Problems We Know How to Solve, “Social Security”

Social Security hits the ripe old age of 75 this year. Wingnuts on the left and right are sounding the alarm and coming up with ways to save it, threats to shut it down, everything but the obvious. Let’s begin by putting to bed forever the myth that Social Security and its brother Medicare are insurance policies. While it’s true that like an insurance policy these government programs take money in from a large group and pay it out when members of the group hit certain metrics. And that you might collect more or less than you pay into it. That’s it! End of insurance comparison.

Unlike an insurance policy, your money is not protected by reserve requirements. Nor is it in any special fund should you have need of it. The bucks you and your employer hand over to the feds for Social Security and Medicare go right into the hands of the Congress, and we all know how careful they are with our money. Right!

The solution to keeping these programs solvent is very simple, level the playing field. Certain folks were left out when Social Security was created in the thirties. For those with higher incomes there is a cut off in how much they had to pay each year, currently a little over $100,000 a year. That means the upper middle class and the rich don’t have to pay FICA taxes on much or most of their income.

Another birth defect was equally unintended. The thinking was that many in the public sector -legislative bodies and worker bees at the federal, state and local level- already had pension plans in place. Since it would not be necessary for them to collect from Social Security, there was no reason for them to pay FICA taxes. As it worked out, many of these folks leave public employment in their forties and fifties, their public pensions in place waiting for them to cash in. They move into private sector employment for ten years or more and collect Social Security benefits just like the folks who have been paying in all their working lives.

What has changed? Social Security/Medicare has become an income tax that pays benefits to nearly everyone but collects mainly from the poor and middle class private sector workers. This tax is at the root of the issue that has billionaire Warren Buffet sounding the alarm that he and all of his peers pay a smaller share of their income in taxes than their lowest paid employee. That is clearly wrong as he points out. Exempting certain folks in the public sector is equally wrong.

We can save the Social Security system by making it fair to all. Everyone should pay this tax on every penny of their income. That would be a well deserved birthday gift; fair to everyone at long last.