Social Security privatization is undead

Allen Sloan does something very few reporters covering budget proposals in Washington do. He reads them.

Duffy said privatization costs were included in the midyear budget update that the Office of Management and Budget released last July 30, so it was logical for them to be in the 2007 budget proposals. But I sure didn't see this coming -- and I wonder how many people outside of the White House did.

Nevertheless, it's here. Unlike Bush's generalized privatization talk of last year, we're now talking detailed numbers. On page 321 of the budget proposal, you see the privatization costs: $24.182 billion in fiscal 2010, $57.429 billion in fiscal 2011 and another $630.533 billion for the five years after that, for a seven-year total of $712.144 billion.

In the first year of private accounts, people would be allowed to divert up to 4 percent of their wages covered by Social Security into what Bush called "voluntary private accounts." The maximum contribution to such accounts would start at $1,100 annually and rise by $100 a year through 2016.

It's not clear how big a reduction in the basic benefit Social Security recipients would have to take in return for being able to set up these accounts, or precisely how the accounts would work.

Bush also wants to change the way Social Security benefits are calculated for most people by adopting so-called progressive indexing. Lower-income people would continue to have their Social Security benefits tied to wages, but the benefits paid to higher-paid people would be tied to inflation.

Wages have typically risen 1.1 percent a year more than inflation, so over time, that disparity would give lower-paid and higher-paid people essentially the same benefit. However, higher-paid workers would be paying substantially more into the system than lower-paid people would.

This means that although progressive indexing is an attractive idea from a social-justice point of view, it would reduce Social Security's political support by making it seem more like welfare than an earned benefit.

Worst. Most. Mendacious. Duplicitous. President. Ever.

Via Josh Marshall, who's firing up the mothballed Conscience Caucus in response.