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Note also this bizarre lie from the briefer:

But having said that, the accounts that I just described are actually funded in a progressive manner, at least in the phase-in period that I described. An account that is a 4 percent account, up to a cap of $1,000, is actually a very progressive account. Only people at $25,000 of income and below would actually be getting the full 4 percent. Anyone at $25,000 or above in the first year would actually have less than a 4 percent account. So there is a progressive funding mechanism in the early years of this program.
There's nothing progressive about that! Among other things, the $1,000 cap is purely a short-term measure. But more to the point, this is irrelevant to the question of progressivity under any normal definition of "progressive."

February 2, 2005 | Permalink

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Comments

Huh? A person making $25k gets to put 4% into a personal account. A person making $100k gets to put 1% into a personal account. Sounds progressive to me.

Posted by: Al | Feb 2, 2005 7:02:36 PM

Dammit, I am sick of this hypocrisy! How can you people say Bush isn't asking for sacrifices from the public in a time of war? I'd say giving up your old-age security net is a prety damn big sacrifice! And we, the people, are up to the challenge!

You liberals are never satisfied.

Why do you hate America/Freedom/Democracy/god?

Posted by: raff | Feb 2, 2005 8:06:49 PM

Al: A person making $25k gets to put 4% into a personal account. A person making $100k gets to put 1% into a personal account.Sounds progressive to me.

Was that a serious comment or are you making fun of people who don't get Matt's point?

In case it was a serious question: the answer is that the person making 100K can put 4% of their earnings into a private account if they so desire - the only difference is that the person making 25K has to put the full 4% in a government mandated private account, whereas the 100K person has 1% in a government mandated account and the other 3% in whatever kind of account they want it in.

Posted by: cs | Feb 2, 2005 8:19:46 PM

Must have been "stalker Al." Real Al isn't that stoopid. Nice try Zizka.

Posted by: Drew | Feb 2, 2005 8:25:24 PM

Drew-
Yeah, I think you're right. Ditto the previous post about reporters being transcriptionists. Zizka's getting better at this though, I gotta admit...

Posted by: Brad Reed | Feb 2, 2005 8:40:41 PM

Paul Krugman Refuted!

"How to do this? If the US continues to borrow 4% of GDP indefinitely, and all of the benefits of GDP growth go to owners of capital - as they have in recent convolescence period from the crash, then it is entirely possible to reach any arbitrarily high P/E ratio. The "historical" averages that we have now are from a time when rent was taxed more than labor. However, in an environment where rent is tax free, and there are no marginal gains to be made in wages, and there is a larger and larger pool of captive money, then this status is entirely possible. The basic theory the Republicans are pursuing is that the reason the Great Depression lead to the New Deal is because people could engage in "runs" on bad banks. If they can just duplicate those circumstances again, only with depositors who by and large cannot withdraw their money, than valuations on as thin an asset base can be maintained indefinitely. I won't quote the guy who thought this up originally, he had a thing for the hackencruz and worked for another guy whose name pops up a bit too frequently in internet discourse." ...Stirling Newberry, BOPNews

Posted by: bob mcmanus | Feb 2, 2005 8:48:52 PM

Was that a serious comment or are you making fun of people who don't get Matt's point? In case it was a serious question: the answer is that the person making 100K can put 4% of their earnings into a private account if they so desire - the only difference is that the person making 25K has to put the full 4% in a government mandated private account, whereas the 100K person has 1% in a government mandated account and the other 3% in whatever kind of account they want it in.

CS: Al is correct, inasmuch as the money that one can put into a PRA is a reduction in one's FICA tax. Thus the reduction in the FICA tax available to one of modest means will indeed be greater, on a percentage basis, than one available to a wealthier person. The outlines of the presiden't proposal are indeed progressive in this manner. The current method of funding Social Security is, of course, highly regressive. So, as usual, the Democrats will fail to live up to their legacy as they fight tooth and nail to lessen Bush's efforts to make the system more progressive, and as they completely fail to offer up any of the competing ideas one hears about such as rasing the FICA cap.

Posted by: P. B. Almeida | Feb 2, 2005 9:39:24 PM

Sure, Al and PB are right... for certain values of "progressive".

To say that there's a "reduction in the FICA tax" a) mis-applies the term "tax", to make the move seem more attractive than it actually is, and b) really mis-states what happens to the money.

The money moves from supporting the current system to a separate account (that will, in all likelihood, return less than the current system, which is the problem with the whole thing). That someone with a lower income will be able to move a larger percentage of their income is as progressive as it is orange!

Posted by: jeff | Feb 2, 2005 10:08:27 PM

I'll confess not to know the technicalities of this proposal, but it does sound progressive, and something like it is done if France. Certain banks (linked to the government) give a higher-than market interest rate on accounts, but these accounts can't pass a certain limit.

Posted by: Andrew Boucher | Feb 3, 2005 1:20:19 AM

A liberal reason for private accounts: Money moving into them can't buy bombs.

Posted by: Mr. Econotarian | Feb 3, 2005 8:53:27 AM

A liberal reason for private accounts: Money moving into them can't buy bombs.

An interesting theory, there, Econ: starve the Pentagon by increasing the deficit even more!

Only trouble is, it won't work. Everyone has seen what gets cut and what is a sacred cow when the red ink starts flowing. That's why Rethugs became big spenders and Dems have become fiscal conservatives since the 80's.

Getting back to the topic, I'm all for progressive changes to the FICA tax. But this change is about as minimally progressive as it could possibly be and still be progressive at all: a $25K/yr or less worker gets a 4% cut, while workers at or over the $90K/yr cap get "only" a 1.1% cut. Big Woo! That 2.9% difference really soaks the rich, doesn't it? And after a couple of years, the rich get their full 4% too, so any progressivity disappears pretty quickly. That hardly cancels out the regressivity of the FICA cap.

Furthermore, the "cut" can't be spent until retirement, and for the $25K/yr worker, most or all of that "cut" will go to the Feds anyway, to buy the mandatory annuity. Some tax cut!

Rather than wasting your time trying to snow those of us who know better, why don't you Rethug trolls support real progressivity in the FICA tax? Let's replace the earnings ceiling with an earnings floor!

Of course, that might keep SS solvent without your precious private (er, sorry, "personal;" for a moment I forgot Dear Leader has removed "private" from the Newspeak dictionary) accounts. So I guess we can't have that.

Posted by: Mathwiz | Feb 3, 2005 11:37:24 AM

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