Soc. Sec. Lingo: Progressive Indexing

It's becoming increasingly difficulty to cut through the fuzz that's collecting around the Social Security debate. In today's Boston Globe, Robert Kuttner does a good job explaining why Progressive Indexing (an idea currently being flogged by the Preznit) isn't going to be so great on those of us in the middling income brackets. The editorial is straight forward, concise, and informative, so give it a look.

Here's a couple grafs to whet the appetite:

''Progressive indexing" is a disguised benefit cut, but the disguise is pitifully transparent. Here's how it works:

Under the present Social Security system, both workers and retirees are protected against inflation. During the four decades of my working life, Americans' real incomes and consumer prices have gone steadily up. So if I retire, say, in 2016, I will get an initial Social Security check based not on my income when I first earned a paycheck in 1966 but on my lifetime contribution to the system adjusted for current prices. And the inflation adjustments continue after I retire. (This cost-of-living guarantee is why Social Security beats any private alternative.)

Bush wants to keep the postretirement adjustments but slash the inflation adjustments that occur during a person's working life except for the poorest Americans. The result would be a steep reduction in benefits for middle-class workers, since their anticipated retirement benefits are steadily eroded by inflation. People's initial Social Security check would be progressively reduced relative to what current law promises.

[snip]

For example, someone with an income of $36,500 -- roughly the median -- would get a 13 percent benefit cut by 2030, a 21 percent benefit cut by 2050, and a 40 percent cut by 2080, depending on when retirement began.

An upper-middle-income earner with a current income of $90,000 would get steeper cuts: 24 percent by 2030, 41 percent by 2050, and 60 percent by 2080. And these cuts would apply whether or not you diverted part of your payroll taxes to private accounts. These would be cuts in the guaranteed part of the benefit.