Date: Tue, 16 Jul 1996 19:09:43 -0500
From: rahul-AT-peaches.ph.utexas.edu (Rahul Mahajan)
Subject: Re: Social Security


Doug, you're a smart guy, except when someone criticizes your work.

>I don't get this. The present system is better than a privatized one, and
>it'd be even better if the wage cap were lifted, nonlabor income were
>taxed, etc. It's hardly an offhand comment to say that. Soak the fat boys,
>as the fellow in All The King's Men put it.

The whole point of the little rigmarole I went through (a serious sacrifice
for me -- I used a calculator, which is at least a venial violation of my
ethical code) is to say that you can't make such an assertion so casually.
I'm obviously not a fan of privatized pension systems, but the choice here
is between a private system that may just have less power to dictate terms
to its employees and a completely coercive government policy that looks
exactly like a deliberately instituted mechanism of class war. The payroll
tax hits the working poor harder than almost any other single measure. To
talk about "reforming SS" so that the tax structure will be progressive
instead of so incredibly regressive sounds like reforming capitalism so it
won't need to expand constantly. It's conceivable you can make a case for
what you're saying, but you've got to try a hell of a lot harder than you
did in your LBO articles. If we limit ourselves to the currently feasible
choices, retaining SS with a regressive tax structure or privatization, it
seems totally unclear to me, and would have to be settled by some serious
number-crunching, at the least. If we're talking "come the revolution,"
we'll scrap SS and replace it with a guaranteed income for everyone anyway.

>It's not meaningless. If GDP grows from 100 to 400, the eligible wage base
>is going to be larger, and almost twice as large, as if it grew only from
>100 to 200. I assumed that the covered wage share of GDP would follow the
>Social Security administration's projections, and merely increased the GDP
>aggregate in accordance with the various growth scenarios.

The first part is trivially obvious. The whole question is about how
"almost" the almost is. The second part was not made explicit. What are the
SS administration's predictions about the covered wage share of the GNP?
Are they consistent with the amazing growth of income disparity we're
seeing? Give me some numbers.

Rahul




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