Although it may be only a trial balloon, the Administration is coming closer to 'fessing up to the benefit cut in its Social Security plan. This is to change the benefit formula so new retirees' initial benefit levels grow over time only at the inflation rate, rather than at the rate of wage growth. Reflecting the power of current law baselines in shaping people's definition of a "cut," the Washington Post notes that this amounts to an estimated 9.9% cut, relative to present law, for 2022 retirees, as opposed to a 46% cut for 2075 retirees.
Put another way, of course, the 2022 and 2075 retirees would now be projected to have the same benefits in real terms, leaving aside life expectancy increases which would still cause the 2075 retirees to get more on a lifetime basis. Or put still a third way, the Post's "cut" language is more accurate after all, not because of present law but because current wage levels are a reasonable framework for gauging benefit generosity. (After all, in 2005 the real benefit level that seemed opulent in 1935 would seem considerably less so, to put it mildly.)
Which is the right way to put it? There is no one right way; it depends on what you think is important. But I consider the last two ways of putting it - what is the same in real terms and what is the same relative to some contemporary gauge of income levels - superior conceptually to a present law baseline because they reflect judgments about the merits, rather than just robotic adherence to whatever Congress most recently claimed it was planning to do. Talking about "cuts" can make it game, set, and match without ever getting to the actual merits.
Anyway, since I titled this post "a modest proposal" let's get going on that. Suppose the Administration actually proposed replacing wage indexing with price indexing, without the individual accounts smokescreen/diversion, and with other measures to put the US on a sustainable policy course. E.g., allowing most of the Bush tax cuts to sunset, raising income tax revenues through base-broadening, and taking steps to rein in Medicare/Medicaid healthcare expenditures. And suppose some way could be found, such as a bipartisan commission, to make this feasible rather than political suicide. Then we would actually be getting somewhere. And columns such as Krugman's today, which argues that we have a general fund crisis rather than a Social Security crisis, would then be wide of the mark rather than being largely correct.
(When Krugman says that we have a general fund crisis rather than a Social Security crisis, he is wrong insofar as what we really have is a general fund crisis that INCLUDES the Social Security element. The latter cannot be dismissed by noting that Congress has purported to make Social Security legally separate. But Krugman is totally right that the Administration is exaggerating the Social Security issue to give the current system the "bum's rush" for its own preconceived ideological reasons. He also importantly notes that the Medicare prescription drug giveaway was bigger than the Social Security gap, and that the Bush tax cuts if made permanent are much bigger.)
The fact that the House Republicans have backed down on their outrageous ethics rules changes suggests to me that a crawldown on Social Security benefit cuts is also likely. But this could still leave us with accounts that are totally unfunded and that thus amount to promising new benefits with rubber checks.