Social Security is one program that clearly demonstrates the good that Government can do and should do. Which is why so many Repubs hate it and would like to turn it into a big cash cow for the financial industry. Beating back Bush’s privatization scheme after the 2004 election was a huge victory even if it was just a holding action. The old right wing canard of ‘social security won’t be there for me when I retire’ was briefly exposed for what it is, a big fat lie, but it seems that we keep forgetting that in strict accounting terms SS is in great shape. Currently there is a large SS surplus, the Reagan/Greenspan tax increase in 1983 to make SS solvent for the foreseeable future (i.e. through the baby boomers retirement) actually worked. However the SS surplus was borrowed by the government for other things, we can argue whether this was right or wrong but it was done. There was enough surplus money to secure SS for decades after SS starts running a current accounts deficit in about 10 years when the current FICA tax payments no longer cover all the benefits being paid out. More below...
So when this current accounts deficit occurs, which is still about 10 years away, what does the government do when those IOU’s need to be redeemed? The bottom line is that the baby boomers paid the taxes, a flat (i.e. regressive) payroll tax I might add, to secure SS and the money has been spent. Well, I would posit that increasing a regressive payroll tax even further to include higher incomes is not a very satisfactory answer. Arguing about raising the FICA cap is self-defeating, the money was paid, if the surplus monies were not going for future SS payments then why the heck were they collected in the first place. Raising the cap on FICA buys into the old right wing canard, the real problem is that we do need to raise taxes and we need to have a good argument for doing it in a progressive manner that does not scare off low-information voters. Personally, I think Obama has the best chance of pulling this off but he hurts himself when he tries to use raising the FICA tax as a faux reasonable response to the fact that the government ain’t planning on paying the boomers back the money that was borrowed. The point is whether the surplus is paid back or not, the money will have to come from somewhere, clearly a more progressive tax structure is needed.
Personally, I like to tie together the money that the government owes SS with the money that is owed to China and all the other institutions that invest in US securities, I mean if the US government will not pay back money borrowed from our own citizens how good is our credit, really? But for that to work, everyone needs to realize that the general fund of the US government owes SS a ton of money and for that money to be paid back we will have to make some fiscal changes. The Repubs answer is to cut taxes (for the rich) some more, decrease benefits to retirees, and keep occupying foreign countries. Our answer is stop with the wars, do not cut benefits that have been promised (and paid for), provide health care to all because not only will it make our industries more competitive but it is also the right thing to do. We will make our tax system more progressive because those that have benefited the most should pay the most. I think if we frame the argument that way that we can convince people. But if we start by saying that we should raise the FICA cap so that more money can go into the surplus which will just be siphoned off to the general fund then we have started at wrong place and we will lose the argument.
If you disagree about the FICA cap, that is okay, let us agree to disagree, but understand that raising the FICA cap does not go to the heart of the problem, I think it is a distraction. What we have to do is work together to convince people that we need a more progressive tax structure, we need to reduce our military spending on foreign adventures, we need to provide decent health care and retirement for all. If that is what we the people decide government should do, then that is what it should do. I want Obama to lead the way and make this argument because I think the people, and definitely our youth, are waking up and are ready to listen.