Like the proverbial bad penny, Sen. Daniel P. Moynihan's scheme to dump the cost of financing the retirement of the baby-boom generation on the children of the baby-boomers is popping up again on Capitol Hill.
If Mr. Moynihan's motive was solely to expose how current surpluses in Social Security funds are tapped to reduce soaring federal deficits, his plan could be tolerated -- provided it is not adopted. But there is an unmistakable whiff of politics in all this. The New York senator is trying to prove his Democratic Party is not inexorably addicted to hiking, rather than cutting, taxes. Good luck.
Mr. Moynihan's plan to lower payroll tax rates from 6.2 percent to 5.2 percent of earnings (a bad idea) and to raise the maximum taxable wage from $53,400 to $82,200 (a progressive, good idea) draws support from diverse interests -- anti-tax conservatives, soak-the-rich liberals, plus labor and business groups. Though this could cost the Social Security fund $195 billion over the next five years, and thus reduce its safety margin, the Moynihan bunch prefers to concentrate on current agendas -- and to hell with the future.
It is the future, however, that ought to concern this most self-indulgent of generations. Elderly Americans, who are drawing more Social Security benefits than they ever paid for, and working-age citizens, who are conditioned to credit-card prosperity by a profligate government, ought to think about their children and grandchildren.
When the baby boomers begin to retire in 2009 -- just 18 years from now -- this huge population group will have to be supported by a relatively smaller cohort, including the skimpy baby-bust generation. The prudent way to do so, as the 1983 Social Security reforms provided (or pretended), is to build up trust-fund surpluses to tide things over to about 2020, which is about as big a jump ahead as current minds can contemplate.
What enrages and sorely tempts Mr. Moynihan is the fact that these funds are automatically purchased by the federal government to pay budget expenses that habitually exceed revenues, thus leaving the trust funds with a bunch of IOUs. The obvious solution is ending deficit financing. Since this is beyond the capabilities of Washington politicos, the Moynihan formula calls for reducing payroll taxes a fraction, thus denying the Social Security trust funds their hoard of government bonds. Meanwhile, the debt-addicted government would still borrow -- only from the private sector, with a consequent upward pressure on interest rates.
All this is mischievous and irresponsible. It would weaken rather than strengthen the economy, as the Congressional Budget Office pointed out yesterday in a critical report. Mr. Moynihan's idea may be new thinking, but it is bad thinking and ought to be deep-sixed as surely as it was a year ago. This generation needs to start paying its way a little more instead of passing its burdens onto little kids and babies yet unborn.