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   The New York Times
------------------------------------------------------------------------


         February 8, 2005

*OP-ED COLUMNIST*


   Spearing the Beast

*By PAUL KRUGMAN 
<http://www.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per> 
*

President Bush isn't trying to reform Social Security. He isn't even 
trying to "partially privatize" it. His plan is, in essence, to 
dismantle the program, replacing it with a system that may be social but 
doesn't provide security. And the goal, as with his tax cuts, is to 
undermine the legacy of Franklin Roosevelt.

Why do I say that the Bush plan would dismantle Social Security? Because 
for Americans who entered the work force after the plan went into effect 
and who chose to open private accounts, guaranteed benefits - income you 
receive after retirement even if everything else goes wrong - would be 
nearly eliminated.

Here's how it would work. First, workers with private accounts would be 
subject to a "clawback": in effect, they would have to mortgage their 
future benefits in order to put money into their accounts.

Second, since private accounts would do nothing to improve Social 
Security's finances - something the administration has finally admitted 
- there would be large benefit cuts in addition to the clawback.

Jason Furman of the Center on Budget and Policy Priorities estimates 
that the guaranteed benefits left to an average worker born in 1990, 
after the clawback and the additional cuts, would be only 8 percent of 
that worker's prior earnings, compared with 35 percent today. This means 
that under Mr. Bush's plan, workers with private accounts that fared 
poorly would find themselves destitute.

Why expose workers to that much risk? Ideology. "Social Security is the 
soft underbelly of the welfare state," declares Stephen Moore of the 
Club for Growth and the Cato Institute. "If you can jab your spear 
through that, you can undermine the whole welfare state."

By the welfare state, Mr. Moore means Social Security, Medicare and 
Medicaid - social insurance programs whose purpose, above all, is to 
protect Americans against the extreme economic insecurity that prevailed 
before the New Deal. The hard right has never forgiven F.D.R. (and later 
L.B.J.) for his efforts to reduce that insecurity, and now that the 
right is running Washington, it's trying to turn the clock back to 1932.

Medicaid is also in the cross hairs. And if Mr. Bush can take down 
Social Security, Medicare will be next.

The attempt to "jab a spear" through Social Security complements the 
strategy of "starve the beast," long advocated by right-wing 
intellectuals: cut taxes, then use the resulting deficits as an excuse 
for cuts in social spending. The spearing doesn't seem to be going too 
well at the moment, but the starving was on full display in the budget 
released yesterday.

To put that budget into perspective, let's look at the causes of the 
federal budget deficit. In spite of the expense of the Iraq war, federal 
spending as a share of G.D.P. isn't high by historical standards - in 
fact, it's slightly below its average over the past 20 years. But 
federal revenue as a share of G.D.P. has plunged to levels not seen 
since the 1950's.

Almost all of this plunge came from a sharp decline in receipts from the 
personal income tax and the corporate profits tax. These are the taxes 
that fall primarily on people with high incomes - and in 2003 and 2004, 
their combined take as a share of G.D.P. was at its lowest level since 
1942. On the other hand, the payroll tax, which is the main federal tax 
paid by middle-class and working-class Americans, remains at near-record 
levels.

You might think, given these facts, that a plan to reduce the deficit 
would include major efforts to increase revenue, starting with a 
rollback of recent huge tax cuts for the wealthy. In fact, the budget 
contains new upper-income tax breaks.

Any deficit reduction will come from spending cuts. Many of those cuts 
won't make it through Congress, but Mr. Bush may well succeed in 
imposing cuts in child care assistance and food stamps for low-income 
workers. He may also succeed in severely squeezing Medicaid - the only 
one of the three great social insurance programs specifically intended 
for the poor and near-poor, and therefore the most politically vulnerable.

All of this explains why it's foolish to imagine some sort of widely 
acceptable compromise with Mr. Bush about Social Security. Moderates and 
liberals want to preserve the America F.D.R. built. Mr. Bush and the 
ideological movement he leads, although they may use F.D.R.'s image in 
ads, want to destroy it.


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