Switching to Price Indexing
Adam O'Neill's absolutely right
-- there are 'good' and 'bad' ways of indexing Social Security benefits to inflation. But the plan put forward by Bush's Social Security Commission -- the so-called Model 2 plan that gets everyone agog -- follows precisely the 'bad' course, so that's the one we should all be complaining about. Robert Greenstein explains
-- and he
certainly understands the various ways you can switch to price indexing.
Now it's true that under the Model 2 price-indexing, benefits would
continue to rise faster than inflation. Nevertheless, for a given worker with a given earnings history, guaranteed benefits would drop from about 42 percent of preretirement wages (today) down to about 20 percent in 2080. And that 20 percent, note, would be entirely
gobbled up by Medicare Plan B premiums, in the absence of health care reform. Note also that under price indexing, we would all receive smaller
benefits than if we had simply done nothing and suffered the crappy productivity growth predicted by the Trustee's intermediate projections.