A few days ago, I wrote about Rick Perry's unviable tax plan. In the same policy document (PDF, see page 14), he outlines his beliefs about Social Security. A few months ago, Perry was calling Social Security unconstitutional and a Ponzi scheme, but now he seems to want to preserve it. Rick Perry's statements about Social Security have moderated, but his proposal remains very far to the right.
Let me start by giving some credit where credit is due: His proposals to reduce the growth of Social Security expenditures are reasonable. First, he advocates slowly raising the full retirement age -- given that life expectancy has increased by more than a decade since Social Security was introduced, this step is unavoidable. And as it should, Perry's proposal takes into account the special needs of those engaged in physical labor such as construction workers.
Second, Perry wants to slow the growth of benefits for upper and middle class Americans through my 2005 idea of progressive indexing (he eschews the word "progressive" in favor of "blended"). This would mean that every future retiree would receive benefits that at least match the purchasing power of benefits today, but the growth of benefits for relatively higher earners will be reduced. To offset this reduction, I have suggested increasing tax credits to match contributions of middle class families to private savings accounts -- it is unlikely that Perry would consider such a policy.
While these are reasonable ideas on the benefit side, he undermines the revenue side of Social Security. There are many reasonable ways to increase revenues to Social Security, such as a 2 to 3 % surcharge on wages above today's cap. However, I would respectfully disagree with those who want to raise that cap from $106,800 to $180,000. That would impose a huge tax increase -- 12.4% of up to $73,000 salary -- on the upper middle class, with little effect on the truly wealthy.
By contrast, Perry would allow workers to put all their payroll taxes from Social Security to a private account. This diversion would increase the overall US deficit -- contrary to his stated goal of reducing the deficit and inconsistent with his balanced budget amendment. The unfunded liability of Social Security currently has a present value of over $5 trillion and the program went negative on a cash flow basis in 2010. Whatever long-term reforms we adopt, we need to continue payments into Social Security so it can continue to pay benefits already accrued by American workers.
In short, despite some good suggestions on benefit reform, Perry's proposal on the revenue side would hasten the day when Social Security becomes insolvent. We need to fix Social Security, not to bankrupt it.
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| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
The problem can be solved quickly and easily.
But citizens/voter keep relying on politicians and economists to fix Social Security, which will never happen until the programs is totally broke.
Reform must take place: either by raising the wage cap over $106,800, by increasing the retirement age to keep pace with longevity, by means-testing and eliminating benefits for very high income seniors, or by some combination of these proposals.”
If the benefits of productivity were passed along to those that made it possible instead of those in a strategic position to funnel it to themselves, this would not be an issue.
Issue #39: People believe that raising the retirement age makes sense because life expectancy is longer.
Increasing the retirement age based on life expectancy is an acknowledgement that the expected total duration of retirement is fixed. If you advocate for increasing the retirement age while maintaining the total expected retirement duration as fixed, the only thing you advocate for is paying more for the same thing. Now a worker has to work for 50 years for 10 years of retirement where before they were only expected to work 45 years. I don't see how that's a good deal for anyone except greedy politicians.
Everyone needs to wake up and realize that Social Security is the problem. You can't fix it. It was created as a broken system and can never, ever be fixed. Time to cut our losses.
Presently, there is a $5T super fund surplus. To a large measure that surplus exists BECAUSE of the Baby Boomers. For decades, we have been putting in enough to far exceed expenditures. It was no secret that eventually the boomers would cause a substantial cost to Social Security, it was inevitable. That IS the entire basis for creating such a large surplus, without a tax cut instead. The fund is supposed to have sufficient assets to pay full benefits until between 2037-2048. In 2037 the oldest boomers shall be 90 & the number of boomers will decrease substantially fairly rapidly.
By then, Social Security will be into its 2nd century, far too long for any Ponzi scheme to exist.
It's O.K. to go until 2036.
Plenty of time to get the Great Recession behind us and only then set about guaranteeing Social Security for the next 75 years or so.
And as far as imposing a tax increase upon our wealthier citizens, I can recall that when I said goodbye to my childhood days and began working and paying taxes that for a good number of years the biggest bite from my paycheck was my Social Security payment. And while it hurt I got by. Thus I figure that folks making $75,000 a year or more could get by, too, despite an increased Social Security bite from their paychecks and then have there Social Security as something of a bonus upon retirement. Maybe a smaller bite for those making $250,000 or less. Who knows?
1. Raise the payroll tax to include a minimum of 180K of wages.
2. Reform health care in America....get the national expense down fro 18% of GDP to 1% of GDP.
3. Reinstate progressive taxes to readjust wealth disparity curve. Even if it turns out that 90% should be the top bracket!
Then weed out all the blatant fraud in the system and all of S.S's perceived problems would be fixed