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.
