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 A Common-Sense Approach to Social SecurityPosted on Aug 4, 2008By Marie Cocco In this summer of our economic discontent, it isn’t necessary to manufacture a financial crisis or to make political hash out of discussing a nonexistent one. So I’m baffled at why the subject of Social Security keeps popping up in the presidential campaign, and all the more so because neither Republican John McCain nor Democrat Barack Obama can manage to talk coherently about it. McCain is guilty of head-spinning turns. Having once been a supporter of partially privatizing the vast retirement and social insurance system, McCain has been more consistent during the campaign in supporting a bipartisan panel similar to the 1983 Greenspan Commission to work out future financing problems. Everything, McCain said, has to be “on the table.” Predictably, this bit of straight talk raised the hackles of the conservative anti-tax lobby—always antagonistic toward McCain. So McCain switched back to a strict anti-tax rhetoric, but in almost the same breath said again that he would support a bipartisan commission that looks at all options. Got all that? More consistent, but no more comprehensible, is Obama’s idea of creating a “doughnut hole” in the payroll tax structure that supports Social Security. Currently, payroll taxes are capped at earnings of $102,000—that is, someone earning more than that does not pay Social Security taxes on the rest of his or her salary. The workers’ eventual benefits also are capped in line with taxes paid. Obama says he would raise taxes to help finance the system, but only on those who earn $250,000 a year or more. His campaign refuses to say what percentage tax increase would be imposed, or even whether it would be a payroll or an income-tax hike. More significantly, the Obama campaign does not discuss what would happen to benefits after such an unprecedented shift in how taxes are levied. Since Social Security’s inception, workers have received benefits that are roughly linked to the taxes they’ve paid into the system. This element of fairness is what keeps the program politically popular, and prevents it from being viewed as welfare. Would some future commission on Social Security go along with adding such complexity—let alone changing the basic bargain that has served the program so well, for so long? Probably not. Luckily, the heat of summer has produced at least one proposal that sheds light, and logic, on the debate. The American Academy of Actuaries—an independent, professional group that has never before endorsed a particular method of bringing Social Security into long-term balance—is calling for an increase in the retirement age. I know this isn’t what people want to hear. Economic stress is so serious now that to mention one more sacrifice is almost too much to bear. As for me, I’ve been working since I was 14 and don’t want to wait a day longer than necessary to retire. The actuaries do not suggest a specific age (the current age to claim full benefits rises gradually to 67 for those born in 1960 and later). Nor do they estimate how much money a gradual increase would save the system. What they do is present a compelling argument that makes far more sense than any politician’s garble. “It’s a demographic solution to a demographic problem,” says Bruce Schobel, who chairs the academy’s retirement security task force. In 1940, a 65-year-old man lived 12 more years, on average, and females lived about 13. By 2007, those figures had reached about 17 years for men and 19 for women. The choice of 65 as the normal retirement age when Social Security was created in 1935 was driven entirely by cost estimates, Schobel says, and 65 was a compromise. The only change in the normal retirement age since then was the gradual boost to 67, enacted in 1983. Privatizing Social Security sets up clear winners and losers, harming women and low-wage workers in particular. Raising taxes through Obama’s “doughnut hole” produces different classes of Social Security taxpayers and beneficiaries, fundamentally changing the nature of the program. Tinkering with benefit calculations has different impacts on various groups of workers. But if we want to keep Social Security fair, if we want a long-term solution to treat all recipients as equally as possible, and if we want to do it in a way that is straightforward and understandable—not so convoluted that few could understand how the change would affect them—there is solid reasoning, and not political sleight of hand, behind the actuaries’ plan. Elsewhere: . CommentsAre you a Truthdig member yet? Login now, or register with Truthdig. Add Your Comment
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By GW=MCHammered, August 6, 2008 at 6:41 pm #
(Unregistered commenter)
Living longer doesn’t take into account our obesity, diabetes and new found Aids epidemic. Looking at historic figures’ lifespans, is the general populace really living longer? Maybe those that would have died earlier from of cancer or heart attacks but not so much Average Joe. This reads like today’s obit:
Benjamin Franklin (1706-1790, 84)
George Washington (17321799, 67)
Plato (423BC-347BC, 76)
Voltaire (1694-1778, 83)
Beethoven (1770-1827, 56)
Socrates (469BC-399BC, 70)
Confucius (551BC-479BC, 72)
Sir Isaac Newton (1643-1727, 84)
Albert Einstein (1879-1955, 76)
Pythagoras of Samos (580BC-500BC, 80)
As for Social Security, the neocons and their nwo dogs are after it. I want a buy-out package now just as corporations are packaging-out their employees.
Report thisBy Blackspeare, August 6, 2008 at 1:32 pm #
Lefty…
Its not nice to call people names, but you are right on the money. Eliminate the cap, reduce the rate and you’ll have a well financed SS that will not have to raise the retirement age can offer more benefits——like I said elsewhere—-do the most good for the most people.
Report thisBy Louise, August 6, 2008 at 6:24 am #
Oh my.
Pam, how come you call yourself “hippy” when in reality you are obviously conservative to the core?
Lady count your blessings. You never know, someday you may be begging for help in this lop-sided feed the rich and starve the poor society we live in.
You wanna get mad about welfare moms? How about Cindy McCain? Now there’s a lady who has moocho wealth, and a whole bunch of connections, but has no problem sharing her husbands Social Security. Which by the way is a whole lot higher than most recipients get. And I’m sure she has no problem grubbing up to the front of the line every time congress gives the wealthy another tax break.
Welfare? Yeh. Corporate Welfare ... it’s broken the bank!
But still, a greedy group of non-servers called congress rushes to the fore to save the banks!
I wont go on ... I think I’m going to lose my breakfast!
Report thisBy John Graf, August 6, 2008 at 6:17 am #
(Unregistered commenter)
For another view on the extent to which Social Security is in “crisis,” commentator Cocco would do well to examine the work of Dean Baker and Mark Weisbrot, co-authors of “Social Security, The Phony Crisis.” Some of their more recent commentary on the subject, from the last couple of years, is available at:
http://www.cepr.net/index.php/component/option,com_ issues/task,view_issue/issue,19/Itemid,22/
Report thisBy hippy pam, August 6, 2008 at 4:54 am #
Again-there is an EXTREMELY BIG DIFFERENCE in the monies paid by THE RICH as opposed to the monies paid by THE MIDDLE[i.e. working]CLASS-who are the ones-by the way-PAYING THE TAXES SO THAT WALFARE MOTHERS CAN SIT ON THEIR ASSES-AT HOME-WITH KIDS BY SEVERAL FATHERS[as long as her baby daddy don’t live in the home]-AND SHE GETS FOOD STAMPS AND HEALTH CARE…And-AS SOON AS HER DAUGHTER IS OLD ENOUGH TO BREED-IT STARTS OVER AGAIN-[I’m gonna draw some flak from this.I do understand-poverty areas-schools with lower scholastic averages-whatever]-there are MANY PROBLEMS-MANY of THIS COUNTRIES CITIZENS[not all]DO NOT HAVE ANY HONOR-OR HARD WORK ETHICS[there ARE jobs out there]-Our kids have been raised to BELIEVE THEY GOT IT COMING WITH NO EFFORT ON THEIR PART…
Report thisBy Sang Ze, August 6, 2008 at 4:12 am #
(Unregistered commenter)
Have no fear, my friends. The people you elected will find many intriguing ways to stuff their pockets with your hard-earned money. They’ve been working at it for years, and are getting better and better - and richer.
Report thisBy Lucienette, August 6, 2008 at 2:59 am #
(Unregistered commenter)
I am pretty sure there will be enough social security for all the baby boomers and those who follow. Most of the boomers have to work until the day they die so they cannot collect. The other half will die from fear of being homeless. So the wealthy will live with their tax cuts in tact.
Report thisBy Big B, August 5, 2008 at 3:21 pm #
Just as with our bankrupt private medical system, both candidates are again ignoring the obvious, but politically painful solutions. They are, increase revenue by a dramatic tax increase that includes taxing all income, private and corporate, and the centralization (socialization) of our healthcare system, which is forever linked to our social security system.
Report thisOur major corporations (who have helped create these disasters) would welcome having to write only one check to the fed every year in lieu of managing their own medical and retirement plans. The people would like it because the element of suprise on retirement day would be eliminated. Everyone would know what they were going to get long before they got it.
No, it’s not communism, it’s smart.
By Amadeo Lese, August 5, 2008 at 10:43 am #
(Unregistered commenter)
How can John McCain down grade Social Security?
Report thisWhile he is employed as a full time Senator, drawing a full salary, getting a full pension from the Navy, and also get 26 thousand dollars from Social Security.
He is not retired and still dips, how many of these double dippers are there in our Government employe or any other employes.
He is a true Republican, gets all he can for himself and to the devil with the rest of the people who did pay into the system all their working years.
Who changed the law when a person on Social Security retired and worked another job, made over a certain amount would have to repair Social Security 1 dollar for every 3 dollars they earn over the amount allowed?
Our Electee Politicians are some of the most greedy people of the world.
Please someone tell me that McCain is the only one in office collecting Social Security.
By cyrena, August 5, 2008 at 1:16 am #
Here we go again, part 1 of 2 of the most nonsensical
I swear I started not to read this piece..as soon as I saw, Marie Cocco, Common Sense, and Social Security, I knew it would be anything BUT..common sense, about a subject that is a painfully acute, for millions of Americans. Miss Marie, why are you so DENSE?
Where do you get your information from? Decade old archives? Heres what John McCain has to say about Social Security Marie. I dont know where you got *your* drivel about a bipartisan commission..
Here’s a Little Straight Talk, My Friends. John McCain Hates Social Security
Thursday 10 July 2008
by: Bill Scher, The Campaign for America’s Future
John McCain declares Social Security to be an “absolute disgrace.”
Sen. John McCain, I’m one of your friends, right? The kind of friend who can handle some of your special brand of Straight Talk.
So why won’t you just tell me you hate Social Security?
Twice this week you lambasted the founding principle of Social Security, that, as you described, “we are paying present-day retirees with the taxes paid by young workers in America today.” In separate appearances, you called the way Social Security has been structured for more than 70 years an “absolute disgrace,” and a “broken” system.
Twice! You even called that pronouncement “Straight Talk.” That’s no slip of the tongue. You must mean it.”
Read the rest Miss Marie. Update your database.
http://www.truthout.org/article/john-mccain-hates-soci al-security
And, what is it that you DONT get, about this:
More consistent, but no more comprehensible, is Obamas idea of creating a doughnut hole in the payroll tax structure that supports Social Security. Currently, payroll taxes are capped at earnings of $102,000that is, someone earning more than that does not pay Social Security taxes on the rest of his or her salary. The workers eventual benefits also are capped in line with taxes paid.
So far so good Marie. This is EXACTLY as it has been, for nearly two decades now..maybe longer. When the employee reaches $102k..for THAT CALANDER YEAR, the remaining paychecks for the rest of the year, do-not-collect the SS withholding. And yes, since our SS retirement income is roughly correlated with what weve paid into the system, an employees eventual benefits are capped, BASED ON WHAT HE/SHE HAS PAID INTO IT! No brainer there.
Consequently, if a person earning MORE than that, fails to independently save..on their own, a portion of the excess of that $102K, they are gonna have a really SERIOUS adjustment crises, when they retire and start collecting based only on what theyve paid into the system, and not what theyve actually EARNED. Thats not so cool Marie, because WITH INFLATION, what they earned, THEN, aint gonna cut it for what stuff costs, NOW. Meantime, even if they ARE saving the extra in PRIVATE investment accounts, thats not doing a thing to help the system pay for those who are collecting now.
Obama says he would raise taxes to help finance the system, but only on those who earn $250,000 a year or more. His campaign refuses to say what percentage tax increase would be imposed, or even whether it would be a payroll or an income-tax hike. More significantly, the Obama campaign does not discuss what would happen to benefits after such an unprecedented shift in how taxes are levied.
Report thisObamas campaign *refuses to say*? Did you ASK Marie? And they just ‘refused’ to tell you what you should already understand? And did you figure out that first of all, OF COURSE IT WOULD BE A PAYROLL TAX? The worker has to get credit for what they pay into the system, and the man said it was to beef up the system for those collecting now, as these same workers will expect to collect later! Jesus Christ!
By cyrena, August 5, 2008 at 1:13 am #
Part 2 of 2 of the most nonsensical..
WHY do you suppose that if the worker doesnt pay any SS tax on the difference between $102K and $250K, that the *percentage* ONCE IT KICKS BACK IN AT $250k, is gonna be ANY DIFFERENT that what it was before?
And why do you expect a CAMPAIGN, to already have these percentages or any of the other specifics engraved in stone, at least 6 full months before the guy takes office? Do you not suspect that the rapidly declining value of the USD, vis-à-vis inflation and the Great Heist that has left us virtually bankrupt, might not have something to do with that?
Why oh why do I persecute myself reading this nonsensical stuff?
Just another example of how everything means the opposite these days. Common sense is exactly the opposite in this total lack of it.
BTW Marie, the increase in the retirement age didnt just become a topic of conversation, It was increased from 65 to 67 over a decade ago for anyone born after 1960. NOT that it matters, because for nearly the ENTIRE baby-boomer generation, that age is directly correlation with individual retirement plans, that combine age with length of service.
Now of course since so many of those individual retirement plans have bottomed out, as a result of corruption and other corporate bankruptcies, the average retiree is now SCREWED!! So while you appear to be too dense to comprehend it, Obamas plan would help current retirees, and provide some security to those who will retire in the future.
If anything should probably be adjusted it should be the parameters of the donut hole. In this formula, were looking at a difference of nearly $150K, where the worker doesnt pay into the system, on any of that money. But before we start messing around with that part, maybe Obama should go after the multi jillioniers, who dont pay even as much as the rest of us do.
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