Maya MacGuineas emailed me with regard to yesterday’s post on Jim Kolbe to remind me that he was the author of a Social Security plan that did include some tax increases and that was, in her mind, “both fiscally responsible and politically courageous.” I will, indeed, give him some points for political courage. The various iterations of Kolbe’s ideas—initially in partnership with Charlie Stenholm, later with Alan Boyd—were among the most fiscally responsible versions of Social Security privatization out there.
At the same time, the embrace of privatization schemes by the soi disant deficit hawk community is one of the reasons that the Concord Coalition crowd has fallen into such discredit on the left. Changing demographics and (to a much lesser extent) growing income inequality have created a situation wherein promised future Social Security benefits will exceeds projected future payroll tax revenues. The obvious solution to this is some combination of higher taxes and reduced payouts, with the balance between the two going to vary according to your political tastes. Given that there’s also a substantial fiscal imbalance facing Medicare, and given that you can use money (i.e., Social Security benefits) to buy health care services, my preference would be to not cut Social Security and just look at Medicare. But tastes will differ.
The thing about Kolbe’s plan (PDF) is that like all privatization plans it introduces a gigantic new budgetary problem by diverting payroll tax money into a forced savings program. Consequently, as observed in James Horney and Richard Kogan’s classic CBPP report, these plans generally actually led to an increase in federal debt outstanding in 2050. The Kolbe-Boyd plan was far more responsible than most of the alternative privatization plans and led to only a very small increase, but the whole endeavor still smacks of a strongly ideological hostility to the program rather than a particular focus on the deficit. You could implement Kolbe’s tax increases, and then just implement a small sub-set of his proposed benefit cuts, and leave the whole privatization business out of it and I think you’d have a better plan.
It’s also worth noting that there’s a technical problem with the Kolbe-Boyd plan wherein they overstate the savings that could be achieved by adopting the C-CPI-U measure of inflation.