To: The Editor Washington Post December 5 2011
Is it fair to conclude that the Post’s editorial “Extend the Payroll Tax Cut” (4 Dec 11) is a clarification, or even a reversal, of its November 27 effort on the same topic? Any other conclusion would leave readers with hopelessly contradictory messages.
By the way, is it further fair to find the fine hand of Fred Hiatt in the November 27 piece? How else to explain his use of the rather peculiar adjective “sacrosanct” in his oped of December 5 to describe the Social Security trust fund and his worry in the same oped that the payroll tax “giveaway, like so many ‘temporary’ giveaways before it, will turn into “something permanent?” Both the same word and the same thought appear in the editorial of November 27.
Or is Hiatt’s oped of December 5 his objection to the Post’s editorial of December 4 which corrected (Hiatt’s?) editorial of November 27?
Fred Hiatt would do well to examine his vituperative attack on the “middle-class tax-cut bar” and try to explain to his readers why the “middle class” is a wasting asset in the U.S. where it once had reached its fullest flower.
Joseph L. Mayer
Wednesday, January 18, 2012
Washington Post Attacks Social Security
Joseph L Mayer
November 28, 2011
Editor, The Washington Post
The Washington Post editorial “Temporary Forever?” (27 Nov 11) presents a dilemma. “Temporary” is the Post’s description of the payroll tax reduction for 2011 supported by President Obama. “Forever” is the payroll tax reduction supported by the President for 2012.
The dilemma according to the Post is that after two temporary extensions what would happen if the valid economic arguments for the reductions, acknowledged by the Post, including 400,000 saved jobs annually and a .5% increase in GDP, “were equally valid in a year’s time. Then what?” By the Post’s implication, the “then what” for President Obama would be support for another annual extension. Grave dangers would accompany the President’s course of action and the Post warns that they “must be counted among the risks of Obama’s plan.”
Seemingly unconcerned by the possible consequences of not providing the depressed U.S. economy the benefits of the payroll tax reduction, the Post says the real danger of an extension would be exposing the “myth” of the source of Social Security benefits. According to the Post “current general revenue finances current benefits.” Accordingly “the more you reduce the ostensible flow into the trust fund, the more transparent the myth becomes, and the clearer to the public, that Social Security is, indeed, an income transfer program, not social insurance. The case for treating it as a sacrosanct entitlement for seniors would be correspondingly weakened”. But wait! Is the Post editorially urging the President not to take an action that would support the Post’s claim that the source of Social Security funding is a myth and that Social Security is not an “entitlement for seniors”?
The “risks” involved in the President’s policy that the Post warns against are the very positions the Post has consistently taken on Social Security and that are repeated in this editorial.
The real myth is the Post claim that Social Security benefits are paid from general revenue. In fact, every cent of Social Security benefits for the past 25 years has been paid out of payroll taxes. During the past 25 years not only have all Social Security benefits been paid from payroll taxes but payroll tax receipts have exceeded benefit payments by $2.6 trillion dollars. This immense sum has guaranteed full current rates of benefits for the next 25 years which would include coverage for virtually all baby boomers. It is either a lie or unforgivable ignorance for the Post to claim that Social Security benefits are paid from general revenue.
Similarly it is a pathetic lie to deny that Social Security is social insurance. Workers retiring today who have paid $2.6 trillion dollars into the Social Security trust fund certainly are entitled to their Social Security benefits. Whatever disparagement of the social Security trust fund the Post intended by denying it is “sacrosanct”, the fund contains only payroll taxes paid by workers for their retirement. By law Social Security trust fund payments to retired workers is an entitlement no matter how disturbing that thought may be to the Post.
Of course the pages of the Post are frequently filled with claims that the Social Security trust fund doesn’t even exist or that if it does exist it consists of “worthless” paper. Articles by Charles Krauthammer, Robert Samuelson and Alan Sloan come to mind. Such thinking holds that bonds issued to the social Security trust fund for payroll taxes used to cover budget deficits caused by unfunded wars and huge tax cuts for the wealthy are not of the same value as bonds issued for loans from China, Great Britain, Japan and other investors. It is unsettling even to think about the response of U.S. citizens to an administration that adopted a policy of paying, in full, interest and principal of bonds held, for instance, by the government of China while at the same time defaulting on bonds held by the Social Security trust fund. Their value at that point would be made unmistakably clear to politicians and maybe even to the Post.
Another theme frequently reflected in the pages of the Post is the notion that without substantial reductions in benefits the Social Security system will go bankrupt. When actual benefits are measured this becomes a difficult position to justify. Average benefits run to about $14,000 per year, hardly an amount anyone would claim is excessive. Means testing would save a small amount, but will not result in significant savings. An honest debate on Social Security benefit levels would certainly result in a conclusion that they should be higher not lower.
It is possible, but rarely acknowledged, to refute the bankruptcy argument without benefit cuts or new taxes. If the U.S. economy were to resume the growth rates of the 50 years following WWII it would more than cover current benefits without any increase in taxes. Unfortunately that growth path was dramatically slowed during the George W. Bush administration and its resumption is not a given over the near term.
To avoid total reliance on uncertain economic growth, social security taxes should be raised. Equal justice as well as economic conditions support raising Social Security taxes. Underlying U.S. tax policy is the philosophy that rates should be progressive. Generally this philosophy is still honored in income tax rates. High income means higher rates. Payroll taxes perversely reverse this philosophy – the higher the income the lower the rate. All income, from the first dollar earned to approximately $110,000 dollars is taxed at 6.2%. Income over $110,000 pays no payroll tax. A worker with three dependents earning $22,000 pays 6.2% of his poverty level income while earners with income of $1 million per year pay less than 1%. This inequity is further exaggerated by limiting payroll taxes to “earned” income and excluding “unearned” income from stock dividends and capital gains mainly received by the wealthy.
Applying payroll taxes to all income from the first to the last dollar and including “unearned” as well as “earned” income would immediately put the Social Security trust fund in the black for the next 75 years without benefit cuts or changes to the low growth rates currently being projected.
The Washington Post calls itself an “independent” newspaper which suggests a vague image at best. Independent of its readers? Its workers? The government whose infrastructures it exploits? What? Today’s editorial “Temporary Forever?” doesn’t help to answer the question. The plain meaning of its message, however, shows little independence and great deference to the rich and powerful only slightly elevated from the slander of Senator Alan Simpson who in discussing entitlements accused the American people of wanting 300 million public teats.
Let’s hope someday Senator Simpson and the Washington Post both famous for proclaiming their “independence” will admit there is a Social Security trust fund containing a huge amount of money paid by workers for their retirement and that workers are justified in looking upon it as an entitlement in a remarkably successful social insurance program.
November 28, 2011
Editor, The Washington Post
The Washington Post editorial “Temporary Forever?” (27 Nov 11) presents a dilemma. “Temporary” is the Post’s description of the payroll tax reduction for 2011 supported by President Obama. “Forever” is the payroll tax reduction supported by the President for 2012.
The dilemma according to the Post is that after two temporary extensions what would happen if the valid economic arguments for the reductions, acknowledged by the Post, including 400,000 saved jobs annually and a .5% increase in GDP, “were equally valid in a year’s time. Then what?” By the Post’s implication, the “then what” for President Obama would be support for another annual extension. Grave dangers would accompany the President’s course of action and the Post warns that they “must be counted among the risks of Obama’s plan.”
Seemingly unconcerned by the possible consequences of not providing the depressed U.S. economy the benefits of the payroll tax reduction, the Post says the real danger of an extension would be exposing the “myth” of the source of Social Security benefits. According to the Post “current general revenue finances current benefits.” Accordingly “the more you reduce the ostensible flow into the trust fund, the more transparent the myth becomes, and the clearer to the public, that Social Security is, indeed, an income transfer program, not social insurance. The case for treating it as a sacrosanct entitlement for seniors would be correspondingly weakened”. But wait! Is the Post editorially urging the President not to take an action that would support the Post’s claim that the source of Social Security funding is a myth and that Social Security is not an “entitlement for seniors”?
The “risks” involved in the President’s policy that the Post warns against are the very positions the Post has consistently taken on Social Security and that are repeated in this editorial.
The real myth is the Post claim that Social Security benefits are paid from general revenue. In fact, every cent of Social Security benefits for the past 25 years has been paid out of payroll taxes. During the past 25 years not only have all Social Security benefits been paid from payroll taxes but payroll tax receipts have exceeded benefit payments by $2.6 trillion dollars. This immense sum has guaranteed full current rates of benefits for the next 25 years which would include coverage for virtually all baby boomers. It is either a lie or unforgivable ignorance for the Post to claim that Social Security benefits are paid from general revenue.
Similarly it is a pathetic lie to deny that Social Security is social insurance. Workers retiring today who have paid $2.6 trillion dollars into the Social Security trust fund certainly are entitled to their Social Security benefits. Whatever disparagement of the social Security trust fund the Post intended by denying it is “sacrosanct”, the fund contains only payroll taxes paid by workers for their retirement. By law Social Security trust fund payments to retired workers is an entitlement no matter how disturbing that thought may be to the Post.
Of course the pages of the Post are frequently filled with claims that the Social Security trust fund doesn’t even exist or that if it does exist it consists of “worthless” paper. Articles by Charles Krauthammer, Robert Samuelson and Alan Sloan come to mind. Such thinking holds that bonds issued to the social Security trust fund for payroll taxes used to cover budget deficits caused by unfunded wars and huge tax cuts for the wealthy are not of the same value as bonds issued for loans from China, Great Britain, Japan and other investors. It is unsettling even to think about the response of U.S. citizens to an administration that adopted a policy of paying, in full, interest and principal of bonds held, for instance, by the government of China while at the same time defaulting on bonds held by the Social Security trust fund. Their value at that point would be made unmistakably clear to politicians and maybe even to the Post.
Another theme frequently reflected in the pages of the Post is the notion that without substantial reductions in benefits the Social Security system will go bankrupt. When actual benefits are measured this becomes a difficult position to justify. Average benefits run to about $14,000 per year, hardly an amount anyone would claim is excessive. Means testing would save a small amount, but will not result in significant savings. An honest debate on Social Security benefit levels would certainly result in a conclusion that they should be higher not lower.
It is possible, but rarely acknowledged, to refute the bankruptcy argument without benefit cuts or new taxes. If the U.S. economy were to resume the growth rates of the 50 years following WWII it would more than cover current benefits without any increase in taxes. Unfortunately that growth path was dramatically slowed during the George W. Bush administration and its resumption is not a given over the near term.
To avoid total reliance on uncertain economic growth, social security taxes should be raised. Equal justice as well as economic conditions support raising Social Security taxes. Underlying U.S. tax policy is the philosophy that rates should be progressive. Generally this philosophy is still honored in income tax rates. High income means higher rates. Payroll taxes perversely reverse this philosophy – the higher the income the lower the rate. All income, from the first dollar earned to approximately $110,000 dollars is taxed at 6.2%. Income over $110,000 pays no payroll tax. A worker with three dependents earning $22,000 pays 6.2% of his poverty level income while earners with income of $1 million per year pay less than 1%. This inequity is further exaggerated by limiting payroll taxes to “earned” income and excluding “unearned” income from stock dividends and capital gains mainly received by the wealthy.
Applying payroll taxes to all income from the first to the last dollar and including “unearned” as well as “earned” income would immediately put the Social Security trust fund in the black for the next 75 years without benefit cuts or changes to the low growth rates currently being projected.
The Washington Post calls itself an “independent” newspaper which suggests a vague image at best. Independent of its readers? Its workers? The government whose infrastructures it exploits? What? Today’s editorial “Temporary Forever?” doesn’t help to answer the question. The plain meaning of its message, however, shows little independence and great deference to the rich and powerful only slightly elevated from the slander of Senator Alan Simpson who in discussing entitlements accused the American people of wanting 300 million public teats.
Let’s hope someday Senator Simpson and the Washington Post both famous for proclaiming their “independence” will admit there is a Social Security trust fund containing a huge amount of money paid by workers for their retirement and that workers are justified in looking upon it as an entitlement in a remarkably successful social insurance program.
Saturday, May 21, 2011
Washington Post Spreads Anti-Social Security Lies
Robert J Samuelson is a relentless foe of Social Security and Medicare who, true to form, filled his column, “The Affluent Elderly” in the Washington Post on May 16, 2011 with lies and disinformation on the subject.
Samuelson endorses House Speaker John Boehner’s call for “trillions of dollars in spending cuts” in any deal to raise the federal debt ceiling and states it must include “significant savings in Social Security and Medicare benefits” because “subsidizing the elderly is the biggest piece of federal spending”. “Savings” in Samuelson’s Social Security and Medicare proposals means cuts in benefits for “well-off seniors” which Samuelson claims is just “…the right thing to do”.
Samuelson supports his “affluent elderly” assertion on the fact that couples 65 and older have a poverty rate of “9.7% which was half the poverty rate of children under 18”. While neither of these rates casts any credit on the richest country in the history of the World, it is appalling that Samuelson sees increasing the rate of poverty for the elderly by cutting their benefits as “the right thing to do”. Samuelson sees further justification for cutting Social Security and Medicare in the fact that 30% of elderly couples were in a “high-income” group defined as those with annual income of $52,000 for a couple in 2009. Samuelson fails to note that his statistic leaves 70% of the elderly below $52,000 per year, a percentage his cuts would clearly increase and an amount no one should mistake as “affluence”.
Samuelson also ignores data from the Social Security Administration that Social Security payments are 100% of family income for over 15% of beneficiaries, more than 50% of family income for 55% of recipients and that the average benefit was $1170 per month, again, an amount no honest observer would mistake for “affluence”.
To Samuelson these sums to the elderly are just too rich and he proclaims that “People do not lose their obligations to the larger society by turning 65”. For Samuelson this means the elderly must give up benefits he argues are excessive and undeserved. Samuelson claims this $1170 per month is a “subsidy” and is just too much to provide for the old, the poor and the sick. However, no matter how many times Samuelson spreads this lie, Social Security and Medicare are not “subsidized” by anyone. They are fully funded programs paid for by taxes on workers throughout their working years and paid back to those very same workers in their retirement years. He compounds his lie by attempting to create a generational conflict, stating “Government over subsidizes the affluent elderly. It transfers resources from the struggling young to the secure old”. In fact, the so-called “secure old” have paid Social Security taxes all their working lives. And for those retiring in 2011 they have actually paid, since 1985, nearly $3 trillion in taxes in excess of benefits paid in those years. That money is held in trust by the Social Security Administration in the form of bonds constituting the sovereign debt of the U.S. Government, for the benefit of the workers who paid those Social Security and Medicare taxes.
Samuelson and his ilk frequently ignore the trust fund or claim that it constitutes “worthless IOU’s”. Or, like Charles Krauthammer in another Washington Post column, (March 18, 2011) suggests that the government could default on the bonds held by the trust fund with no effect on U.S. credit in the world and no serious objections from the tens of millions of U.S. workers who would thus be defrauded. Krauthammer’s expectations in this regard make Pollyanna look like a pessimist. Such a default would be much more likely to create a global financial crisis and push workers to massive protests.
Samuelson repeatedly demands sacrifice to solve our fiscal problems but only from the poor, the sick and the old, who are the main beneficiaries of Social Security and Medicare. He resolutely ignores asking for sacrifices from those in our society who have so richly benefitted from its bounty. He ignores the fact that Social Security and Medicare taxes apply to only the first $106,000 dollars of earned income which amounts to 85% of total earned income. If the 15% of income received by high earners were taxed for Social Security and Medicare, the system would be completely solvent. Why should only the poor and middle class pay these taxes on their full income? And why should only earned income be subject to Social Security and Medicare taxes? If unearned income, including dividends and capital gains, were taxed the same as the income of poor and middle class workers there would be funds for a truly generous retirement for all. But recipients of high incomes and unearned income can’t be touched according to Samuelson and his compatriots because they would all stop working and investing if they were taxed at the same rates as the poor and the middle class.
Of course, the risk to our economy that a fair tax system would stifle anyone’s work ethic is an acceptable one, especially given the otherwise unfettered scope our capitalist markets provide to individual greed.
Mr. Samuelson should do some soul-searching and ask himself if perhaps the policies and programs that provided multi-trillion dollar tax cuts for the wealthy and which pursue completely unfunded wars in Iraq and Afghanistan and against global terrorism are the real causes of our fiscal crisis and that their termination is the key to a its solution?
Answering “yes” would truly be “the right thing to do.”
Joseph L. Mayer
9340 Fairfax Street
Alexandria, VA 22309
Email: xtopherrobin@msn.com
Phone: 703-360-0709
Samuelson endorses House Speaker John Boehner’s call for “trillions of dollars in spending cuts” in any deal to raise the federal debt ceiling and states it must include “significant savings in Social Security and Medicare benefits” because “subsidizing the elderly is the biggest piece of federal spending”. “Savings” in Samuelson’s Social Security and Medicare proposals means cuts in benefits for “well-off seniors” which Samuelson claims is just “…the right thing to do”.
Samuelson supports his “affluent elderly” assertion on the fact that couples 65 and older have a poverty rate of “9.7% which was half the poverty rate of children under 18”. While neither of these rates casts any credit on the richest country in the history of the World, it is appalling that Samuelson sees increasing the rate of poverty for the elderly by cutting their benefits as “the right thing to do”. Samuelson sees further justification for cutting Social Security and Medicare in the fact that 30% of elderly couples were in a “high-income” group defined as those with annual income of $52,000 for a couple in 2009. Samuelson fails to note that his statistic leaves 70% of the elderly below $52,000 per year, a percentage his cuts would clearly increase and an amount no one should mistake as “affluence”.
Samuelson also ignores data from the Social Security Administration that Social Security payments are 100% of family income for over 15% of beneficiaries, more than 50% of family income for 55% of recipients and that the average benefit was $1170 per month, again, an amount no honest observer would mistake for “affluence”.
To Samuelson these sums to the elderly are just too rich and he proclaims that “People do not lose their obligations to the larger society by turning 65”. For Samuelson this means the elderly must give up benefits he argues are excessive and undeserved. Samuelson claims this $1170 per month is a “subsidy” and is just too much to provide for the old, the poor and the sick. However, no matter how many times Samuelson spreads this lie, Social Security and Medicare are not “subsidized” by anyone. They are fully funded programs paid for by taxes on workers throughout their working years and paid back to those very same workers in their retirement years. He compounds his lie by attempting to create a generational conflict, stating “Government over subsidizes the affluent elderly. It transfers resources from the struggling young to the secure old”. In fact, the so-called “secure old” have paid Social Security taxes all their working lives. And for those retiring in 2011 they have actually paid, since 1985, nearly $3 trillion in taxes in excess of benefits paid in those years. That money is held in trust by the Social Security Administration in the form of bonds constituting the sovereign debt of the U.S. Government, for the benefit of the workers who paid those Social Security and Medicare taxes.
Samuelson and his ilk frequently ignore the trust fund or claim that it constitutes “worthless IOU’s”. Or, like Charles Krauthammer in another Washington Post column, (March 18, 2011) suggests that the government could default on the bonds held by the trust fund with no effect on U.S. credit in the world and no serious objections from the tens of millions of U.S. workers who would thus be defrauded. Krauthammer’s expectations in this regard make Pollyanna look like a pessimist. Such a default would be much more likely to create a global financial crisis and push workers to massive protests.
Samuelson repeatedly demands sacrifice to solve our fiscal problems but only from the poor, the sick and the old, who are the main beneficiaries of Social Security and Medicare. He resolutely ignores asking for sacrifices from those in our society who have so richly benefitted from its bounty. He ignores the fact that Social Security and Medicare taxes apply to only the first $106,000 dollars of earned income which amounts to 85% of total earned income. If the 15% of income received by high earners were taxed for Social Security and Medicare, the system would be completely solvent. Why should only the poor and middle class pay these taxes on their full income? And why should only earned income be subject to Social Security and Medicare taxes? If unearned income, including dividends and capital gains, were taxed the same as the income of poor and middle class workers there would be funds for a truly generous retirement for all. But recipients of high incomes and unearned income can’t be touched according to Samuelson and his compatriots because they would all stop working and investing if they were taxed at the same rates as the poor and the middle class.
Of course, the risk to our economy that a fair tax system would stifle anyone’s work ethic is an acceptable one, especially given the otherwise unfettered scope our capitalist markets provide to individual greed.
Mr. Samuelson should do some soul-searching and ask himself if perhaps the policies and programs that provided multi-trillion dollar tax cuts for the wealthy and which pursue completely unfunded wars in Iraq and Afghanistan and against global terrorism are the real causes of our fiscal crisis and that their termination is the key to a its solution?
Answering “yes” would truly be “the right thing to do.”
Joseph L. Mayer
9340 Fairfax Street
Alexandria, VA 22309
Email: xtopherrobin@msn.com
Phone: 703-360-0709
Wednesday, December 22, 2010
The Social Security Trust Fund is U.S. Government Sovereign Debt
Today's Washington Post (21 Dec 10 pg. A14) published an irresponsible misrepresentation of social Security funding by Allan Sloan which undermines the system's integrity and gravely disadvantages workers.
Sloan contends that the Social Security trust fund, currently valued at $2.6 trillion, is "a snare and a delusion for people who think that it makes Social Security financially sound. " Sloan falsely claims that "This year (2010) ... Social security (is) collecting less cash than it pays out." Sloan masks this dishonesty by assuming that the Social Security trust fund does not collect interest on the U.S. bonds it holds. In fact, it does, and that interest puts Social Security comfortably in the black for 2010 and for the foreseeable future.
Sloan also supports his falsehoods by claiming that the Social Security trust fund " ... is merely an accounting fiction that has no economic value when it comes to protecting Social Security beneficiaries." Sloan is contending that U.S. laws passed in 1985 which taxed workers to pay all Social Security benefits since that date plus taxes to build up a surplus that will soon reach $3 trillion to pay their future benefits "has no real funds" and only an "economically useless" .... "moral" claim on the U.S. government.
Sloan and all the other foes of Social Security should stand reminded that the trust fund is the sovereign debt of the United States government and has at least the same value as such debt held by the governments of China, Japan, Great Britain and other investors at home and around the world.
To state, as Sloan does in the Washington Post today, that the Social Security trust fund is worthless, is to endanger far more than the hard-earned benefits of American workers, it is to cast into doubt the very survival of our country as a capitalist constitutional democracy.
Sloan contends that the Social Security trust fund, currently valued at $2.6 trillion, is "a snare and a delusion for people who think that it makes Social Security financially sound. " Sloan falsely claims that "This year (2010) ... Social security (is) collecting less cash than it pays out." Sloan masks this dishonesty by assuming that the Social Security trust fund does not collect interest on the U.S. bonds it holds. In fact, it does, and that interest puts Social Security comfortably in the black for 2010 and for the foreseeable future.
Sloan also supports his falsehoods by claiming that the Social Security trust fund " ... is merely an accounting fiction that has no economic value when it comes to protecting Social Security beneficiaries." Sloan is contending that U.S. laws passed in 1985 which taxed workers to pay all Social Security benefits since that date plus taxes to build up a surplus that will soon reach $3 trillion to pay their future benefits "has no real funds" and only an "economically useless" .... "moral" claim on the U.S. government.
Sloan and all the other foes of Social Security should stand reminded that the trust fund is the sovereign debt of the United States government and has at least the same value as such debt held by the governments of China, Japan, Great Britain and other investors at home and around the world.
To state, as Sloan does in the Washington Post today, that the Social Security trust fund is worthless, is to endanger far more than the hard-earned benefits of American workers, it is to cast into doubt the very survival of our country as a capitalist constitutional democracy.
Thursday, November 11, 2010
Is Social Security a Pension Plan?
Floyd Norris writing in the New York Times on November 5, 2010 asks "Is Social Security a pension plan?" and answers "No." He supports his answer by noting that when Social Security was established (in 1935 in response to the Great Depression) it immediately paid benefits to individuals who had not paid Social Security taxes. Norris infers these initial recipients received a windfall benefit which forever taints as welfare the benefits of future Social Security recipients, which are fully earned by their social security tax payments. Yes, Mr. Norris, Social Security is a genuine pension plan with workers and employers fully funding the benefits paid to the workers in their retirement.
In fact, the government has collected approximately 2 trillion dollars more in Social Security taxes than it has thus far paid out, insuring that the Social Security system without any increases in taxes or reductions in benefits or improvements in US economic growth, will be fully funded for the next 30 years. Moreover, if average future US economic growth were to even modestly exceed the worst case projections of US growth used to calculate the 30 year horizon, the unchanged current system would be fully funded for the next 75 years. This represents a government fiscal policy of unprecedented and unmatched success, revealing talk of a Social Security funding "crisis" as insidious disinformation.
By contrast, trillions of dollars have been and are being spent for our wars on "terror" and in Iraq and Afghanistan without any funds being raised to pay for them. These huge, unfunded war costs are the cause of our fiscal crisis, not Social Security.
Of course, there is a problem with future Social Security funding. The 2 trillion dollar surplus in Social Security taxes which by law may be spent only on Social Security benefits, have been "borrowed" by the government to partially offset the huge budget deficits caused by simultaneously fighting wars and cutting taxes. In return, the Social Security trust fund has received U.S. government treasury bonds. Those who claim Social Security faces a funding crisis describe these bonds as "just paper" or as an "imaginary" trust fund. But these bonds are also held by China, Japan and other governments and individual investors in the U.S. and around the world. It is inconceivable that the U.S. would default on this sovereign debt including that held by the Social Security trust fund.
In the absence of an unthinkable default, the bonds held by the Social Security trust fund must be made good by either raising taxes or cutting Social Security benefits. Mr. Norris favors cutting benefits through a means test. High earners (he uses Warren Buffet as an example) would receive reduced benefits. Social
Security benefits are already justifiably structured to favor low wage earners and Mr. Norris' suggestion would not materially change it.
Mr. Norris does, however, raise a much more serious question. He asks,"If government spending must be reduced in some areas to deal with the soaring level of national debt, would it make sense to cut spending that benefits those who need it least?" Norris' puny answer to reduce Social Security benefits for high earners ignores the reality that the average Social Security benefit is slightly more than $1000 per month and the highest is only $2500 per month. These are not deep pockets suitable for reducing "soaring national debt". Norris joins the consensus among the wealthiest Americans that the place to balance the budget is on the backs of citizens with the lowest incomes in the country which includes almost all Social Security recipients.
The answer to Norris' question is, yes, of course, cut spending on "those who need it least." Most urgently that includes hedge fund managers with multi-billion dollar annual salaries paying taxes at a rate barely above payroll tax rates. If this country desperately needs to reduce its debt and deficit and make good on the bonds held by the Social Security trust fund, begin by taxing all income at earned income rates by eliminating the tax expenditure entirely for capital gains and dividends which go to those who clearly "need it least."
Maybe soon we will see articles in the New York Times truthfully and informatively reporting that Social Security is fiscally sound and that the Departments of Defence and Homeland Security and the Office of the Director of National Intelligence are bankrupt.
In fact, the government has collected approximately 2 trillion dollars more in Social Security taxes than it has thus far paid out, insuring that the Social Security system without any increases in taxes or reductions in benefits or improvements in US economic growth, will be fully funded for the next 30 years. Moreover, if average future US economic growth were to even modestly exceed the worst case projections of US growth used to calculate the 30 year horizon, the unchanged current system would be fully funded for the next 75 years. This represents a government fiscal policy of unprecedented and unmatched success, revealing talk of a Social Security funding "crisis" as insidious disinformation.
By contrast, trillions of dollars have been and are being spent for our wars on "terror" and in Iraq and Afghanistan without any funds being raised to pay for them. These huge, unfunded war costs are the cause of our fiscal crisis, not Social Security.
Of course, there is a problem with future Social Security funding. The 2 trillion dollar surplus in Social Security taxes which by law may be spent only on Social Security benefits, have been "borrowed" by the government to partially offset the huge budget deficits caused by simultaneously fighting wars and cutting taxes. In return, the Social Security trust fund has received U.S. government treasury bonds. Those who claim Social Security faces a funding crisis describe these bonds as "just paper" or as an "imaginary" trust fund. But these bonds are also held by China, Japan and other governments and individual investors in the U.S. and around the world. It is inconceivable that the U.S. would default on this sovereign debt including that held by the Social Security trust fund.
In the absence of an unthinkable default, the bonds held by the Social Security trust fund must be made good by either raising taxes or cutting Social Security benefits. Mr. Norris favors cutting benefits through a means test. High earners (he uses Warren Buffet as an example) would receive reduced benefits. Social
Security benefits are already justifiably structured to favor low wage earners and Mr. Norris' suggestion would not materially change it.
Mr. Norris does, however, raise a much more serious question. He asks,"If government spending must be reduced in some areas to deal with the soaring level of national debt, would it make sense to cut spending that benefits those who need it least?" Norris' puny answer to reduce Social Security benefits for high earners ignores the reality that the average Social Security benefit is slightly more than $1000 per month and the highest is only $2500 per month. These are not deep pockets suitable for reducing "soaring national debt". Norris joins the consensus among the wealthiest Americans that the place to balance the budget is on the backs of citizens with the lowest incomes in the country which includes almost all Social Security recipients.
The answer to Norris' question is, yes, of course, cut spending on "those who need it least." Most urgently that includes hedge fund managers with multi-billion dollar annual salaries paying taxes at a rate barely above payroll tax rates. If this country desperately needs to reduce its debt and deficit and make good on the bonds held by the Social Security trust fund, begin by taxing all income at earned income rates by eliminating the tax expenditure entirely for capital gains and dividends which go to those who clearly "need it least."
Maybe soon we will see articles in the New York Times truthfully and informatively reporting that Social Security is fiscally sound and that the Departments of Defence and Homeland Security and the Office of the Director of National Intelligence are bankrupt.
Sunday, April 18, 2010
Understand Goldman Sachs
Grumpy highly recommends you listen to last week's This American Life:
http://www.thisamericanlife.org/radio-archives/episode/405/inside-job
http://www.thisamericanlife.org/radio-archives/episode/405/inside-job
Tuesday, April 13, 2010
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