New York Times columnist and economist Paul Krugman, in his column today, is right to expose the attacks on Social Security as being the work of right-wing ideologues eager to destroy a government program that works, backed by cowardly Democrats who want to show their fiscal "responsibility" by getting tough with future pensioners.
But he doesn't go the extra step to point out that this program, founded 75 years ago as a cornerstone of Franklin Roosevelt's New Deal, could be much more fair and even generous to elderly and disabled retirees, and also placed on a much sounder economic footing, by a few simple reforms that would not cost most people a penny, or require hard working folks to work one day longer before retiring.
There is a problem facing Social Security, which Krugman doesn't mention. The Novel economist is correct that the system has built up a huge multi-trillion-dollar surplus over the years. And he is correct in noting that this surplus--the Trust Fund--is big enough to fund the system probably indefinitely, even during the huge bulge in retirement that is starting now that the Baby Boomer generation is hitting retirement age. What he fails to mention is that the Trust Fund has all been stolen (okay, technically borrowed) by the federal government to fund its own annual deficits, and given the national attitude towards taxes, it will never be repaid. That's why the right is able to create a panic by falsely claiming that Social Security is going to go "bankrupt" when current workers' Social Security taxes can no longer pay for the benefits of current retirees.
But there is a simple solution to even this deception, which is to eliminate the cap on income which is subject to the Social Security tax.
At present, every worker in America pays the same percentage of income into the Social Security Trust Fund--currently 6.2% of the first $106,800 of earnings. Since everyone pays at that rate, whether they earn $10,680 a year or $106,800 a year, that would be a flat tax, except that it's not. Because once someone earns more than $106,800 in a year, the tax rate falls off precipitously. After that cap, which is adjusted upward a little bit each year to account for inflation, there is no SSI tax on additional money earned. In other words, if someone earns $106,800.00, she or he pays $6,621.60 into the Trust Fund, but if that worker earns $107,000, or $313,600 a year, the tax is still just $6,621.60. For the person earning twice the income cap of $313,600, that means an SSI tax rate of only 3.1%. For someone earning 10 times the cap, or $1.680 million, the tax rate is only 0.62%.
Making things even more unfair, if someone were to earn that $106,800, or any other amount, by investing in the stock market, or by investing in real estate, he or she would pay no SSI tax at all, since the tax is only applied to what is called "earned income," not to investment income.
According to a recent study conducted by the Congressional Budget Office for the Senate Special Committee on Aging, if this income cap for the Social Security tax was eliminated, so that all earned income was taxed, the dreaded wall when current workers' tax payments ceases to be enough to pay for current retiree benefits, instead of arriving in 2037, would be pushed back to at least 2075, a date almost as distant in the future as today is from the founding of the Social Security program.
Of course, if the tax were applied also and at the same rate to unearned income from investment, not only would there be no Social Security crisis ever, but instead of talking about making people work until they are 70, and about cutting benefits for retirees, we could be talking about lowering the retirement age to 62, and raising benefits, so that people could live decently in retirement instead of worrying that they might have to cut their food intake in order to pay the rent or buy required medications. People could also stop having to lose sleep at night working about the destruction of their IRA or 401(k) by the Wall Street banksters. Alternatively, the retirement age could be restored to the original 65, and the tax rate on all workers could be reduced.
Now people on the right will howl--they are howling now--that it's unfair to tax the rich on all their income when they will only be collecting a pittance in Social Security benefits for all the money they pay into the system if there is no taxable income cap, but in fact, that's exactly what has been done in the case of the 1.45% Medicare tax, which is also levied on every worker. That tax is applied to all income earned.
Krugman is also wrong in saying that it is ideologues who are trying to wreck Social Security. The ideologues at places like the Cato Institute and Heritage Foundation are providing the intellectual justification for destroying Social Security, but the real opposition to Social Security, though, is corporate America, as represented by groups like the Business Roundtable and the US Chamber of Commerce (it's corporate America that funds those foundations and their resident "scholars," after all). And the reason for this corporate opposition is that Social Security taxes and Medicare taxes paid by workers are both matched, dollar for dollar, by employers. If you pay 6.2% of your income in taxes to the Social Security Administration each year, so does your boss, and if the income cap is lifted for workers it will also be lifted for employers. That means a bigger tax bill for the company, and of course personally for the managers and board members.
So let's at least be honest in this coming battle over "saving" Social Security. It is nothing less than a war between bosses and workers.
The system is not in trouble because it's too generous or because it is underfunded. It has been pilfered over the years by politicians who have been unwilling to raise taxes to fund America's wars, or to fund the programs that we Americans say we want, like better roads, grants for local schools, etc. Instead of telling us what things cost, they borrow (steal) money from the Social Security Trust Fund, and then tell us Social Security is in trouble.
And now, as a day of reckoning approaches, they pretend it's all our fault. They say we want too much in benefits, or that we want to retire too early. But the truth is, we deserve decent retirement income, and we deserve to retire at 65 or even 62. In fact, if we hang onto our jobs until 70 or 72, as these hacks and the lobbyists for corporate American want us to do, it'll just be that harder for our kids to get jobs and move out of the house!
This is not about a private pension fund that's going bust. It's about a public pension program that has been raided, that has never been adequate, and that needs to be bolstered now by a tax on the rich. Nothing elaborate mind you. They just need to pay at the same rate that the rest of us do.