Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 23, 1993 TAG: 9302230343
SECTION: EDITORIAL PAGE: A-8 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
SOCIAL SECURITY: TO TAX OR CUT?
HIGHER taxes on the affluent and an energy tax on everybody aren't the only "contributions" to the nation's long-range future that President Clinton's economic plan asks Congress and the American people to make.Clinton is also challenging America to reconsider old ways of thinking about public finance.
For instance, critics of his plan have trotted out familiar talk about the need to "cut spending" rather than "tax and spend." They are certainly correct in arguing that the plan would benefit from more spending cuts; entirely correct, as well, in fearing that Congress may approve new taxes and spending programs while shrinking from cuts.
Even so, the "tax and spend" argument sidesteps the fact that the real debate for the past 12 years has not been "tax" vs. "cut," but "tax and spend" vs. "borrow and spend." The argument says nothing on the critical issue of whether public dollars are to be spent for consumption or for investment.
And in some instances, the "tax and spend" argument is simply wrong. Sometimes, it's better to tax more than to spend less. Consider, for example, Social Security benefits.
Social Security clearly cannot be left out of any deficit-reduction plan offering the slightest pretense at fairness and the slightest promise of effectiveness. But how to do it?
One method, floated by the administration before Clinton's speech, would be to freeze benefits for a time, so they would not rise with inflation. It would, in other words, cut spending.
That trial balloon was shot down, and with cause. Instead, the Clinton plan embraces another method: Achieve an equivalent amount of deficit reduction - about $29 billion over five years - by making Social Security benefits more fully taxable for middle- and upper-income beneficiaries. It would, in other words, raise taxes.
Clinton may be faulted for trying to categorize such recovery of Social Security dollars as a cost savings rather than a tax increase. This categorization runs counter to most people's definitions; his point is made, but less forthrightly than it might be.
But put forthrightly, the distinction in this instance between a "tax increase" and a "spending cut" is not especially meaningful. And if the distinction is insisted on, then it is one instance where a "tax increase" is preferable to a "spending cut."
Under either method, the federal government would retain some of the dollars that otherwise would be distributed to Social Security beneficiaries. But under the "spending cut," Social Security retirees would be hit regardless of income. Under the "tax increase," the burden would rise with ability to pay; beneficiaries on the edge of poverty would be spared entirely. Isn't this the better way?