President Bush called on Congress last night to curtail future Social Security benefits for all but low-income retirees in an urgent new effort to address the popular program's shaky finances.
Let's be clear, by "low income" we're really talking about "low income." Everyone else gets big benefit cuts. Here's the CBPP analysis of the Pozen plan, which is basically what Bush is embracing.
A "medium" earner, one earning $36,507 in 2005, would see benefits cut by 16% in 2045 and 28% in 2075.
A "high" earner, one earning $58,411 in 2005, would see benefits cut by 25% in 2045, and 42% in 2075.
By 2100, basically everyone earning above $20,000 would earn exactly the same benefit, no matter how great their tax contribution was. You think Social Security provides a poor rate of return now? Just wait.
This turns the system into a modest welfare program.
And, let me add, for most workers this is worse in the long run than the "do nothing" plan - the one which assumes given current projects benefits would have to be cut 28% or so starting somewhere between 2040-2050.