An Internet hub for moderates, centrists, and independents, with domestic and international news, analysis, original reporting, and popular features from the left, center, and right

« Obama and Us [Arabs]: Let’s Not Be Taken in Again – Awan of Kuwait

NYTimes Online Exec Leaving to Become NPR CEO »

Things We Should Change, But Won’t – Part I: Social Security

Posted by NED LIPS in At TMV.
Nov 11th, 2008 | Comments

Change has been promised, as it always is by almost every new president. So President-elect Obama, who I voted for lest you think I am being harsh, has begun yet another quest for the holy grail of change in Washington. I am going to suggest several things over the coming posts that should be changed, but won’t be. Perhaps I am wrong.

Social Security:
A common misconception about Social Security is that it is a savings plan. Because you paid in you are entitled to get something back out. While certainly sold to the public that way, it is no more than a tax on current workers to pay a stipend to current retirees. It is the worst sort of government entitlement, precisely because we choose to lie to ourselves as to what it is. It is:

A Regressive Tax:
It is a tax where the least wealthy pay a higher percentage of their pay than the wealthy. The tax is only paid on income up to a certain level. If you make less than that amount, you pay the full FICA percentage on 100% of your pay. If you make more than the FICA limit, you pay the full percentage on your pay up to that amount and then NOTHING on your pay over that amount. The more you make, the lower the percentage of your wages you pay in FICA taxes.

Welfare for the Rich:
Then, to add insult to injury, the government gives your hard-earned pay to rich old people. So while you struggle to make ends meet, someone who is worth millions receives welfare payments that you pay for. Talk about screwing the working middle class. I had a wealthy client who could neither refuse to take his social security check nor give it back. YOU pay over $600 every month to this multi-millionaire.

Bad for Jobs and Pay:
Now if that were not enough, employers pay a social security tax based on the number of employees they have and on the amount they pay them. That means the more people they hire, the more tax they pay, and the more they pay their middle class workers, the higher the company’s tax burden. In this manner we make our already “expensive” worker around 7 – 8% more cost-inefficient to American businesses. This, of course, causes employers to hire fewer American workers and move jobs overseas, or makes American firms less competitive in world markets.

Recap. Social Security:
• Taxes the poor more than the rich.
• Gives your hard-earned money to rich retired people now.
• Makes it harder for your American employer to afford to employ you or raise your pay.

Could anyone invent a more ludicrous program?

Solution: Assuming we are not going to get rid of it entirely:
• The FICA tax should apply to all income no matter how much or where it comes from.
• Recipients should be means tested. If you do not need the money, you do not get it. We know how much everyone has made since they were 15. We know who is or should be rich.
• Eliminate payroll taxes to make American workers more competitive.

Result:
For middle class Americans nothing will change.
For those making over the FICA limit, they will pay FICA on 100% of their pay.
We will stop paying rich people money they do not need.
We will make American workers more competitive without lowering pay or benefits.
Will it happen?

Do not hold your breath. Those rich old people vote . . . a lot.

Ads by Project Wonderful! Your ad here, right now: $0

adelinesdad

A common misconception about Social Security is that it is a savings plan. Because you paid in you are entitled to get something back out. While certainly sold to the public that way, it is no more than a tax on current workers to pay a stipend to current retirees.

Considering your entire argument is based on this claim, you offer no support for it. Social security taxes go into a fund that is invested and used to pay future benefits that are based on the amount the retiree paid into the system. Perhaps you are basing your claim on the fact that the government borrows from that fund to pay other bills, so there is no pile of cash sitting somewhere waiting for people to retire. However, that money is borrowed and is to be repaid with interest, just as any other money that is invested. We would not like it very much if the government just took that money and put it under a mattress until we asked for it back after we retire. We expect them to invest it, which means lending it out to those who want to borrow (including the government itself). Now, that puts the government itself into debt, which isn't good, but that has nothing to do with the social security system which is separate from the rest of the federal budget.

But even ignoring that point, let me make sure I understand your argument:

1) Social security is more like a social welfare program than a savings plan.
2) Therefore, we should change it to be more like a social welfare program than a savings plan.

Isn't that a contradictory argument?

Don Quijote

Solution: Assuming we are not going to get rid of it entirely:
• The FICA tax should apply to all income no matter how much or where it comes from.
• Recipients should be means tested. If you do not need the money, you do not get it. We know how much everyone has made since they were 15. We know who is or should be rich.
• Eliminate payroll taxes to make American workers more competitive.

Result: 10 years after above solution becomes law:
• 75 year old grandmothers who have raised families and worked all their lives at low paying jobs will be called Welfare Queens driving Welfare Cadillacs by Republicans running for Office.
Result: 20 years after above solution becomes law:
• 75 year old grand mothers who have raised families and worked all their lives at low paying jobs will be called Welfare Queens driving Welfare Cadillacs by Spineless Democrats running for Office.
Result: 30 years after above solution becomes law:
• 75 year old grand mothers who have raised families and worked all their lives at low paying jobs will not exist, they will have died an early death due to homelessness and hunger.

blog comments powered by Disqus