Patrick Ruffini has an excellent evisceration of Harry Reid’s Social Security calculator and offers a more realistic one of his own. Reid’s assumptions in trying to show how much someone would “lose” via Social Security reform are designed to twist the facts in his favor. Assuming constant wages over a lifetime is utterly preposterous, and arguing that a long-term investment strategy is going to produce a return of only 3% is highly unlikely. Even if it’s only 4% (Ruffini’s 4.5% being a a more reasonable figure) that changes the results dramatically. If the government’s own estimates hold true 5-7% might be quite likely.
The fact is that the PRA system is entirely voluntary. If Social Security is truly not facing a crisis as the Democrats now disingenously argue (ignoring that they said the exact opposite during Clinton’s tenure – which either means that Bush has miraculously saved Social Security between then and now or the Democrats are viewing the world through partisan-colored glasses again), then where’s the harm in allowing a certain amount of people to invest a portion of their Social Security taxes? If the Democrats assume that a small change in payroll taxes can suddenly create $10 trillion in new revenue over the next few decades to fix the shortfall in Social Security, it’s hard to believe that allowing workers to invest a certain amount of their payroll taxes in a diversified portfolio will cause the end of Social Security.
The truth is, this isn’t about Social Security. This is about the entitlement culture. The Democrats have staked their political futures on the idea that government largesse can create a culture of dependency. The reason the Democrats react so negatively to the whole concept of the ownership society is because it’s a threat to their power. If people are dependent on government, it tends to help the Democrats. If people are invested in the economy, it tends to make them Republicans. (With the exception of the ultra-rich who tend to be a strong Democratic voting block. When you’re an über-billionaire a tax hike doesn’t particularly matter to you, and liberal guilt is all the rage in Nantucket and Hollywood these days.)
By beginning to shift people away from government and towards self-reliance and investment, it weakens one of the few things holding the Democratic coalition of interest groups together. The Democrats know this, and that’s why they’ve suddenly made a 180 on the issue of the future of Social Security – Clinton’s planned reforms would have helped them politically, and Bush’s doesn’t. The Democrats could care less about the actual effects of PRAs in Social Security – which is why they’re trying to ignore the evidence on them.
Uncap the income cutoff. You’re always talking about the fairness of a flat tax; well, this is your chance. Uncapping Social Security taxes would make it a flat tax.