Which brings us to another issue. One of the arguments deployed against attempts to moderate the growth of Social Security benefits for the highest earners is that it would weaken the link between taxes paid and benefits received, and thereby reduce political support for the program. The theory is that when high earners pay a lot to Social Security but receive only a little in return, they will start to see it as a welfare program.
If that argument is sound, though, it doesn’t just apply against proposals to reduce the benefits of affluent people. It also applies against proposals to raise their taxes without giving them any corresponding benefit increases. It may apply even more strongly, if we assume that high earners care more about their tax rates today than about the benefits they may receive in the future.
But if the argument is unsound — if, that is, we should not maintain foolish policies because of speculation about the possible political effects of abandoning them — then we should prefer moderating the benefit growth for high earners over raising their taxes. They are, after all, the people who should find it easiest to save for their own retirements. Let’s tell them that they’re responsible for doing more of it.
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This article was provided by Bloomberg News.