Washington Post endorses “progressive price indexing” for Social Security

In an editorial, the Washington Post opposed Social Security expansion and endorsed a Bush-era reform to reduce benefits for middle and income retirees in the future.

The Social Security 2100 Act, co-sponsored by over 200 House Democrats, would

divert scarce resources toward a vast majority of Social Security recipients who are not only not poor but, in many cases, perfectly comfortable. We are all for making the overall tax system more progressive than it already is, including by taxing high earners, as the Social Security 2100 Act would do. You can tap “the rich” only so many times, however; and the priority should be to use that money for children, who are almost twice as likely to be poor as senior citizens.

Instead, the Post argues, we should consider a proposal that was part of President George W. Bush’s Social Security reform proposals, so-called “progressive price indexing.”

There is an alternative proposal to make Social Security both protective of the elderly poor and more solvent over the long term. The plan would retain Social Security’s current benefit formula for the 30 percent of workers with the lowest lifetime earnings, while reducing the growth rate of initial benefits for the top 70 percent. Phased in over the next 30 years, it would save a relatively modest $77 billion in the first decade. Savings would accumulate more quickly thereafter, though, to reduce Social Security’s total claim on national output in 2048 from 6.3 percent under current law to 5.7 percent, according to the Congressional Budget Office. The CBO refers to the proposal as “progressive price indexing.” Given that it allocates the nation’s limited retirement-income resources to those who need them most, instead of promising more benefits to practically everyone, the “progressive” label does indeed apply.

I certainly wouldn’t oppose a reform package based on progressive price indexing. At the same time, it’s a proposal that’s very difficult for the public to understand and doesn’t have any end goal of what we want our Social Security program to look like. Progressive price indexing says simply that we’re going to reduce benefit growth for middle and high earners, not what we (as a society or as policymakers) think the appropriate benefit levels are for Americans of different means.

That’s why over time I came to favor a different, and more radical approach: a flat dollar benefit that provides a true guarantee against poverty in old age, while requiring middle and high earners to save more for retirement. This flat dollar benefit approach is similar to New Zealand’s retirement system, along with reforms that have been enacted in the U.K.