Dr. Strangetax, or How I Learned to Stop Worrying and Love the Idea of Regressive Social Security

Judging by the way things are going, I probably shouldn't even bother commenting on President Bush's Social Security reform plan. I use the term "plan" loosely. Having learned the lesson of the Clinton health care plan (which, whether or not one liked it, was an actual plan), the White House has studiously avoided providing an actual proposal upon which legislators might actually vote; when you release an actual proposal, people have a nasty habit of looking closely at it and finding things they don't like. No, the White House prefers to leave the writing of actual proposals to the legislature. What the White House has would better be called an agenda.

Most people know that the keystone in Mr. Bush's SS reform agenda is the "personal savings account" or "private savings account," depending on which side of the fence is bending your ear at the moment. On the stump, Mr. Bush says these little doogadgets are simply to die for: you get to keep your own money, you'll earn a better rate of return through the miracle of compound interest, you'll have more money to retire on, and if you somehow are un-American enough to not spend all your money before you die, you get to pass what's left in your PSA on to your estranged children.

Let's just assume for a second that this -- what Mr. Bush is saying on the stump -- is the truth. It isn't, as his own aides quietly admit to the press when asked, but let's pretend it is. (In actual truth, there are a host of restrictions on the money in your PSA. In fact, unless you meet certain minimum economic criteria [that is, if you're too poor], the government "holds" your "personal savings" and doles it out to you a bit at a time through an annuity, and it doesn't have to give any leftovers to your children. But that's neither here nor there, since it's not what the president is telling the American people.)

Here's how what the president's describing would work. You, Joe or Jane Punchclock, get to put some percentage of your income, let's say 8%, since that's roughly what the SS tax currently is, into an investment account every week of every year of your income-producing life. That's 8% of your income that's completely income-tax-free, since it's taken out of your check before taxes. (Think 401k.) If you are able to hold out enough and invest wisely enough to have more money than you can spend between your retirement and unfortunate demise, you get to pass that on to the little Punchclocks (or your trophy wife, favorite cat, etc.). And, since the Republicans plan to end the estate tax in 2010, your heirs will get every single dime of that money (aside from the legal fees they'll incur wrangling over it).

The president sells this as a pro-family policy.

My question is: whose family does he think he's talking about?

In other words, who's going to benefit most from this "reform" of SS? Families that look like mine, or families that look like his? (And does he know the difference?) Let's say Mr. & Mrs. Joe Punchclock, a 2-income family with 3 children and no college education, gross $50,000 a year. That means they can, if they choose, hold out and invest $4,000 a year for retirement. Meanwhile, Mr. and Mrs. George H.W. Bush could hold back, say, $80,000 a year for their retirement. Are they going to need that money when they retire? No. So why would they participate in the new SS at all?

Here's why. Because that's $80,000 every year. Tax-free. And they'll never miss it. And since the Bushes are highly educated people, well-connected in financial circles, and are experienced, sophisticated investors, their $80,000 a year is going to earn a much better rate of return than the Punchclocks' $4,000. And since nearly all of the Bushes' income is from stock dividends, bond interest, memberships on boards of directors, etc., every dollar anyone invests in the stock market increases their wealth disproportionately -- that is, much, much more than it increases the wealth of the Punchclocks or the pedestrian Urbinos.

And when George and Bar finally head off to that big oil company in the sky, they can leave their tidy PSA (from which they haven't had to spend a single, solitary dime) to all the little Georges and Jebs and Jehosophats. Tax-free. And they can add to it and leave it to their kids. Tax-free. And those kids can do it again. Tax-free.

It's called untrammelled concentration of wealth, and it's about as poisonous to a democracy as decreeing that some people's votes won't count.

What's amazing is that they can sell this kind of thing -- the elimination of the estate tax and the creation of a tax shelter for intergenerationally hoarded wealth -- as somehow being pro-family. The estate tax applies only to estates valued over $1.5 million. Does your family fit that bill? Probably not. Mine certainly doesn't. Eliminating that tax does nothing for families like mine or yours.

What was it von Hayek, high priest of laissez-faire, called Keynesianism? "The road to serfdom"? Eliminating the estate tax isn't pro-family. It's pro-feudalism.

There's a reason the Founders thought an estate tax was a good idea. (What, you thought FDR invented the estate tax?) There's a reason every Congress from their day to Dick Armey's continued to think it was a good idea. What is that reason? An estate tax spreads the wealth, encouraging the growth of the middle class and helping keep the poorest above water. It helps prevent too much wealth from accumulating in too few hands, which is dangerous; just ask the French aristocrats of the 1790s, or a 21st-century Russian. It recirculates wealth through the economy, which causes the economy to grow, increasing everyone's wealth. Yes, conservatives will blanche, but redistribution of wealth by the government is a necessity in a democracy. Democracies require a large middle class. If wealth is allowed to continue accumulating generation after generation in the hands of a few, the middle class ends up squeezed down to nothing.

And what ever happened to the idea of people working for their wealth? Why is it a good idea for children and grandchildren and great-grandchildren to be completely unproductive, living off the wealth developed by their ancestors? Have you ever met these people? Did you come away thinking, "Gee, wouldn't it be great if there were more people like that?" I hear Religious Right churchgoers quoting "let him who doesn't work, not eat" at poor people with vomit-inducing frequency; do these people think Paul wasn't talking to their mall rats?

The estate tax also encourages private philanthropy, by the way, something that really does seem like a good idea, and that Republicans often give lip service to.

"Personal Savings Accounts" are not a solution to whatever problems Social Security may have. Nor are they intended to be. Nor are they "pro-family." They are pork-barrel politics for plutocrats. A clever, cynical way of using moralistic language to sell the many on an immoral policy that will benefit the few.