In recent years there has been a hue and cry about the "dire" situation "entitlement" programs such as Social Security are in. Even among non-right winger moderates, there is a belief that Social Security is simply not sustainable long-term.
Even more unsettling than Rick Perry's mind-boggling assertion is by itself, it's that he is not alone in making this reality-challenged claim. More than a few other lights in conservative circles have publicly signed on to this false bit of nonsense.
Of course there is nothing even close to being true about it.
Yet concern among voters about the solvency and long-term health of the most successful New Deal program persist. Despite the bamboozlement of such people as Rick Perry, there is a factual basis for concern about the ability of the program to meet its full benefit obligations in the long-term. Particularly while the trust fund is spent out (which it was intended to do in order to deal with the baby-boomers retiring).
So what's the problem?
Because the earnings of workers in the highest income groups have grown faster than average earnings in recent decades, the share of all earnings from jobs covered by the Social Security program that were below the taxable maximum has fallen from about 91 percent in 1983 to about 83 percent in 2009.
In short, more of the money in the economy has shifted upward, beyond the current maximum amount of earned income which is subject to FICA withholding (currently $106,800 per year).
Not only is it an issue of almost 9% of total earnings in the entire nation moving into the pockets of people making above $106,800 per year, but it is also the kind of income they "earn" which is affecting the overall revenue of Social Security.
Since unearned income such as dividends, capital gains, etc. are not at all subject to FICA (unlike actual wages) every dollar the investor class gets in the form of unearned income doesn't have a single penny withheld from it to be put into the Social Security trust fund like wages do.
A rather simple set of changes to the current system would not only make the program solvent in perpetuity, but can even be made to run at a profit in a fair an equitable manner. The first change is simply removing the cap on how much earned income (wages) are subject to FICA (the withholding tax that funds Social Security).
The CBO report shows that by removing the cap, Social Security’s total revenues would increase by 0.9 percentage points of gross domestic product (GDP) in 2040, or by 19 percent relative to current law, and outlays would increase by 0.3 percentage points of GDP, with further increases in subsequent years. This option would improve the 75-year actuarial balance by 0.6 percentage points of GDP (almost the entire amount to close the funding gap) and extend the trust fund exhaustion date to 2083.
The second is to subject unearned income to FICA withholding which gets us the rest of the way there.
Removing the cap and including unearned income to FICA withholding would make the fund solvent in perpetuity. In fact doing both would allow for an across the board increase of Social Security benefits, a slight decrease in the amount of withholding most people would have to pay, or a combination of the two. All this without raising the retirement age, cutting benefits, or reducing cost-of-living increase formulas.
Sounds like a good idea, right? But how can we get the administration to take this idea seriously you may ask?
What we can do about it.
Fortunately there's an easy way we can get the ball rolling.
Recently the Obama administration created an online tool called "We the people: Your voice in our government" for people to petition the administration about important issues they would like to see the administration address.
Late this past Friday (September 23) I created a petition on the White House's website using this new tool. It is about proposing the simple fixes to Social Security I talked about above. The tool only allows a maximum of 800 characters and in whittling it down I managed to bungle the wording slightly, but the text is as follows:
Make Social Security solvent in perpetuity without having to cut benefits or raising the retirement age.
As more income in our economy has shifted to upper brackets and as income that's not subject to Social Security withholding. Furthermore, capital gains (income generated through investment) are not subject to withholding.
Combined with the Bush tax giveaways, the very wealthy pay an overall effective tax rate that is less than middle and lower income wage earners.
It's led to the Social Security being in trouble long-term. Instead of cutting benefits, or increasing the retirement age simply remove the cap (currently the first $106,800 wages) & subject ALL income to withholding.
Lifting the cap & subjecting capital gains to FICA withholding would increase the revenue enough to make it not only permanently solvent but would run at a profit & allow benefits to be increased (for everyone).
Now here's where you come in.
I would like to ask that everyone who cares about keeping Social Security solvent in perpetuity, and reintroduce basic fairness into the program at the same time, sign the petition so if it gets 5,000 signatures and thereby get looked at by the administration so they will issue an official response to the idea.
The link is: www.wh.gov/gLJ
There is a 150 signature threshold before it is publicly viewable on the White House website. So far, we have managed to get over a dozen signatures, even when my timing on launching the petition was less than opportune (late at the start of a weekend is not ideal).
If everyone could sign it and share the link (www.wh.gov/gLJ) on Facebook, Twitter or anywhere else it might get exposure, that would be great. Actively reaching out to the people in your social networks and getting them to sign the petition as well getting them to share the link with their friends and family can make a real difference.
Thanks in advance if you sign, and help spread the word!