed to manufacture a sense of middle-class entitlement (that’s F.D.R’s “most durable achievement”), the American voting public will not support programs for the elderly poor at a level people like Krugman deem adequate. That is to say, if the deceits of the Social Security system are not in place to manipulate the preferences of American voters, then American voters will express their own preferences, and that is not OK. Because . . . why? No, Krugman, THIS is about ideology.

In any case, is there any reason, other than an insane conviction in the rottenness of American voters, to buy into the prediction that citizens with unmanipulated political preferences would not support fairly high levels of assistance for the elderly poor? I simply cannot believe that the massive political energy now being wasted to conserve the Social Security status quo–a regressive tax and a huge set of transfers that achieves precious little progressive redistribution–would not be effective in ensuring a decent level of benefits for the needy in old age. Little old ladies with no savings simply do not generate the suspicion of free-riding and the resentment of parastism that Great Society welfare at its worst managed to do.

Of course, a system of personal retirement accounts would do a great deal to ensure that few Americans are needy in old age. That’s the great appeal of personal accounts together with a well-designed means-tested safety net. Fewer people will need help, and those who do need it will get it — and without the waste and anti-democratic deception of “insurance contributions,” “trust funds” and the sky-blackening green tornado of pointless transfers.

Last, it is very encouraging that Krugman chose to compare Social Security reform with welfare reform, the biggest American public policy triumph of the past twenty years.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center