Something that has been on my mind lately is our Social Security System. The government demands that we give 6.2% of our earned income and that our employers contribute 6.2% of what they pay us to a fund that will then pay benefits to us upon reaching a retirement age. If you are self-employed, like my wife, then you and your employer are the same person so you pay a total of 12.4% to the cause.
Maybe I’ve been thinking about it because time is coming closer for me to collect and there is talk about it being the cause of our federal deficit, that it is unsustainable and that benefits will have to be cut. There was a time when I would have foregone any of the benefits I paid into Social Security to secure my parents continuing to receive benefits and for my children not to be saddled with pouring a significant part of their income into a program, I’m told wouldn’t be around for them. I no longer feel that way.
Now I think it is a worthy program to save.
Okay, so now my ox is being gored. I’ll accept that as being the reason I’m becoming more concerned about the program but that isn’t the whole reason for me doing an about-face and believing it should be saved. No, the reason for my changing my mind is that I actually did more research into the program, how it really works and, most of all, how it really is funded.
Social Security and Medicare are funded by their own special tax. None of the money that is taxed for Social Security can be used for any other purpose. If it is then it is a loan and must be paid back. While there can be all sorts of arguments made for whether or not there is an actual Social Security trust fund it can not be denied that each individual with a Social Security number has an account that keeps track of every penny credited to that individual. That money is to pay for the individual’s benefits and there is no need for another tax to do that.
Benefits paid to the individual must be made available to that individual because those benefits have been paid for. If the government borrowed the money from Social Security for something else paying back the loan isn’t what’s causing that deficit and politicians should stop insinuating that it is. Social Security is an entitlement because I am entitled to get what I paid for.
Now I will agree that Social Security is somewhat of a Ponzi scheme in that it depends on there being enough workers in the workforce making enough of a salary to pay the benefits of the current retirees. In 2010, I think, Social Security tax income first failed to meet the full benefit requirements and surplus dollars started being used to supplement those payments. A summary of the Social Security Administrations Trustee report can tell you more about this.
So making some changes to funding Social Security is necessary. One change could be to raise the cap. Currently workers pay into Social Security only until their income reaches “the cap.” That cap for 2015 is $118,500. Any income above that amount is not taxed by Social Security. Let me suggest raising that cap to $250,000 but start lowering the tax rate on it starting at the $118,500 that is the current cap.
Let’s face it, many people have prosperous years and years that aren’t so prosperous. Placing a cap on their Social Security contribution also places a cap on their benefits. That’s fine for a steady earner but for those not so steady earners, those who have good years and bad years, the cap limits their good years from averaging out their lean years in calculating their benefits.
I would also consider looking at unearned income as a possible source of funding Social Security. Yeah, I understand that under many circumstances all that would manage to do would be to hurt those you are trying to help but I’m thinking that some formula could be figured out to fairly tax this income for the Social Security Administration.
So what brought this up? Mother Jones wrote an article on Elizabeth Warren taking the offensive on Social Security expansion. I’m generally in disagreement with Mother Jones and I think Elizabeth Warren is more an opportunist than the populist she wants us to see her as. Still there is a lot to what she says here. I definitely don’t believe the conservative line (Republican or Democrat) on Social Security. There is no way you can convince me that the program I’m paying directly into is the fault of our Nation’s deficit spending, especially when we are still showing a surplus of funds in the accounts.
What do I want to do about this? I want to make saving Social Security and expanding the program through self-sustaining funding a grassroots movement that can not be ignored by right wing politicians. I want to see Ted Cruz and Rand Paul take up this unlikely for them issue and make it their own.
I’ll talk more about why tomorrow.