Is $97K A Year Rich?

Barack Obama has been saying that he thinks the best way to shore up Social Security's financial future is to raise the cap on earnings that can be taxed. Right now, Americans pay that irksome FICA tax on their first $97,000 in wages. (Other forms of income aren't taxed.) It certainly makes sense that if Social Security is in trouble then looking at higher taxes is one option. But this poses a huge political risk for Obama. He's open to the charge of wanting a massive tax increase on top of the repeal of the Bush income tax cuts for Americans making over $200,000. Hillary Clinton has argued that the program is not in trouble and she won't stake out a position on how to shore up the program before dealing with larger questions of fiscal discipline. It's a dodge, yes. (My spouse works for Clinton, I should note.) But it may be a deft one. She avoids asking for another tax hike. She doesn't irk upper income voters who tend to vote more. She doesn't make Social Security an issue in Iowa where voters tend to be older.

For his part, Fred Thompson has walked into the issue too saying he'd like to index Social Security benefits to prices rather than wages which would slow the growth of the cost of the program. And he's talked about a kind of supplimental 401K, a Bush lite, where workers on the cusp of retirement could divert some of their money to a private account. Wanting to trim benefits could be politically risky in elderly Iowa but it's a gamble Thompson is willing to take.

I don't know where the Obama-Thompson Social Security gamble will leave them but it is interesting and gutsy. One is going at the tax side, the other the benefit side. Either way, it's a pretty bold move.