The talk about the need to reform Social Security, which means cutting back on benefits, is not logical. Everyone pays a Social Security tax that comes out of their paycheck. This money goes into an interest bearing trust account. Every person who pays money into the system starts receiving money back from this account once they reach retirement. It is self-funded. Social Security is, therefore, not going to go bankrupt.
Additionally, there are ways to put more money into the Social Security trust fund. Right now 6.2 percent of an individual’s income goes into this trust fund. Any income above $113,700 is not subject to the Social Security tax. So someone making a millions dollars every year will only have $133,700 of their annual income taxed. That means such a person is paying the same amount in Social Security taxes as someone making exactly $113,700 every year. Surely, lifting this $113,700 cap, and having no limit on the amount of income that is subjected to the tax, would certainly end any Social Security crisis. The Congressional Budget Office has even indicated that lifting the cap would keep Social Security fully funded.
Why is Obama saying we need to cut Social Security then? He either wants to make a deal with the Republicans because he does not like having these fiscal cliff fights, or he is buying into the demands of wealthy individuals who do not like Social Security taxes. It is an example of the Democrats’ increasing friendliness to the wealthy, including big business. Do not let Obama and other Democrats fool you.