Boo!
The Scary, Scary Social Security 'Crisis' is Back!
29 March 2010By
Dave Lindorff
Get ready kids. It’s time for more scare stories about
Social Security.
The New York Times weighed in today with a dire
warning that this year, six years ahead of what had
been predicted only a few years ago, the Social
Security system would be (cue scary music) paying out
more in benefits than it takes in from the payroll
tax. The reason for this earlier-than-anticipated
event is the Great Recession, the paper explained.
Well yeah. If you were 62, or 65, and you had lost
your job, with no likelihood of its coming back,
wouldn’t you, once your unemployment checks ran out,
opt to start your retirement earlier than planned, so
you’d at least have some money coming in each month?
Oh, and with 10 percent of the work force currently
unemployed (actually close to 21 percent if you count
the people who have given up looking for a nonexistent
job, and those who have taken some low-paid part-time
work out of desperation), there is a lot less money
being paid into the Social Security Trust Fund. So
with beneficiaries rising faster than anticipated, and
the total national payroll in sharp decline, of course
things have gone negative for Social Security earlier
than originally anticipated.
So what to do about it? I mean aside from the obvious
solution of offering a real significant jobs program
for the unemployed and laid off so that they would
still be able to pay into the system and so that those
who are 62-65 don't have to condemn themselves to
reduced retirement checks for the rest of their lives
by retiring early.
Well Hank Paulson, the guy who as Treasury Secretary
under President George W. Bush, helped engineer the
real estate bubble that brought the economy to its
knees, and who then engineered the sweet deal that
helped his former company, Goldman Sachs, come out of
the crisis as the nation’s biggest bank, fattened by
tens of billions of taxpayer bailout dollars, and of
course Peter Peterson, the former ad exec turned
self-described economic guru who has been a perpetual
doomsayer about Social Security, calling for its
privatization, both say the answer is benefit
cutbacks, an older retirement age and other attacks on
the system. Why not? They won't be depending on Social
Security checks to get by.
But really, the real question is: What’s the crisis?
Sure a wave of Baby Boomers is about to start retiring
next year (actually for those born first, in 1946, who
decided to retire early at age 62, Baby Boomer
retirement began in 2008), but that’s a demographic
wave that will eventually pass. In the meantime,
financing the benefits for Baby Boomer retirees simply
means that current workers--the Baby Boomers’ children
and grandchildren--will have to pay more in payroll
taxes. Or--and this is what has people like Paulson
and Peterson scared--Baby Boomers and their allies
among younger workers, may decide to use their
unprecedented electoral clout to take those extra tax
payments not out of younger workers, but out of their
employers. There is, after all, no legal, theoretical
or even mystical reason why the Social Security
payroll tax should be split 50/50, with half being
paid by the worker, and half by the employer. It could
easily be a 40/60 split, with the employer paying 50%
more than the worker, or even a 30/70 split. That is a
political question. Likewise, there is no reason on
earth why the payroll tax should be set at the same
percentage rate for all income levels, as it is now,
instead of progressively calculated, so that
high-income workers would pay a higher percentage of
income into the fund than low-income workers. And
finally, there is no reason why the income subject to
the payroll tax (the FICA tax on your W-2 statement)
should be capped (currently at $106,800), or why
investment income should be exempt.
The so-called Social Security funding “crisis,” which
has Republicans and many Democrats warning ominously
of the system’s looming “insolvency” as though Social
Security were just another AIG, could be solved simply
by just eliminating the income cap, and taxing
investment income.
Oh, but the conservatives wail, if we raise the
payroll tax, America will become uncompetitive, and
our economy will collapse.
How then to explain Germany, where social security as
a percentage of GDP is much greater than in the US (40
percent of Germany’s adult population receive some
form of government income, whether in the form of
retirement payments, unemployment compensation or
disability payments--far higher than in the US)?
Despite its high social welfare budget, and its high
wages, Germany is the second-largest exporter in the
world after China, and despite Germany’s being a huge
importer of goods and services, second only to the US,
overall, Germany is a net exporter. Go figure.
Clearly, the problem with America’s economy is not
high social security costs, and the “crisis” facing
Social Security is not that it is going to “go
bankrupt.” It is simply that the corporate interests
in America, and the wealthy, don’t want to have to pay
for the system. They want the lion’s share of the
funding to be paid by ordinary workers and the poor.
The political game being played by corporate
interests, Republicans, conservative Democrats, and by
the corporate media, is to pretend that Social
Security is just another pension system--underfunded,
overburdened, and in need of downsizing. They insist
the only solution is cutting benefits, raising the
retirement age, and privatizing--taking away the
guarantee of a monthly benefit check, and replacing it
with the “miracle” of the financial markets.
American workers need to reject this campaign of
misrepresentation. They need to realize that Social
Security is a government income-support program, and
that its benefits are not just for the elderly, but
are also for the current workers, who are relieved of
having to personally care for their parents and
grandparents. They need to realize that Social
Security is a government program, and that it will be
there for them when they want to retire, just as it is
available now for today’s retirees. And they need to
realize that there are many ways to finance those
current and future benefits besides just raising their
own and their employers’ payroll tax payments from the
current 7.65 percent each and/or raising the
retirement age beyond the current 66/67 level. We need
to demand that all Americans pay the payroll tax on
all income, with no caps and no exemption for
investment income.
At that point, the fake “crisis” will be over, and we
can focus on the real crises facing us: the endless
wars that our government keeps dragging us into (one
advantage Germany has is that it spends only 1% of GDP
on its military, compared to 5% for the US), global
climate change, and health care (yeah, they sure
didn’t solve that one with the so-called Health Care
Reform Act just passed, which will still leave us
spending 20 percent of GDP on health care by 2016, up
from 17.5 percent this year!).
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