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Great Thomas Geoghegan op-ed at the New York Times http://www.nytimes.com/2011/06/20/opinion/20geoghegan.html
that says what many at FDL have been saying – it is time to raise Social Security, not cut it, noting that SS pays out on average 39 percent of the average worker’s preretirement earnings and suggesting it become 50 percent at a cost of an additional 5% tax, as he notes we can afford it given the FIT only brings in 15 percent of our G.D.P. which is well below other countries and that the January CBS/New York Times poll showed 2/3rds were OK with higher taxes to save Social Security. Indeed he notes that our options include no cap (I want to also add investment income to the base) on high earners, affecting the 6 percent of workers who make over $106,800 a year – a 2.32% of the current wage base effect if no extra benefit to the rich, and a bit over 2% if the current formula is extended into those higher earnings (and much more if investment income is included). Dedicated taxes could be added, such as the estate tax at its 2009 levels to get another 0.5% of payroll equivalent, adding new new public employees for another 0.42 percent, leaving only about a 1% payroll tax cost to get Social Security to 50% of average wages.
He also notes that labor economist Richard B. Freeman reported that hourly earnings of workers dropped by 8 percent from 1973 to 2005. leaving the extra productivity earnings to go to the already rich. Finally he notes that this years payroll tax cut has produced little hiring and warns against the Democrats accepting some “reasonable” version of Paul Ryan’s GOP plan.
Will Democrats (Obama) think of F.D.R., Robert Wagner, or LBJ or will he go with his hero, Reagan.
8 Comments
Thanks for the post and for highlighting this OpEd. I happened to read it, as well.
If memory serves, I believe that Geoghegan also discussed raising the Income cap beyond the current, regressive $106k (or thereabouts) limit. It was refreshing to see this information in print.
Do I think that the current “Democratic establishment” will listen to this? NO, emphatically NOT… sad to say. But at least the OpEd was written and published.
from the article,
“Retirees today are shortchanged on Social Security because they have been shortchanged on wages for their entire working lives. The labor economist Richard B. Freeman points out that the hourly earnings of workers dropped by 8 percent from 1973 to 2005 while productivity shot up 55 percent or more. The United States is one of the few developed countries where workers are routinely cheated of a share in higher productivity.”
Productivity goes up, and … wages go down.
Only in Amerika.
I recall Jamie K. Galbraith made the same recommendation some time ago.
Recommend – Yes. The plutocrats in Congress are disgusting and I don’t care which party they belong to. One of their schticks is that they pretend that many problems are “so complex and difficult to solve” that it will take years blah blah blah. That is nothing but pure BS.
Social security could be raising to a living income by issuing forth a one sentence piece of legislation:
“All Americans will now pay Social Security tax on 100% of their income each year.”
For those who may not know, only Americans who earn less than $106,800 a year must pay Social Security tax on 100% of their income. Any amount over $106,800 they don’t have to pay Social Security Tax. In other words, another free ride for the rich.
And speaking of free rides, the 525 members of Congress are included as for one example, members of the House (425) don’t pay Social Security taxes on $67,200 of their $174,000 annual salary. This works out to almost $2 million a year in Social Security taxes–just from the House.
In a feudal society the peasants have no rights. Not even to live.
And Obama is making damn sure no one forgets that!
Of the many options proposed during the birth of Social Security what we ended up with was the bare minimum. FDR (who I admire for trying) pushed through the most modest of plans to help desperate citizens at great risk to himself and the country (a coups d’état).
From the beginning every time we were tossed a bone the Republicans have worked tirelessly to take it back: remember Ronald Reagan’s AMA ads against Medicare?
The Democrats told us over and over during the health care debates that “half a loaf is better than none.” Turns out that this health care scam did not even deliver a slice. Bottom line is that we at some point need to be as bold as our oppressors; to hell with a bone! We want some meat! Half a loaf be dammed! We will bake our own bread!
Hey I thought I’d really explode heads with the additional concept of lowering the age to collect Social Security given the sustained depressionary economy for which the Congress is very much responsible as it takes time to undo what coulda, woulda, shoulda have been done already. How would the numbers need to be tweeked, papau, for a qualification age of, say, 58?
A lower age has 2 effects that increase cost – shorter working life as folks retire earlier, and longer payout.
Age 58 can be interpreted two ways – a normal retirement age of 58 with earlier reduced retirement beginning at the current systems 5 years early age 53 (corresponding to Reagan’s normal retirement age of 67 and earlier reduced age of 62), or simply extending the “earlier reduced age” from the current 62 to 58, leaving “normal retirement alone at the current (phased in) age 67. Having an earlier reduced age of 58 is slightly more costly as it will have the effect of a slight reduction in the working years – but because the benefit would be low it would not be a large incentive to retire, so I would say we could do that tomorrow at near zero cost – the reduction factor taking care of any problem.
But if normal retirement is set at age 58 we lose 9 years of the normal 35 years working time that supports the system with taxes, and have a cost increase for the benefit (IRS says one lives 22 years more at age 58 versus 15.27 years at age 67 – 19.6 versus 13.8 are the IRS present value factors http://www.irs.gov/publications/p939/ar02.html#d0e1394 so the increase in the present value of benefits would be 42%) of 42%. So a 25% increase due to shorter working life and a 42% increase for longer benefit gives a compounded 78% increase in cost – so the Medicare 2.9% would stay constant if age 65 is maintained, and the current 12.4% for Social Security would rise to 22%.
While the above is very crude – the actual projections and analysis use hundreds of variables with a great deal of feedback loops – it is a rough justice estimate. I doubt that any would approve of such a large flat tax increase.