During the 2008 election, then Senator Obama promised that he would not cut Social Security nor would he cut the Cost of Living Adjustment (COLA). He also realized that healthcare played a very large role in our deficits. The Affordable Care Act has put us on a path to start that mitigation. Social Security still needs to be rebalanced to ensure it remains viable indefinitely. A few years back the President was proposing breaking his promise albeit in a cunning manner to solve the problem. As usual, it would have been on the backs of the middle-class, your grandma. He was proposing something called chain CPI.
Chain CPI assumes that when prices rise people attempt to find cheaper alternatives. As such Social Security recipients would get cost of living increases that were smaller. It would be based on some nebulous calculation on behavioral change in shopping. This almost sounds like what Republicans are currently doing to further bust the budget by using dynamic scoring to pay for their tax cuts.
The President was hoping that by inflicting some additional pain on the middle-class Republicans would come to the table for a grand bargain. Of course they did not come to the table and the President has subsequently removed the middle-class Social Security recipients as his sacrificial lamb.
The reality is Social Security could be made solvent tomorrow. Simply tax all income. Currently the Social Security tax stops at all income in excess of $118,500. So millionaires and billionaires pay a much smaller percentage in Social Security tax. Additionally capital gains have no Social Security tax. So the wealthy may not pay any at all.
Of course the middle-class capital gains in the form of IRA disbursals are taxed. Our tax policies are designed to keep you where you are economically at best while favoring those who were lucky to make the leap or were chosen to make the leap into a wealth accumulation modal or a high income modal.
Many have been making the case to expand Social Security for some time. The country has the wealth to do so. The reality is that the Social Security tax rate could decrease and a retirement income one can live on paid. This will be covered in a subsequent post. The problem is no politician has the will to tax those that should be taxed, the wealthy. The middle-class made them and it is time for them pay the fees like any broker is paid his/her fees for his/her services.
It was refreshing to read the following passages in Paul Krugman's article titled "Where Government Excels."
Suddenly, it seems, many Democrats have decided to break with Beltway orthodoxy, which always calls for cuts in “entitlements.” Instead, they’re proposing that Social Security benefits actually be expanded.
This is a welcome development in two ways. First, the specific case for expanding Social Security is quite good. Second, and more fundamentally, Democrats finally seem to be standing up to antigovernment propaganda and recognizing the reality that there are some things the government does better than the private sector. ...
And in the real world of retirement, Social Security is a shining example of a system that works. It’s simple and clean, with low operating costs and minimal bureaucracy. It provides older Americans who worked hard all their lives with a chance of living decently in retirement, without requiring that they show an inhuman ability to think decades ahead and be investment whizzes as well. The only problem is that the decline of private pensions, and their replacement with inadequate 401(k)-type plans, has left a gap that Social Security isn’t currently big enough to fill. So why not make it bigger?
Needless to say, suggestions along these lines are already provoking near-hysterical reactions, not just from the right, but from self-proclaimed centrists. As I wrote some years ago, calling for cuts to Social Security has long been seen inside the Beltway as a “badge of seriousness, a way of showing how statesmanlike and tough-minded you are.” And it’s only a decade since former President George W. Bush tried to privatize the program, with a lot of centrist support.
But true seriousness means looking at what works and what doesn’t. Privatized retirement schemes work very badly; Social Security works very well. And we should build on that success.
It is time for Americans to deprogram themselves from the fallacies mostly pushed by the Right. The middle-class has sacrificed enough. Income inequality and wealth disparity are the manifestations of that sacrifice. Stop buying into the policies that have failed. Brainwashing Americans into supporting and defending bad policies were designed. If anyone doubts that, it is imperative that one reads the Powell Memo. It is time to vote our interest. It is time to engage.