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Rethinking Social Security – Without Higher Taxes

social security

Social Security is among the least favorite topics for politicians – in either party.  Democrats often raise it to justify new taxes and accuse Republicans of planning cuts, while Republicans stress solvency. 

Here is some truth.  Younger Americans tend not to think about it, most older Americans depend on it.  As the number of eligible Americans swells, pressure on Congress to keep it solvent rises.  Congress hates hard decisions.  Accordingly, members agree on the problem, put their head in the sand on solutions.

That cannot continue.  By varying estimates, Social Security will either continue to be mismanaged and collapse by 2034, or responsible, long-term thinkers will take the helm, avoiding the iceberg.

While few want to think about it, assuring sustained solvency for Social Security is complex, politically difficult, and yet also essential.  No one wants to wake up one morning to headlines saying no check, federal commitment has lapsed.

Notably, just as hard cases make bad law, so do crises. A balanced, fiscally responsible solution to Social Security insolvency is possible, but that takes forethought – not massive cuts or new taxes. 

Another untenable idea was lofted last week by Democratic Congressman John Larson.  His solution is new taxes. His plan – without being moderated – would effectively raise taxes on those who work hardest, especially small businesses, gradually spreading them outward to more employees and employers. 

The goal appears to be a slight-of-hand, higher taxes obscured by higher benefits.  Just boost federal revenues, buying off Republican members with higher benefits to some constituents.  Missing are ways to raise labor participation of older Americans, reward saving and working, prompt younger workers to open private saving plans. 

Haven’t we heard this before?  Yes, this has been the chant for 80 years. Give me your money, give me more, grow the federal government and we promise to give you a piece of the action. 

Buying votes with empty promises, centralizing power at the federal level, and seeding a progressively Socialist state is not new.  The idea of raising taxes, year over year, on those who work – to finance Congress – is also not new.

In August 1935, Franklin Delano Roosevelt bemoaned the government could not assure “100 percent of the population against 100 percent of the hazards and vicissitudes of life,” a goal that would obviously be unattainable but lodge enormous power in the Government, usurping personal responsibility.

Instead, FDR pressed Social Security, having the Federal Government do what people might not for themselves – save.  He argued people would “reap direct benefits,” drawing from a bottomless well.

Today, while Congress bickers over discretionary spending, three-quarters of every tax dollar goes to entitlements.  Sadly, while we paid into the system, the return is anemic.  The federal government long ago spent our money.  

That is where the Larson promise picks up – He offers another chance for the big payout through higher taxes.  It puts one in mind of Lucy offering Charlie Brown another swat at the football, which she will again pull away.

So, what is the answer?  Groups like AMAC offer – in detail, with balance and respect for those who have paid in, but no false promises – a way forward.

Keeping Social Security solvent did not worry FDR.  It should us.  A way forward was mapped by AMAC in March of 2019.  It does not involve raising taxes.

In short, the goal should not be pie-in-the-sky promises, but a “path to long term … trust fund solvency without raising taxes.”  The 2018 Report of the Social Security Trustees said, absent reform, the “trust fund reserves become depleted by 2034.”   That should be spur enough.  

The answer must be tied to economic growth, gradual adjustments and realism, not to slap-dash taxes, eroding private sector growth, higher levels of dependency, and fairytale windfalls.

Specifically, AMAC offered balance with integrity, their top five recommendations:  Prioritize solvency, not revenue hikes for elevated benefits.  If Congress wants to increase benefits for low earners, find offsets in the bill. Recognize how much Americans have paid into the system; work to treat earners more equally.  Offer incentives that permit earners higher retirement income, with less federal dependency. Assure long-term Social Security solvency by enabling states to improve fiscal management.

In short, guarantee solvency but do not do so by raising taxes.  COLAs could be tagged to Adjusted Gross Income (AGI).  Social Security benefits should be excluded from an individual’s gross income, eliminating “double taxation.” 

If FDR promised a Depression-era safety net, lets enhance survivor benefits – perhaps make adjustments with an age setback for new retirees, even as percentages surrounding early retirement remain unchanged.  

In short, while no one likes to talk about Social Security, “AMAC believes that the implementation of key structural reforms enacted by Congress provides the opportunity to evaluate their efficacy and sufficiency for long term solvency” of the Social Security Trust funds. 

To get to there, we should take taxes off the table, think in terms of perpetuating our high growth economy, remember Social Security was born in the Great Depression, when unemployment levels were off the charts. Today’s economy is not that one.  Not needed are higher taxes on young families – acting responsibly and trying to save for retirement. 

Moreover, we should generally want higher levels of labor participation, not more incentives to leave the labor market. That is neither a fruitful national objective – or good reason to raise taxes.

Balance and long-term thinking are the missing pieces.  Until we get real about what we want and why, we will continue to snarl at each other and blame each other for snarling.  One thing we all know:  Like open-ended tax hikes, that is no solution.

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Bob Evans

Why don’t we just invest social security for good returns, just as the Canadian’s do. Do not put the money into the general fund where it is a political target.

J wolf

I just wander if a portion of SS had been invested in stock market the last 3 years what it would look like, I know of Penion’s that started doing that some 40 something years ago and are in the top 10% of funds in the country today.

Terry G.

Since the SSA has become a very low paying investment PONZI scheme run by the government the following needs to be implemented: First, the government cannot be allowed to touch SSA $….EVER. It should be overseen by an independent management team. Second, the $ needs to be invested and credited to each individual. Third, deductions should be on all income not to a limited upper amount as now. Fourth, do away with the present retirement program of all government employees and officials and require them to participate in the SSA. No separate retirement system as now. They are servants of the people not princes and princesses.

Pat R

The first thing that MUST BE DONE before any real fix should be instituted is to legally lock up the Soc Sec Trust Fund from Congress. It will still be under a government agency but without any Congressional ability to tamper with it’s usage whatsoever.

I Am M.O.TheR.

No one asks the important question: Where is the missing $2 Trillion? Of course SS is going broke and Medicare costs are continually being shifted onto the patient just like Obamacare did! If you want to better your retirement funds and get free healthcare, go to Mexico, throw away your ID card and come back across the border claiming asylum! Then the criminal elitist Congress will bend over backwards to take care of you.

Tom Willenbring

1, SSA payments into the system top out at a certain level. While I enjoyed that cap on FICA taxes when it happened around late October each year, it was not required for me to pay my bills and save some for my retirement years. To help regain solvency of this system so vital to some retirees, I think high wage earners could continue to pay into the system even after reaching the magic maximum earnings threshold, and beyond. 2, Double taxation is not fair! One bite of our earnings apple is enough. Exclude SSA benefits from the taxation puzzle. 3, Give wage earners the option of investing in private plans. SSA has been proven to fail in its main mission of providing retirement funds. Instead, it has proven to provide less than what is needed for the beneficiaries to exist above the poverty level. 4, Now that the USA… Read more »

Meri Coury

I liked the idea some years ago whereas we STOP putting our retirement into social security and PRIVATIZE it so the federal government can’t get their sweaty palms on it! I do not understand why Democrats don’t like that idea. I guess they like being broke.

Mary Lou Hults

I worked for SSA for 21 years as a technical expert. Several times congressman hosted town hall meetings. I talked to them about several ways to save money, but none if them were really wanting to listen. They said my ideas wouldn’t save enough. Even saving several million seems a goid start.
Anyway, I’m sure anyone who did my job could suggest several ways to help keep SSA solvent longer. Those measured coupled with the “experts” who do this for a living should be able to help.

Dee

When SS was passed; the law said it could not be taxed. That went down the tubes but the taxed money doesn’t go back into the SS fund like it should it is spent by Congress in the budget. Both parties have been stealing it for other purposes since 1965 including setting up and funding the Peace Corp. There are IOUs in the pot. it’s time those IOUs are repaid and if they have to take the Congressional pension plan and convert it to SS so be it. They also need to take off the yearly limit and pay the tax all year like most of us do but CEOs are done by 2/1. Now that entire fund is OUR money only. We paid the FICA taxes in good faith as insurance for our retirement and it was matched dollar for dollar by our employers in our name. We ARE… Read more »

CowboyB

First, put my retirement age back to 65! Replace the $2trillion, swiped by politicians, by taking a cut of oil profits that someone is getting. I don’t mean the company producing the oil, I mean the country of America…if we are indeed the world’s biggest or second biggest energy producer…then sell some…put it in a Social Security fund/safe investment…that cannot be stolen by politicians! (Use the rest to pay down the deficit!)
Stop punishing ME…by taxing me more, moving the goal post by age, or yakking about cutting benefits!
We should not be in this position!
DANG A BUNCH OF POLITICAL HACKS! This can be fixed if brave an honest elected officials get after it!

SweetLadyMary

How about paying back the money that the federal government has taken from our social security fund and used for other government activities? Now they are talking about providing medicare for illegals. I personally have worked for many years throughout my life and so I have invested in the social security program. Now that it is time for me to take some of the money that I invested, they are talking about how they are going to deal with the shortfall. If I had invested that same amount of money in the market, I would have much more than I have now. My social security check is not an entitlement, it is money that I put into the system that I am now accessing. It was earned.

Judy ball

SS. Is just not enough to live on. What we had saved went during the Obama years. Because our business went downhill. By the time we pay our monthly bills we have less than $300 for gas and groceries for the month. My husband has to take extra work to pay for car insurance and repairs.
Thank God he is still able to work.

LTC S

Unfortunately, this is a loose/loose situation. Social Security was never meant to be an entitlement program. It was meant to be a welfare program for the destitute, extremely poor and the disabled. So how do we get this back on track? I think we can do this by removing the entitlement part from SS and make it a separate program. Similar to an encouraged or mandatory Thrift Savings Program. You have to pay into the program to get money out of the program. And you only get out what your account has in it. This way we separate the Social Security Welfare program funding from the Entitlement Program funding completely. The general tax fund will pay for the Social Security Welfare Program (totally separate from the Entitlement Program). You will pay your mandatory entitlement tax separately based on your salary (you and/or your company can pay extra). At age 70… Read more »

Dave

Why is SS listed as an entitlement? We paid into a fund that promised a return on our investment. Does the payment by a company as a dividend considered an entitlement?

Nasty Nat

Politicians have been robbing SS and Medicare for years without even leaving an IOU. They have neglected SS and Medicare for nearly 50 yearsshould have acted 50 years and have little or no interest in making SS or Medicare solvent, since they do not collect SS benefits or are covered by Medicare. They only enjoy stealing funds from both when they’re desperate for money. Put SS and Medicare back in a trust, not the general account and stop taxing SS payments that were paid already.

Howard LAST

Social Security does not need to be fixed; it needs to be repealed outright. The problem is how to make whole all our citizens that had their funds stolen over all these many years. Yes stolen, what else would you call it when something is taken under duress? Don’t pay your FICA and see what happens. There is a simple way to get their money back, just abolish all items in the budget not authorized by the Constitution. This would give better than 90% of the budget available to give their money back with interest. It would have an added benefit of getting Big Brother out of our lives. How many people are aware that Social Security was the idea of Otto Bismarck and that Adolph Hitler refined it? Joe Stalin’s best friend FDR fits right in with these two great humanitarians. Bismarck made the retirement age 65 because most… Read more »

Paul Brixner

I agree with Bob Evans; don’t put Social Security Money in the General Account where our politicians can use it for something other SS payments to those Americans who earned it. Invest SS money to get decent returns with responsible investors.

Glenn Scott

No one should be receiving SS benefits if they didn’t contribute into it.

Kathleen & James Miller

Keep social security relevant! Pay back the
money that Obama took out for Obama stole!!

Penny Webster

Please AMAC get er done!!!!!!