Social Security in Two Minutes

By David Bean of Portland, Oregon who describes himself as a "Carpenter-Economist."

When Social Security was initiated 70 years ago a large third of our retired population was suffering abject poverty. Forgotten today are the poorhouses that were so common and degrading then. Forgotten as well was the tremendous boost Social Security gave to the entire economy. Poverty as well as prosperity can be contagious. A lesson not missed by depression era citizens. After the creation of social security everyone felt to be part of these United States..... no one was left outside with nothing to lose.

Yet as time progressed it became apparent that the 'baby boom' would demographically strain the structure of the Social Security system. In 1983 there was an adjustment added to everyone's paycheck to cover this projected short-fall caused by the 'baby boom'. We as a society were 'putting money in the bank' for our retirement.... and have been doing so for over 20 years. That money, taken from workers checks, went into the SS trust fund.

And there was some fat left in the Social security structure, just in case there needed to be adjustment in the future... for it is difficult to project accurately 20 to 50 years into the future. The fat was that only the first $90,000 dollars annually was subject to the Social Security tax. If you made more that 90 grand, unlike the income tax, or any other tax .... you were home free. Now, with the short fall, all that is necessary is to remove the 'home free' adjustment on 6% of the wealthiest of our population and our Social Security system would be solvent. That 6% as a proportion is wealthier now than at any time since 'the gilded age'.

As it stands the Social Security system is receiving in more than it is paying out and will remain so until about 2012. After that it will draw on the 'money in the bank' in the form of US Treasury Bonds until somewhere around 2042. This money workers have already paid out .. and has been used otherwise until needed. This brown haired fifty-something would then be 96. At that point the Social Security fund must seek some sort of adjustment.

The obvious adjustment, the one planned for years ago, is simply to terminate social security tax cut on incomes above $90 grand. People would then pay back to society in direct proportion that they have received benefit from it. Just like the estate tax.. our most progressive tax. If the wealthy, those that gain the most from our society , contributed their share to it, then there would be no Social Security problem..... at all.

Finally, it is worth remembering that Social Security is a moral reflection of who we are as a country.
It was an inter-generational promise made, saying... we respect our ancestors, our elders, may they be respected when we get there. It is not an investment scheme. It is a respectful promise.

  • gus (unverified)
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    That $90,000 cap on SS earnings is powerful for the mega earners. Several years ago Michael Jordon was paid 30 million for one year playing as a Chicago Bull. On SS, capped at $80,000, Mike and his employer paid a combined 12.4% or a little under $10,000 to Social Security. They paid a combined 2.4% or $720,000 into Medicare on the full 30 million which was not capped.

  • Jeff (unverified)
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    I don't disagree with the overall thesis, but I'd like to offer one point of fairness to the "super-wealthy." The flipside of the argument that they "gain the most" from society, is that they also, in a sense, give the most. Further, when put in those terms, it ignores the extent to which many, though not all of the rich (think inherited wealth), make their own way to wealth. In other words, the simple use of the phrase "gain the most" carries an unfortunate connotation that their wealth comes from a government hand-out.

    After the everyday things that truly benefit everyone - roads, public safety, that kind of thing - the rich don't take as much from the system. Their kids don't typically go to public schools and they rely very little on social services. To be sure, all those things will be there for them if and when they need them, just as they are for everyone else. But the traffic from their pockets is generally more one way than it is for the hoi-polloi. We don't necessarily need to celebrate that - Lord knows the wealthy are also more aggressive about tax shelters, mainly because they can afford to be - but it's worth recognizing.

    Anyway, as much as this is a point of phraseology, it has consequences on the honesty of the debate. Even as some elements in the conservative movement cuts corners in that regard, I prefer it when progressives keep their noses clean.

    Oh, and anyone is wondering, I'm anything but rich.

  • gus (unverified)
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    Jeff:

    I do not know of many wealthy people who turn down their Social Security and Medicare entitlements. They also collect them longer on average as they live longer than their less affluent bretheren.

    The 500 student Riverdale School District in Portland's Dunthorpe area is well attended by children from affluent families. Their school foundation annually raises as much or more than Portland's foundation. One year, Riverdale's fund raising chairman said that itt is much easier to get large donations when the money does not have to go to a larger district such as Portland or Lake Oswego.

    Those who set up Social Security were well aware that they had to make the entitlement universal to gain the support needed to establish and maintain the system. Medicare was eventually set up as a universal entitlement as well.

    Those who run and work for the public schools are also well aware that they need the full support of the affluent class.

    Public school spending per student is compared to tuition at Catlin Gabel by public school proponents because public education is a universal entitlement. We will not see anyone pushing to fund Food Stamps at the rate a west hills family spends at Stroheckers because Food Stamps is means-tested.

  • gus (unverified)
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    Jeff:

    I do not know of many wealthy people who turn down their Social Security and Medicare entitlements. They also collect them longer on average as they live longer than their less affluent bretheren.

    The 500 student Riverdale School District in Portland's Dunthorpe area is well attended by children from affluent families. Their school foundation annually raises as much or more than Portland's foundation. One year, Riverdale's fund raising chairman said that it is much easier to get large donations when the money does not have to go to a larger district such as Portland or Lake Oswego.

    Those who set up Social Security were well aware that they had to make the entitlement universal to gain the support needed to establish and maintain the system. Medicare was eventually set up as a universal entitlement as well.

    Those who run and work for the public schools are also well aware that they need the full support of the affluent class. Public school spending per student is compared to tuition at Catlin Gabel by public school proponents because public education is a universal entitlement. We will not see anyone pushing to fund Food Stamps at the rate a west hills family spends at Stroheckers because Food Stamps is means-tested.

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    If you also switch to annual cost of living increases based on CPI instead of wage inflation for affluent people, you save more money and you don't have to eliminate the cap altogether, just raise it to $200,000 or so and link it to inflation.

    But rather than go with this approach to fix social security, it appears that Congressional Republicans will do nothing just because they don't have the votes to create private accounts. Why does it have to be all or nothing with them?

    I wouldn't mind if they created personal accounts that function like a 401k in addition to social security, but not as a replacement for it.

  • gus (unverified)
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    Adam:

    Individual Retirement Accounts have been available to folks with earned incomes since 1976. They can be set up with banks, stock brokers or mutual fund companies with low or no fees.

    <h2>Annual contributions are tax deductible for modest income folks and earnings grow tax-free until taxable withdrawals are started at age 59 1/2 or before age 70 1/2</h2>
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