The Social Security Fix - so simple and yet so difficult

[ThomWV]

This is one of those little things that its easy to assume everyone knows, and surprising to find that everyone doesn't know. So here goes

The fix for Social Security's financial problems is simply to lift the cap. "What's the cap?", some of you might ask. The cap is the maximum gross earnings on which Social Security tax is due. Huh?

Some folks don't know it but each year a maximum amount of gross earnings is set and earnings above that amount are not subject to the 6.2% Social Security tax that 'all workers pay'. This year the cap is $106,800, last year it was $102,000.

So a person making $10,000 a year pays in $620. A person making $106,800 pays in $6,622, but a person making $1,000,000 still only pays in $6,622, not the sixty thousand plus that you'd expect.

There is also a match, which is to say that your employer must pay in an amount matching your contribution - so in effect the cap acts as a subsidy to business for its highest paid employees because the companies too are exempted from paying social security tax on gross pay amounts greater than the cap.

So if you want to see solvency in Social Security its easy enough to achieve. Legislate the cap out of existence. You'd think this would be politically possible - after all, the vast majority of workers are under the cap and this would have no effect on them at all - only those who's gross pay is well over one hundred thousand per year.

[Skink]

1. Create a doughnut hole so SS taxes kick in again after a million.

that means leave the 106 cap in place. Give everyone relief between that figure and a million then have ss tax kick in again. Leave whatever employers have to pay untouched.

[ThomWV]

2. Why? What purpose would the 'donut hole' serve?

Why on earth would we want to exempt anyone?

[Warpy]

3. It's a little more complicated than that

Social Security was originally designed to be a pay as you go insurance program.

LBJ got Congress to pass a law putting the then minute overpayment into the general fund to be used to defray the cost of Vietnam.

Reagan raised FICA taxes six times, supposedly to create a surplus we boomers would use when we got old enough to retire so there wouldn't be a huge burden on our children. Congress simply kept robbing the then massive surplus, putting it into T-bills none of us in our right minds think will ever be redeemable, all in the name of keeping those tax cuts for their fat cat donors.

The only real crisis in Social Security is the one created by LBJ, Reagan and a Congress that got too comfortable robbing boomers to fatten the rich. The only real crisis is that as we boomers retire, Congress will no longer be able to rob a surplus because there won't be one to rob.

The fix for Social Security is getting it out of Congress's greedy hands and turning it back into what it was always meant to be, an old age insurance program that allows us to live decently when we are too old and sick to keep working.

Anything else will simply not work.

[Skink]

4. If it is out of congresses hands who manages it?

[Warpy]

6. Social Security

They always did that quite well and are doing it today on the funds they spend.

Congress has been stealing the overpayments. That's what has to stop.

[ThomWV]

12. If I'm not mistaken - and you know more about this than I do ...

I think that when the money was/is taken out of the 'fund' it goes directly to the Agencies who then issued some sort of IOU that is held by the Social Security Administration. That is how it has been explained to me, but it might be wrong. At any rate, if its right there's a real problem. The Agencies, with few exceptions, do not have income of their own so to repay the debt they owe Social Security they would have to dip into funds appropriated for other purposes - and that is illegal for them to do unless Congress approves the redirection of funds.

[closeupready]

5. I'd like to see this change in conjunction with a lockbox.

Otherwise, we're only going to get back to this place, not get beyond it.

[dmosh42]

8. If it was restored as a payment for 'retired seniors', as it was...

intended, there would be surpluses again. When I filed to receive my payments at age 62, five years ago, I would say there was a room full of people,(maybe 120) but only about five or six who were old enough for what was intended by FDR. All the rest were younger people who were receiving some other kind of payments tied into Social Security in the years since. I never realized how many until I was eligible to file. So all this bullshit about it not being able to pay is because the politicians added many more reasons to pay people because Soc. Security always was in surplus until the 1960s.

[pinto]

9. Legislative History of Disability Program under Soc. Sec.. '35 - '74

A. LEGISLATIVE HISTORY
The Development of the Disability Program Under Old-Age Survivors Insurance, 1935-74

http://www.ssa.gov/history/pdf/dibreport.pdf

(pdf file, 18 pages)

[Greyhound]

7. If the cap were removed, the tax itself could be powered, or alternatively,

the match could be reduced or lowered, and either way the "problem" is fixed.

Of course we all know the real problem is that the financial sector wants that money.

[Vinca]

10. You're exactly right. It's an obvious, easy fix.

They don't even have to legislate it out of existence, just raise it another $100,000 or so.

[TahitiNut]

11. "There is always a well-known solution to every human problem -- neat, plausible, and wrong."

(In other words, I disagree.)

The Social Security system, first of all, includes retirement, disability, survivors, and health insurance based, at least partly, upon some minimum and maximum amount of quarterly taxed payroll earnings. For the purposes of calculating a "primary insurance amount" (for retirement), the greater an individual's taxed payroll earnings then the greater an individual's benefits. Thus, raising the "cap" would, under the current system, result in a increased benefit. An "unlimited" cap, then, would result in an "unlimited" benefit. In order to adjust the system to accommodate an "unlimited" cap, it's clear that benefits at the lower range would then be decreased. That's not a positive change.

We already have a "hardship amplifier" in the system where folks who're at the lower end of the earnings range and who're forced, by economic and employment circumstances, to collect benefits early (age 62, at 20% less than a 'full benefit') are the folks who need it most. The folks who need it least, conversely, are the folks able to wait and who're earning more. Raising the "cap" would amplify this stress between the needs of the least affluent and the needs of the most affluent.

One could postulate all kinds of associated 'adjustments' to the law and calculation of benefits in order to rationalize the new "unlimited" cap, but the result would be a system that bears less and less resemblance to the system that exists and the degree to which it's fair to workers. Social Security today is insurance and not welfare in the largest sense. Increasing the "cap" might adopt a different mix. That's not a can of worms I'm eager to see opened.

But more important, the sole existing 'problem' with the Social Security system's funding projections today has to do with the diminishing share of the 'income pie' being afforded to the 'bottom 90%' of the working class. It is, quite simply, an indication (symptom) of the widening chasm in the distribution of income in this country -- the "war on the (disappearing) middle class" or "class war" if you will. As the very people who, in concert, fund Social Security are increasingly impoverished, so are their parents and grandparents threatened in terms of the benefits they can expect. In this sense, the Social Security funding projections are like a "canary in the coal mine." It's warning that the working class in this country will be economically unable to care for their retired parents, grandparents, their survivors, and the disabled ... and will become increasingly dependent upon the 'charity' of the wealthy. Raising the "cap" merely rationalizes that condition and says it's OK.

It's not.

No way. No how.

The "social contract" we made was to leave to every succeeding generation the opportunity to earn a living income in safe working conditions. We provide education to our children. We provide health care for our children. We work to create economic and political justice. We make a promise to future generations that we will leave them a world better than we found it. We must not break that contract.

The increasing disparity between the haves and the have-nots is intolerable and absolutely must be addressed if we're to survive as any semblance of a democratic society.

The most effective 'solution' to the Social Security system's funding is increasing the share of the income pie given to the 'bottom 90%' of wage-earners. Increase the minimum wage. Enact a living wage. Abolish 'right to work' laws. Enact trade agreements that impose fair labor standards on any goods imported into the U.S.



"There is always a well-known solution to every human problem -- neat, plausible, and wrong." -- H. L. Mencken

[truedelphi]

15. Hey for now I'd settle for this eensie weenie teenie tiny bit of change

The bank charge for insufficient funds (In other words, when your check bounces) cannot be more than the minimum wage in the state where you bounced the check.

No more $ 33 fees every time a check bounces.

[Rabrrrrrr]

13. Yeah, and when the retired CEO draws $500,000 a year in SS, you'll piss and moan about that, too.

Christ.

:eyes:

[dkofos]

14. That's just taking the easy way out.

It also happens to be the only way out.