The rumors that Bush is willing to consider tax increases on upper income people to make progress on issues he views as important to his legacy gained credence yesterday. In his press conference yesterday Bush as much as said so, per the WaPo:
Signaling a new flexibility on issues in the wake of the Democrats' wins, Bush said he is willing to discuss Democratic ideas for solving the Social Security problem, including tax increases. "I don't see how you can move forward without people feeling comfortable about putting ideas on the table," Bush said when asked about the prospect of tax increases to keep Social Security solvent. "I have made it clear that I have a way forward that can do it [without raising taxes] and I want to hear other people's opinions."
The deals most often talked about to secure Social Security's finances would combine an increase in the level of salaries subject to the payroll tax, set to rise to $97,500 next year, with some shrinkage of benefits for those retiring in a few years, either by way of increasing the age of retirement (with full benefits), now 67 for those born in 1960 or later, which also reduces the initial benefit for those who begin to draw benefits at age 62, or by so-called "progressive indexing," which ties the calculation of initial benefits to the rate of inflation, rather than to wage increases, ultimately resulting in a lower initial benefit for workers who make more than $25,000 a year (in today's dollars) at retirement.
In the last two years the focus has been on Bush's insistence on private accounts. Dems refused to even discuss the topic of changing Social Security so long as private accounts, funded by some percentage of payroll taxes, was on the table. But even if Bush takes carve-out private accounts off the table, and agrees to consider increases in the payroll tax as part of a deal, Dems should still decline the invitation to tinker with this highly successful program. Why? Because so long as payroll taxes exceed benefits paid, which they will until at least 2017 under the current system, and as long as Bush insists the Social Security Trust Fund is a phantom, any increases in payroll taxes will just fund the war and tax cuts for the very rich. They will not put Social Security on a sounder financial footing than it is now because there is no real mechanism to ensure that result.