While many chuckle over Paul Ryan getting booed at the AARP conference – and sure, that is funny – President Obama actually made some news in his appearance. Because it’s a year divisible by four, he returned to a progressive idea on Social Security that he endorsed in his last campaign.
President Barack Obama revived a 2008 campaign promise on Friday, telling the crowd at an AARP forum that he would be open to raising the level of income on which Americans pay Social Security taxes.
“You know, I do think that looking at changing the cap is an important aspect of putting Social Security on a more stable footing,” Obama said, via satellite feed. “And what I’ve said is, is that I’m willing to work with Republicans and examine all their ideas, but what I’m not going to do, as a matter of principle, is to slash benefits or privatize Social Security and suddenly turn it over to Wall Street — because we saw what could happen back in 2008 and 2009 when the stock market crashed, and we are still recovering from that.”
You’ll notice that he really hit opposition to privatization hard, which isn’t really on the table at the moment.
As you know, we have a payroll tax cap, currently at around $110,000. Someone making that amount pays the same in Social Security payroll taxes as the highest-paid CEO in America.
When Obama first looked at this in 2008, he suggested a kind of doughnut hole. You would exempt payroll taxes from $110,000 to $250,000, and then lift the cap on all income above that. This would provide enough revenue to cover most of the 75-year shortfall in the Social Security program. You could probably adjust that doughnut hole downward, making it even more progressive while taking in relatively the same level of revenue. And this happens to be the most popular way to deal with the shortfall, which I should explain is PROJECTED and not actually set in stone. Actuarial projections vary wildly, and while the ones for Social Security actually don’t show much of a shortfall relative to the possible solutions out there, they should be viewed with a jaundiced eye.
Do I expect this legislation to take off as part of a grand bargain. No. But between this, Joe Biden’s assurance that there will be no changes to Social Security, and the letter from Harry Reid and 29 Senate Democrats in all pledging not to cut the program, there could certainly be worse signs out there. I’m all for talking about how to cover the projected shortfall in Social Security, outside of the grand bargain/catfood commission process. And Obama’s position, stated today, represents the best possibility for a successful resolution.