From time to time the funding of Social Security becomes an issue. The baby boomers are going to put it under some stress, as will the trend towards longer lifespans. And although it is currently funded adequately, some studies indicate that that it will start to experience shortfalls starting in 2041. But it's hardly a crisis.
In spite of that, GWB attempted--unsuccessfully--to dismantle the program. Gingrich and Romney are more cagey; both seem content to steer clear of the 'Third Rail', but I am skeptical that their support of Social Security is heartfelt. Well, that's just me.
In my humble opinion, there is a glaring defect in the way the program is funded. Social Security taxes are horridly regressive. Let's explore this issue below the fold.
The regressive nature of Social Security taxes is blatant, yet there seems to be no serious effort to remedy this defect. It is wrong for two reasons.
First, it removes money from the wrong end of the economic spectrum. The bulk of Social Security taxes would have been spent on consumer goods had it not been taxed. That money represents real, immediate, and substantial demand. The wealthy, far from creating jobs or spending their money to allow it to "trickle down", use that money to build their net worth and gain social and political influence. Stock portfolios don't trickle down.
Second is the issue of vertical fairness. The worker making less than $110,000 bears almost the entire burden as a percentage of earnings. Taxing the worker who is least able to bear the burden is just bad tax policy.
The argument for this inversion is that it is the low end of the economic spectrum that reaps the rewards--the actual retirement benefits--and it is they who should bear the brunt of the burden. However, this view ignores the economic value that accrues to society every day, far beyond the retirement date of those whose labor created that value.
Let's take the case of Joe and Jill Lunchbox. They work all their lives; maybe on an assembly line or driving a truck. Maybe they are plumbers or carpenters or teachers or road construction workers. They work their entire lives doing the jobs that are absolutely necessary for to our economy. If they, and millions of others like them, didn't do their jobs, our economy would utterly collapse. We would have no buildings, no roads, no schools, no food, no clothing, no shelter.
Without them, the Newt Gingriches and the Mitt Romneys of the country would be left with nothing. They would literally not have a tin roof over their heads, a crust of bread to gnaw on, or a pot to piss in. Without Jill and Joe Lunchbox, they would have nothing: no computers, no microwave ovens, no fuel injected automobiles, no silk ties, no supermarkets, no airports, no country clubs, no roads or bridges -- nothing. With their labor, their ideas, their consumer spending and their taxes, Joe and Jill put all those things in place.
The Newts and Mitts of the world did not invent any of the technological marvels that enabled them to make their fortunes. Without them, Newt and Mitt would be nothing but hunter-gatherers, desperately trying to pry a living out of an unfriendly environment that they don't understand, and hoping each day merely to survive. Rather than acknowledging that the stand on the shoulders of giants, the Newts and Mitts of this country put their heels on the throats of Joe and Jill.
Eventually, Joe and Jill reach the end of their productive years. They can no longer drive the trucks, assemble the machines, or build the roads. Time takes its inevitable toll, and they have any number of physical ailments that prevent him from working, the most obvious of which is old age. It is time for them to retire. They have earned it.
Of course, it is a foregone conclusion that the Newts and Mitts of the world will, in their gratitude for all that Jill and Joe have done for them, be lavish in their support for their retirement, right? If nothing else, some of the money they spend in the economy during their retirement will eventually find its way into the pockets of rich. Surely, they will not object to making a modest contribution toward their retirement, would they?
Sadly, the Newts and Mitts of the world have no intention of doing anything of the sort, at least not voluntarily. Rather than accept the obvious obligation to repay the workers that have made them wealthy, the Newts and Mitts of the country have not the slightest qualm in turning their collective backs upon Joe and Jill Lunchbox. Listen to their remarks; they are damning.
I propose that we, the 99%, use our votes to compel the 1% to do what is so obviously right. Actually, we would be doing them a great favor. Without our help, they would just naturally gouge every dollar they could out of the 99%. Of course, this would produce a great deal of guilt and anxiety on their part. By compelling them to do what is right, we would relieve them of these guilt feelings. I believe it is our duty to save them from themselves. [/snark]
I have become convinced by fellow Kossacks that keeping the funding of Social Security separate from the rest of the federal budget is a good idea. The principle seems to be that we should not let long term social goals conflict with short term politics.
It would be a simple matter to rectify the regressive nature of Social Security taxes, and that's exactly what I propose. We should tax all income (including--and perhaps especially--capital gains and dividends) to fund Social Security retirement benefits. We should exempt income below the poverty level, and levy a modestly progressive Social Security tax on everybody else. It might range from about 6% marginal rate at the low end to 14% or so at the high end if my back-of-the-envelope estimate is reasonable. If this proves inadequate at some point, raise the tax rates rather than cut benefits or extend retirement age.
The very wealthy have benefited from the labors of Joe and Jill, and continue to benefit from the value that those two workers have left behind. The wealthy should participate in funding their retirement. If this wouldn't represent simple social justice, what would?