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.
Subscribe to:
Posts (Atom)