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New Study Identifies Revenues for Doubling of Social Security Payout
Guaranteeing the American Dream with Expanded Social Security
For millions of Americans, the dream of a secure retirement has been threatened by the Great Recession. Since WWII, retirement has been conceived as a "three-legged stool," with the three legs being Social Security, pensions, and personal savings centered around homeownership.
Instead of cutting back Social Security, what we need to do is expand it by doubling the individual payout. (Photo by iStockphoto.com)
But today most private sector employers have quit providing pensions, and state and local government’s public pensions are drastically underfunded. In addition, a collapsed housing and stock market, combined with increased inequality even before the Great Recession, have drastically reduced Americans’ personal savings.
In short, the "retirement stool" no longer is stable and secure, and suddenly Social Security, which always has been viewed as a supplement to private savings, is the only leg left for hundreds of millions of Americans. Studies show that people in the bottom two income quartiles depend on Social Security for 84 percent of their retirement income, and even the second richest quartile depends on Social Security for 55 percent of its retirement income. Only the richest 25% of Americans don't rely on Social Security.
Despite Social Security's new role as a de facto national retirement plan, many budget deficit hawks are calling for cuts to it to decrease America's indebtedness. But that would only make things worse for retiring Americans. The real problem with Social Security is that it is not robust enough to play this role as retirement security of last resort, though not for the reasons most critics say. Contrary to gloomy predictions about its future collapse, the program is on solid footing, with the Congressional Budget Office projecting that Social Security can pay all scheduled benefits out of its own tax revenue stream for the next 40 years.
The bigger problem is that its payout is so meager. Currently it replaces only about 33 to 40 percent of a worker’s average wage from the year prior to retirement. That is simply not enough money to live on when it is your primary -- perhaps your only -- source of retirement income.
Instead of cutting back Social Security, what we need to do is expand it by doubling the individual payout. That would cost about $650 billion annually for the 51 million Americans who receive benefits. This expanded version -- call it Social Security Plus -- could be paid for with revenues identified in a new study (pdf) I wrote for the New America Foundation. Here’s how.
First, lift Social Security's payroll cap that disproportionately favors the wealthy. Currently Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle class, and even moderately upper middle class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthiest Americans pay a much lower percentage. A lawyer making $500,000 a year effectively pays only 2.5 percent, and millionaire bankers pay a paltry 1.2 percent.
Removing the income cap and making all income levels pay the same percentage -- which is how Medicare works -- would be a popular reform. Polls show most Americans think that if they pay Social Security tax on their full salary, others should too. Taxing all income brackets equally would raise about $377 billion, which is nearly sixty percent of the revenue needed to double the payout.
Second, with all Americans receiving Social Security Plus, employers would be freed from providing retirement for their employees. So they no longer would need to receive the substantial federal deductions they currently accrue for providing employees’ retirement plans. These deductions total an estimated $126 billion annually.
Third, we could reduce or eliminate other unfair deductions in the tax code that allow higher income people to reap generous deductions that low and moderate income Americans can’t enjoy. These include deductions for private retirement savings, homeownership, health care and education. For example, individuals who have enough income to divert for savings or investment are allowed considerable tax deductions for their 401(k)s, IRAs and pensions. Similarly the homeownership deduction for mortgage interest only benefits people with sufficient income to buy a home. But the poor and working class rarely can take advantage of these since they don’t make enough to itemize deductions. Consequently, the majority of these benefits go to the top 20 percent of income earners; in 2010 the mortgage interest deduction alone will amount to about $108 billion.
These three revenue streams -- lifting the payroll cap, eliminating the employer tax deduction for providing retirement, and capping or eliminating various wealth deductions -- would raise 100 percent of the revenue needed for doubling the payout of Social Security Plus. It could be implemented in stages, targeting first those who are most in need.
An expansion of Social Security -- one of the most successful, stable and popular programs in U.S. history currently celebrating its 75th year -- not only would be good for retirees but also for the macro-economy. It would keep money in retirees’ pockets and stimulate consumer demand; act as an “automatic stabilizer” during economic downturns; and make retiree benefits portable when changing from one job to another. It also would help American businesses trying to compete with foreign companies that don’t provide pensions to their employees, since those countries already have generous national retirement plans. And it would be broadly fair, since even those higher income Americans who are losing their tax deductions would see part of it returned to them in the form of a greater Social Security payout.
In short, Social Security Plus would provide a stable,
secure retirement for every American and contribute greatly toward a solid
foundation from which to build a strong and vibrant 21st century
economy.
Steven Hill (www.Steven-Hill.com) is a political writer and
researcher whose most recent book is "Europe's Promise: Why the European
Way is the Best Hope in an Insecure Age" (www.EuropesPromise.org).
- Posted in
70 Comments so far
Show AllAs I am myself on Social Security (deafness, diabetes, sleep apnea, hypertension) this is obviously of interest to me. Much obliged, CommonDreams!
A critical issue being ignored in the social security discussion is the effect the current low payout and proposed further dilution of social security is having and will continue to have on young Americans' job prospects.
Millions of American workers age 55 and older are delaying or cancelling retirement because of inadequte social security. These millions will increase dramatically when Obama starts diluting social security after the Nov. election.
As a result, millions of young Americans, mostly college graduates are under employed or unemployed because the 55 and older crowd is not retiring in great enough numbers. Young Americans' prospects for employment in family wage jobs with benefits will be further diminished when Obama starts diluting social security after the Nov. election.
Excellent! Now how to put it into practice?
To implement something like this presupposes a civilized State. Sorry folks but it just ain't going to happen anytime soon, at least not while the people of America are content to sit idly by and condone mass murder and pillaging in sovereign nations around the globe by their government.
Great idea! Won't ever happen.
WAIT WAIT WAIT WAIT WAIT!!!!!
It is hard enough for the rich to scrape by on $1,000,000 per week. Just imagine that they only had $850,000 after taxes. They would starve to death!!!
Just ask any ignorant American to explain 'trickle down' economics. Money 'trickles up' - just ask the politicos who passed such tax laws!!!
"They would starve to death!!!"
Why do I feel no compassion?
Obviously you are not a "compassionate conservative".
How dare the average citizen think he/she is worth that kind of consideration!!!!!
The government needs all the money it can collect in order to keep the endless war machine cranking!!!
Stop thinking only of yourselves, you older people!!!
P.S. I'm one of you (with no hope of the status quo ever changing!)
FrankS sez: "The government needs all the money it can collect in order to keep the endless war machine cranking!!!
Stop thinking only of yourselves, you older people!!!"
***
Actually, the occupations on the U.S. empire's frontiers are funded through loans from China, Saudi Arabia, et al. And the tab is going to your grandchildren, so the old folks are off the hook for that, at least.
The financing is not genius, it is simple arithmetic like you learned in grade school.
What IS genius is the corporate propaganda machine's success in convincing American voters to keep voting for polticians who continue to work against the interests of those voters.
"Guaranteeing the American Dream with Expanded Social Security"
While I agree with increasing SS and the means proposed in this article, doubling benefits is NOT a ticket to the American Dream, nor should it be. The American Dream is a defunct idea based on endless economic expansion and consumption, something our planet is telling us in no uncertain terms is not possible.
If we re-define the American Dream as simply being able to retire before dying with enough money for the basics--food, shelter, clothing, and health care--then this plan will do it. Of course, then it would be ridiculous to call it the American Dream because civilized countries are already ensuring this kind of retirement.
We need to dump the old and create a new American Dream, one that dreams toward ecological sustainability rather than the production and accumulation of mountains of consumer crap, one that dreams of less disparity in the accumulation of wealth rather than the self-serving social Darwinism of wealthy elite.
But let's start small and push this idea forward first.
If by the "American Dream" we mean the ability to rise in the world from humble beginnings, then it is much more prevalent in "socialist" Sweden, and in most countries in Western Europe. Americans like to think of this country as the land of opportunity and social mobility - the fruits of "free enterprise." Alas, this view has been delusionary for decades now; but hardly anyone has been able to break through the swamp of media propaganda and patri-autism.
"Patri-autism"--I love it (though I doubt the PC enforcers would condemn the term as demeaning to the autistic)!
If most Democrats were at all liberal they'd be working to create Social Security Plus rather than settling for stopping Republican attempts to dismantle Social Security.
As Glenn Greenwald pointed out a few days ago on Salon.com (why don't we see his articles on CD anymore?) it is our Democrat president's panel that will be proposing steep cuts in social security while regaling the populace with tales of how they're saving social security from those mean, scary Republicans.
Obama's speech on the 75th anniversary of social security last week primed the pump for the shell game Obama will be playing with us to convince us that he is saving social security from the Republicans.
I am living on Social Security Disability Insurance and can not imagine this ever happening. We as a nation will not even include dental or vision coverage under Medicare. I had to cut my medicare insurance so I could buy food. Once you are retired or become disabled you are no longer part of the machine and are marginalized to nonexistence. Oh, you can still vote but you haven't the funds to buy a lobbyist. I once wrote my senator, that mac kain guy and asked why dental wasn't included in medicare and I got 10 pages of ready to use toilet paper. Lets all face the fact that this is not a humanitarian society, we do not take care of our own. This idea makes perfect sense and that is why it will never happen. It's too simple, too clean and too much the right thing to do. I want to thank CommonDreams and the author for this piece. At least there are some left with Heart.
"I once wrote my senator, that mac kain guy and asked why dental wasn't included in medicare and I got 10 pages of ready to use toilet paper."
You should have wiped your arse with those 10 pages and sent it back from whence it came.
Actually what he put forth was the same battle that Jefferson and Adams fought so many years before. He was on the Adams side of the debate. Sad to say but Adams won.
Good article, but it presumes a sane government in a sane country and, if you had that, funding would be no problem at all... Hill only scratches the surface. The outlaw motorcycle gang that seized power on 11/22/63 has tightened its grip on the "national debate"... media consolidation, disallowing 3rd party candidates at presidential debates, "Free Speech Zones" (remember when all of America was a "Free Speech Zone"?). MiniTru (the MSM) would quickly dub this "fringe" (like they did Public Option, a "fringe" notion shared by 72% of the population), and it would eventually disappear down the rabbit hole of memory. But if funding were the only concern, a few suggestions: A Tobin Tax on financial transactions like they have in Great Britain would raise billions and help dampen useless speculation, cut Defense in half, close most of those 800+ military bases, stop the wars against people who never did anything to us, deal with corporate tax evasion in all its disguises, restore the Eisenhower Tax Rate, institute Single Payer Health Care... I could go on but these ideas will wither on this post and never be so much as articulated anywhere in the public debate... which is the real reason the Party (Dems and Reps) excluded Nader and Buchanen from the presidential debates... God forbid anyone hear Reality in a political discussion.
And of course if you mention raising taxes on millionaires in any way, the media will bleat that you are raising taxes on everybody.
In California, polls tell us that 80% of the population do want millionaires to pay more. But no one knows that statistic, and so we are busy cutting Medicare, Medicaid, education and now Social Security; the poor grow poorer and the economy, without purchasing power, staggers.
Progressives talk to each other in isolated media ghettoes. Like this one, although I do value it. Is there any way we can break out into the public at large? I suspect that it will have to be through person to person organizing. "The press is free to those who own one." (A.J. Liebling, early 20th century)
Marxists like to comfort themselves that when things get worse, people will rise up. But I am afraid that that can only succeed if there has been previous organizing and education. I am open to suggestions.
You're missing the point. It isn't that social security is not enough.
The point is social security is a supplement, and now the 'main retirement plans' it used to supplement are not there anymore. Government should legislate to encourage real retirement plans, not pay out one itself.
Of course to do this effectively, we'd have to stop destroying our own employment base by outsourcing to cheap foreign labor. As long as the wealthy are content to destroy the middle class in the name of greed, this won't happen. The inevitable result is widespread social problems twenty years down this road.
" widespread social problems twenty years down the road ". What do you think we have now? With all due respect: is there any more rooms to rent on the planet you're living on? The only way to prevent the stealing of your retirement savings from " vulture capitalism " is to set up a program like the FDIC's deposit insurance program. I've had investment and savings instruments of various types and the people administering them were very successful " nickel and dime " thieves. In fact, I say roll all gov't retirement programs, including the military, into the SSA retirement insurance program. If you volunteer to go kill people in exotic lands for empire why should you get to retire at 40-45? I'll be busting my chops till 67 and I haven't even hit anyone in 50 years. By the way: I've paid all my taxes, too.
Right now we have overcrowding in the 'lower' world and some noise in the affluent world. Earth's population is about 7 billion people, which is about 4 billion too many with the world's relative tech base. This noise is ignored by the rich, who also ignore the 'lower' world unless exploiting it as a cheap labor source.
By widespread social problems, I'm talking more like the breakdown of law as people are forced into bad decisions by no social support net. Right now our social support net is still present but fraying, thus, noise. Social security can still support someone who is careful. In the future, this will not be so.
I'm not looking forward to a time in America when guns are plentiful yet retired people need money to live. Will jails be the new retirement homes then?
Besides the jobs available for younger Americans, an expansion of SS benefits will permit older Americans to help their children and grand children have better lives. It won't only help older Americans, it will help everyone.
I was young at the time but if I remember correctly the German government after the war gave very generous benefits which of course was immediately spent by the retirees and the economy took off.
Doubling Social Security is a suggestion I made for political purposes.
Such a position would immediately neutralize those who favor elimination of Social Security entirely.
Unfortunately we don't have a political party with access to corporate media to trumpet the message of doubling Social Security.
Instead we have two parties looking to hack it to pieces.
Makes way too much sense. Never happen.
The Government of Canada and various Provinces have all discussed upgrading our own CPP and OAS to ensure a better retirement. I just hope they get it done and SOON.
One problem seems to be that Good ideas took for ever to implement.
Hey, I'm all in !
Jimmy Carter tried this method. It should have solved the problem.
Congress promptly spent the increased revenue just as they will any future increase.
The author states that $650 billion is enough to double the Social Security payout, i.e. to increase it by 100%. But part of this money is to be obtained by eliminating the federal tax deduction for for providing employees' retirement plans. This is to be done by eliminating the retirement plans themselves. The deductions total $126 billion per year, and presumably the retirement plans total at least as much. So $126 billion of the "payout increase" is merely transferred from one pocket to another. The actual increase in the amount of money reaching the Social Security recipients is thus $524 billion, or 80%.
This exercise in welfare gerrymandering is not really a waste. Because corporations can dump their retirement commitments by means of engineered bankruptcies, transferring these commitments to Social Security at least ensures that former employees will still get the money they were promised.
Im all for this idea of expanding SS by raising more revenue, But I'm not sure how Mr. Hll got the idea that the mortgage and IRA deductions are rich-man perks. If he were to come up here to the rust belt, where a dilapidated but livable house in a "less desirable" neighborhood can be had for $10K, even people too poor to own a car are paying mortgages. And many poor people also make efforts to save - however small those savings may be.
Because the deductible interest paid on such low mortgages doesn't get above the standard deduction everyone gets at a minimum.
The only inaccuracy in the article is that the standard deduction is offset by itemized deductions, not added to them. So to accrue a benefit from your mortgage interest, or any other deduction, that is not a business expense on self-employment, you have to accrue total deductions above the standard deduction.
A 10K mortgage is not getting anywhere near that amount.
Another revenue source-the $500,000,000,000 to $1,000,000,000,000 we spend killing people in other...I mean on defense, every year.
YES! This is exactly what needs to happen, and not just for seniors. The private economy circa 2010 only has room for, what, 20% of the people to live well? Or maybe 10%. It's time to ensure income to the masses so we can have a functioning economy and society.
Great article. It's refreshing to read a journalist speaking truth to power, for a change, on this very critical issue, instead of the garbagey myths about folding and cutting back on social security.
Can we see some more courage out there from other journalists, please?
It's a no-brainer that the money's there, that social security needs to be expanded and improved, and so that American society can move into the 21st century as a modern, civilized and sane nation.
SS tax could also be applied to all individual and corporate income, including bonuses and investment income. I don't see why all that income is excluded. Taxing only wages up to 100K is the most regressive tax ever.
Granted, corporations won't "retire", but since I have to pay taxes for wars I don't want, I don't care.
You need to find a better way. My local paper won't publish stuff like this because its Board of Directors browny noses Republicans.
You want it out there? POST IT ON GODDAM BILLBOARDS FROM SEA TO SHINING SEA.
37 comments in 2 hours and Common Dreams takes this essay off the "front page"? WTF is this about?
I believe it was moved to the main headline, unless I need Medicare to help pay for new glasses.
(There's a good chance most of us here need new glasses--starting with rose-colored ones!)
"Third, we could reduce or eliminate other unfair deductions in the tax code that allow higher income people to reap generous deductions that low and moderate income Americans can’t enjoy"
Unfair? Really? I know quite a few moderate income Americans that disagree with you on this one.
Some of us like to save in our 401k without being penalized, just in case your "Social Security Plus" scheme doesn't work as planned.
Some of us would also like to be able to purchase a home and have some extra equity when we retire, and not have to pay rent, just in case "Social Security Plus" doesn't deliver as promised.
.
A simple 5% tax on all stock, options and derivatives trades would easily pay for a doubling of Social Security checks.
The first 100 trades by any person or business are exempted.
This will sock it to Wall Street Casino Banks, Hedge Funds and High Frequency Trading computers.
We use the lottery to (allegedly) pay for a portion of public school expenses in my state.
Why not be similarly creative with funding methods for Social Security?
From what I've heard, only a far smaller transaction tax - a tenth of a percent, would raise enormous revenues for worthy stuff.
Do not open the door to any new legislation under the current Democrats or the Republicans.
They will take your good ideas and run them through the legislative process.
The current congress will sh*t all over your good ideas and replace them with "business friendly" legislation.
The congress will name the legislation in a manner that is appealing to the public and hints at their initial desire to do good.
Obama will happily sign this legislation and then report to the people that their wishes have been met.
In the case of SS, opening the door to new legislation will undoubtedly open the door to Wall Street interests.
The same process played out with the "universal health care".
No legislation under the current congress is better than bogus legislation or further Wall Street bailouts.
I'm thinking Steven Hill would be a good candidate for a urine test Mr. Gibbs.
Capitalism breeds greed and abuse and makes slaves of the poor.
"The Greater Good and the Greater Profit are not compatible aims" -- Yann Martel.
I have posted this a hundred times all over the Internet. Its the truth, does no one SEE?
Happy Birthday to Me – I’m 73 today.
I offer this perspective from someone who has lived too long:
After investing 17 years in school, I figured I might be able to do better than $300 a month teaching school, by jumping on the corporate bandwagon.
Actually, in the olden days, it wasn’t a bad way to go. Businesses had a reputation then of taking care of their own. I worked myself into a management position; the man who I succeeded had retired a millionaire, and I was better than him at the job (which in those days represented real money).
Many companies (which were later run by idiots) were founded by geniuses, who were often quite benevolent employers. This particular company provided, in addition to the usual benefits, a generous stock option plan (half-matched by the employer), a low-cost housing loan . . . stuff like that.
When the founder died, guess what? I was there, and could provide details, but doing so would be redundant to you CD folks.
The New Way became to provide the most for the least, and especially to make sure the money went to the top. In these years, they were trying out different scams, to see how much they were able to get away with.
Through their continuing program of buying Congressmen, they were eventually able to achieve major changes in the tax law. They were now FREE to discard the company and skedaddle with ‘their’ money.
Eventually, I was put out on the street by three different corporations.
In one case, I knew the computer guy who printed out Buick-sized loads of documents daily, who filled me in on one of the primary scams they were working toward. They kept four sets of ‘books’. When Ronald Reagan was running for president, the executives of the company actually made the rounds amongst the ‘little people’ urging, “Be sure to vote for Reagan; it’s important.” I kid you not.
Their subsequent victory put 12,000 people on the street overnight.
As luck would have it, I landed a dream job after age 40. I won’t go into detail but it was a very successful family owned business that had an exclusive territory assigned to them by the manufacturer. One day, we found our product was being delivered to our customers at below our cost. We were designated to the scrap heap by a much larger organization (although we did the same work they did). This was during the Nixon days, and the family of the company that put us out of business was actually connected to a very high official in the Nixon administration.
The Criminals more and more were given the green light to cut and run, eventually ending our chance to earn a retirement income, and even to work.
Meanwhile, they were able to begin their war against Social Security. Need I say more? “If you’re out of work, that’s your problem. There are plenty of jobs.” Sound familiar? Arbeit Macht Frei.
Moving right along, my wife and I were victims of an armed robbery (in a motel), where we were tied up and held at gunpoint by three bad guys (I’m biting my tongue here) for about half an hour, with constant threats of rape and death. Because of the duration, especially, that does serious damage mentally. (I had to go on Social Security Disability.) The bright side of that is I don’t ever have to worry about being called for Jury Duty.
My wife, later, was broadsided in her Mustang convertible by a 15-year old kid who ran a stop sign at high speed. At night. Drunk. Perhaps on drugs. On Probation. Even the guys in the Ford Wreck Yard stopped to look at the remains of the car.
My wife was in intensive care for a week or so, with the doctors telling me it was too early to say if she would be a quadriplegic, paraplegic, or (initially) even if she would survive.
She suffered a broken neck, as well as breaking about everything else: Scapula; Clavicle; Ribs; Fingers; etc.
In addition, she had a punctured bladder and kidney.
Well, she recovered, mostly because she was extremely healthy and had no bad habits.
Our attorney announced we had a million dollar case. Oh, good.
The end result is that we lost our ass financially. The kid was a minor. No money. Nobody to go after. You can’t sue the State (Probation Department); maybe you can, if you have some serious money to hand the attorney up front.
Later, I developed a very advanced prostate cancer, where the cancer had spread beyond the prostate. I was fortunate to have that taken care of by a most excellent surgeon. The ironic part is that I now feel better physically than I have for years. My doctor quipped, “You look better in person than you do on paper.”
Oh, there’s more; but, what the hell. Welcome to life.
Now, we are in a desperate situation. The ‘Donut Hole’ for me represents a likely death sentence.
For all practical purposes, Social Security has already been destroyed, in my case (the amount is insignificant, in the overall scheme of things).
We’re still not completely bottomed out; we could still sell some assets. The problem I face is this: Should I sell our few remaining assets (like a pickup) to by meds, to the detriment of my wife’s well being? Or take the Hemming-Way out? Just another American waste product.
The point of this rant is to serve as a warning to you good people, to fight for your lives to keep and improve Social Security and to institute Single Payer. For some of you, your lives may very well depend on your success.
Hard road brother, hang in there!