An Audacious Plan To Rescue The U.S. Economy
David Brooks, the New York Times’ conservative columnist, wrote that President Obama’s convention speech lacked audacity. I agree. So here’s my own audacious plan that if actually implemented would cure most of this country’s economic ills.
Begin by making Social Security a pay-as-you-go system. The amount of money collected by the Payroll Tax would all go (no diversions) to fund the system yearly costs.
Apply the Payroll Tax to all earned income, not just the first $106,800 of earned income. This extra tax bite, however, would not apply to the employers’ share of the tax that would remain topped at this level so as not to overly burden small businesses. The payout to future beneficiaries of the system would also be kept at present levels because the people paying more taxes under this plan do not need additional Social Security income for retirement, they are well-fixed enough to fund their own retirements without extra aid.
That’s my audacious plan to save the economy. Why do I think it would have the desired effect?
First, because is will reduce the country’s annual deficits and greatly improve the future credit worthiness of U.S. bonds. This is because with a pay-as-you-go Social Security system the Social Security Trust Fund — an absurd concoction of Ayn Rand acolyte Alan Greenspan — is filled with nothing by government paper, and its contributions to present Social Security shortfalls comes from deficit increasing borrowing. Thus, not only would yearly deficits be reduced because this government borrowing would not be needed with a pay-as-you-go system, some two trillion dollars worth of government’s total debt (In the Trust) could be written down immediately without hurting a single bond holder (only government bonds are in it). With our national debt now so much smaller by two trillion or so, the government’s credit worthiness would be assured far into the future.
And second, because so much additional revenue would now be flowing into the Social Security system, while its outlays are limited to only the rising costs of insuring an aging population, 95 percent all working people, those making $106,800 a year or less, would see a sharp decline in their own Payroll Tax bill. This extra money would do wonders when it comes to pumping up spending in this country, and spending shortfalls are the primary cause of our weak economy.
Some things to keep in mind about this plan: The argument that this is a tax increase is bogus. It is a tax shift from the 5 percent well-heeled to the 95 percent less well-heeled. In terms of total added taxation it’s a wash. Also, it is not an example of class warfare. The rich aren’t getting stiffed in a way the less rich aren’t. They are simply paying what everyone else with a job is paying. It is therefore a classless change. It’s the present Payroll Tax system that exemplifies class warfare.
This is certainly an audacious plan in one sense — the sense that it isn’t being floated in political circles. But it is also a simple and an obvious solution to several major economic problems facing this country.
So why isn’t it at least being discussed in this campaign?