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The Myth of Social Security's Insolvency

02/10/2013 11:15 am ET | Updated Apr 12, 2013

To set the stage for this inquiry, it's appropriate to borrow from Professor Walter Burkert, an expert on mythology and emeritus professor of The University of Zurich. Professor Burkert concludes, "Myth is a traditional tale with a secondary, partial reference to something of collective importance."

If you watch cable news or follow Congress, you are undoubtedly saturated with so many myths about Social Szecurity that you probably don't know what to believe.

Unless we act, Social Security reform could easily fall victim to the most conservative mythmakers in Congress.

We must determine if Social Security faces a system-wide breakdown, or if it's falling victim to a deliberate campaign of misrepresentations.

Unfortunately, the national media never seems to get into the details, so this research becomes necessary.

For the facts, let's turn to NASI, the National Association of Social Insurance. This is a non-profit research group that analyzes the findings of the Annual Social Security Trustees report. From their analysis, we should be able to ascertain if the Social Security system is becoming insolvent.

Here is a conclusive quote from NASI:

"The 2012 Trustees Report shows that Social Security is 100 percent solvent until 2033, but faces a moderate long-term shortfall. In 2011, Social Security had a surplus - revenue plus interest income in excess of outgo -- of $69 billion. Reserves are projected to grow to $3.2 trillion by the end of 2020. Then, if Congress takes no action in the meantime, reserves would start to be drawn down to pay benefits."

Why have these facts been ignored by Congress and the national media?

NASI continues:

"Since 1935, the Social Security Program has collected $15.5 trillion and paid out $12.8 trillion, leaving a balance of over $2.7 trillion in the trust funds at the end of 2012."


The 2011 to 2012 increase was 64.5 billion dollars.

See Historical Data...

Here's more from NASI:

"The $2.7 trillion is invested in U.S. Treasury bonds. In financial markets, Treasury bonds are considered an extremely safe investment because they are backed by the full faith and credit of the United States."

See NASI video...

Wow... I'm sure these facts will be a real buzz kill around right wing think tanks who feign concern about insolvency.

A reasoned analysis, such as the one published by NASI, clearly points to the year 2020 as the turning point when the Social Security system begins to draw down its reserves. This begs the question, what is changing in America that will cause reserves to decline?

The answer has been celebrated in board rooms for years, especially by recipients of "corporate welfare" who earn profits and bonuses from the labor of minimum wage earners.

The old adage that the rich are getting richer and the poor are getting poorer is no longer a cliché, it has become America's economic record since the 1970s.

This wealth and earning gap necessitates changes in the way Social Security taxes are imposed.

Currently, wages above $113,700.00 annually are not burdened by Social Security taxes. This "cap" takes us to the crux of the problem.

Social Security needs to tax at least 90% of all wages in America, but because the rich are getting richer and the middle class is stagnating, too much tax exempt wage gains are going to earners who make more than 113,700.00 a year. As a result, only 80% of all wages are now subject to Social Security taxes.

See table on maximum taxable earnings...

According to NASI, the decline has occurred because those at the top of the economic ladder who make more than the 113k a year have enjoyed more rapid earnings growth than those who make less than the 113k a year.

To insure the viability of Social Security, we simply need to eliminate the cap and do some modest means testing for top earners. These changes can insure solvency for another 75 years.

This study by The Congressional Research Service leaves no stone un-turned.

The findings of the CRS can be summed up with the following simple graph. The graph was published in The Washington Post as part of an article written by Dylan Matthews.

The data concerning Social Security is inviolate. Removing the cap is essential. This will require the top 6% of wage earners to pay the same percentage of social security taxes as all the rest of us.

We should think of Social Security as an insurance policy that protects all of us from abject poverty. It is morally wrong for the rich to use their power over Congress to "opt out." These are the people who have benefited the most from capitalism so they should certainly pay their share of social insurance.

Obviously, the "need" to cut Social Security in order to reform it is pure myth. We have enough compelling arguments to embarrass the mythmakers into civility and compromise but instead, we should expect very little civility and absolutely no compromise. They will give no quarter when threatened by additional Social Security taxes. Regardless, we must stand against their selfish demands for cuts and reductions to the only programs that prevent homelessness and hunger for millions of Americans.

Americans have fallen victim to too many destructive myths in recent history. We can no longer afford to fall prey to such subterfuge.

Don't expect any help from the pundits of nationally syndicated radio and the big cable news networks. Most of these people "earn" far in excess of the cap while the top ranked talking heads of Radio and TV make tens of millions. These people, like most of those we elect to Congress, will never voice support for lifting the cap because it will raise their taxes. This could be why we hear cut, cut, cut, and almost nothing else.

The best way to win this battle is to put these facts in front of the American people at the grass roots level and turn them loose on Congress and the national media.

Don't worry about taxing top wage earners. They have plenty of money to pay their fair share of social security taxes.

It is time for all top wage earners and all the other Social Security mythmakers to put away their bad ideas and silence their propaganda for the real good of America.

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