Social Security reforms past and present
May. 1st, 2005 06:39 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
petardierChapter 8 of Perfectly Legal is titled "How Social Security Taxes Subsidize the Rich". It starts by noting that tax lawyers consider tax deferral to be 90% of tax planning. Delaying taxes is what the rich do. Conversely, paying a tax early means forgoing all the interest you could have earned from that money for that interval. But wait, I hear you say, what tax is it that we're paying early? It's the Social Security tax, but it hasn't always been this way. It started in 1983/84. In response to a Social Security deficit and predictions of demographic problems in the future of Social Security, Social Security was changed from a pay as you go system to one that collected a bit extra in advance to finance the retirement of the baby boom generation.
Daniel Patrick Moynihan, a senator knowledgeable on social policy issues, believed that the Social Security scare was a fake. He thought that the extra Social Security money masked the revenues lost through Reagan's tax cuts. Whether this is correct or not depends on a number of factors including inflation, immigration, and future earnings increases. One aside, the scenarios most favorable to private accounts also favor simply avoiding the problem altogether through growth.
Does this raising the spectre of future Social Security problems in order to justify changing it now sound familiar? It should, because president Bush has been trying to do it again. At first, he was pushing the idea of private accounts (which actually did nothing to reduce the future problem). Most recently, he's proposed reducing benefits for those of us who are "better off". He's defining that as anyone who earns more than $20,000 per year. That appears to be about 70% of the population*. He's working hard to fulfill the Republican meme that "Social Security won't be there for you". I think the plan is to divide and conquer. If only a minority of the retired public has Social Security as a major source of income, then it will be easier to kill Social Security later.
I do find one problem in this chapter, the author glosses over the fact the Social Security debt is in the form of US government bonds, a commitment that the government can't constitutionally duck out of. It's true that this money has already been spent. The SSA has loaned that money to the US government. Though I have not confirmed this myself, I've read in several places that the SSA holds not, as president Bush has claimed, worthless IOUs, but government bonds that differ from the kind we sell foreign governments only slightly. As I understand it, the difference is that these Social Security bonds (whatever their formal name is) cannot be re-sold.
Also, I'm not sure if the author has a specific proposal to handle the demographic problem posed by the baby boomers. I get the sense he'd reverse the Reagan tax cuts (and probably Bush's too), but he doesn't say so. I'd support raising the cap on Social Security withholding. My wife and I would be paying more taxes if that happened, but keeping the deal that FDR started with our retirees and that's run successfully for 60 years is worth it.
Want to read more about what I've said about Perfectly Legal? Here's a link to the previous entry:
http://www.livejournal.com/~petardier/37817.html
*Keep in mind that when Bush was selling his tax cuts, he implied that anything under $100,000 was low-income.
Daniel Patrick Moynihan, a senator knowledgeable on social policy issues, believed that the Social Security scare was a fake. He thought that the extra Social Security money masked the revenues lost through Reagan's tax cuts. Whether this is correct or not depends on a number of factors including inflation, immigration, and future earnings increases. One aside, the scenarios most favorable to private accounts also favor simply avoiding the problem altogether through growth.
Does this raising the spectre of future Social Security problems in order to justify changing it now sound familiar? It should, because president Bush has been trying to do it again. At first, he was pushing the idea of private accounts (which actually did nothing to reduce the future problem). Most recently, he's proposed reducing benefits for those of us who are "better off". He's defining that as anyone who earns more than $20,000 per year. That appears to be about 70% of the population*. He's working hard to fulfill the Republican meme that "Social Security won't be there for you". I think the plan is to divide and conquer. If only a minority of the retired public has Social Security as a major source of income, then it will be easier to kill Social Security later.
I do find one problem in this chapter, the author glosses over the fact the Social Security debt is in the form of US government bonds, a commitment that the government can't constitutionally duck out of. It's true that this money has already been spent. The SSA has loaned that money to the US government. Though I have not confirmed this myself, I've read in several places that the SSA holds not, as president Bush has claimed, worthless IOUs, but government bonds that differ from the kind we sell foreign governments only slightly. As I understand it, the difference is that these Social Security bonds (whatever their formal name is) cannot be re-sold.
Also, I'm not sure if the author has a specific proposal to handle the demographic problem posed by the baby boomers. I get the sense he'd reverse the Reagan tax cuts (and probably Bush's too), but he doesn't say so. I'd support raising the cap on Social Security withholding. My wife and I would be paying more taxes if that happened, but keeping the deal that FDR started with our retirees and that's run successfully for 60 years is worth it.
Want to read more about what I've said about Perfectly Legal? Here's a link to the previous entry:
http://www.livejournal.com/~petardier/37817.html
*Keep in mind that when Bush was selling his tax cuts, he implied that anything under $100,000 was low-income.
