Friday, March 04, 2005

Solutions to Social Security, not "Chicken Little!"

I Don't Get It, originally uploaded by jragon.

Just A Problem, Not A Crisis!

A Letter To My Local Paper, My Congressman, Senators Clinton and Schumer:

Dear (Senator, Congressman, Editor):

Social Security is the main insurance policy of the retired of every generation. It is the debt one generation pays to the one that came before it, and raised it. To privatize, would mean that we dishonor that debt, not just for today, but for the next generation as well.

There is no crisis! Moderate adjustments can keep the system as healthy as it ever was. The most recent trustee’s report says that the system can pay all scheduled benefits until 2042. And on that year, if no changes are made, only 30% of benefits according to AARP, (a solid, patriotic organization) to bring payments in line with payroll taxes. And that is a rather liberal estimate, as far as others are concerned, who would say only 20% of benefits would be cut. Privatization represents a greater danger, than it does a solution.

Even so, rather than sit on my hands and be a “naysayer”, I propose to counter the onslaught of dangerous ideas presented by the irresponsible with a few common sense ideas that would actually work, in this universe, not in the neocon fantasy one.

First the payroll tax. A slight increase in the payroll tax by 1% for employer and employee from the current rate of 6.2% would keep Social Security solvent through 2077.

Also we could raise the cap on taxable income. The wage cap is $90.000 today. However, many people these days keep a larger portion of the income, so that the portion of income that is taxable is down to 84%. If we raise the cap on taxable income to $140,000, it would make Social Security solvent for 75 years.

It seems that the only outcome predicted by the administration that would remotely come true, is the permanence of the Bush tax cuts. According to the Center on Budget and Policy Priorities:

“Over the next 75 years, the combined cost of the 2001 and 2003 tax cuts (if made permanent) and the Medicare drug legislation will be at least five times as big as the Social Security shortfall.”

We can also tap the untouched resource of newly hired public employees. Edith Fierst wrote last year in the Washington Post:

“A third change would be to bring all newly hired public employees under mandatory coverage of Social Security, thereby reducing the long-range deficit by about 0.22 percent of payroll. About 6.7 million state and local government employees are currently exempt, virtually the only workers not covered by America's retirement system. Instead, these employees are covered by plans operated by their employers. For long-term employees, the benefits of state and local government plans are often greater than those paid by Social Security.

But these plans, unlike Social Security, are not portable, so employees who change jobs or employers may lose their coverage. If they become disabled before acquiring substitute coverage, they may be without disability benefits. Furthermore, the dependents of public employees exempt from Social Security, even employees fully covered by state and local government plans, are unlikely to be protected by disability, spouse or survivor benefits.”

Privatization sounds more and more like the Primrose Path. It looks and feels pleasant at first, but can only lead to perdition.

Bush thinks that private plans invested in the stock market will generate greater benefits than the traditional Social Security. But they may not. Most IRAs are already subject to market risk, and already there are less people on pension plans.

Private accounts are in the long run insecure when the market takes a plunge, or if someone makes bad investment decisions.

Unless they purchase the usually expensive annuities, retirees with private accounts run the risk of outliving benefits. Their shortened Social Security may not be enough to sustain them.

What about the administrative costs? Each account would have to be separately administered, commission need to be paid. And what of policing disreputable account brokers?

And we can’t forget that individual families have individual problems. What about divorce and death? If the owner decides not to share with the spouse, or ex, or widow, or disinherited person?

And here’s where the grandchildren pay for our selfishness. Who in this deficit spending universe will fund the transition to this wonderful paradise? Either the present retirees will have to forfeit some of their benefits, or the workers will not get as large a benefit, most likely through some kind of “revenue enhancement” (tax), or our children and grandchildren will pay with huge deficits.

The neocons say that in 2018 benefits will exceed revenues. Not true. In 1983 Congress raised the payroll cap and gained for us a surplus in the Social Security trust fund to pay for the Baby Boomers. The trust fund’s holdings will balloon to $3.7 trillion up from $1.5 trillion today. This is our nest egg boomers.

And the trust fund will work. Treasury Bonds are the strongest things on earth, not the “I.O.U.”’s that the neocons scare up. If they are good enough for Fannie Mae, they need only to be honored and redeemed.

To George Bush I have one thing to say. If you don’t like way Social Security is running now, why did you destroy the budget surplus and leave us with a deficit? We will be fine thank you. We will fix it without you if necessary.

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