A proposal for a realistic way to save Social Security and keep the promises made to the workers of America when the program was first put into effect.
A: For every year since the inception of the program:
- Determine the dollar amount of revenue from payroll taxes for that year.
- Determine the amount paid in Benefits for that year.
B: The amount by which (1) exceeds (2) is the Social Security surplus for that year.
- VERY IMPORTANT: ADD this amount to the National Debt. It has been borrowed directly from American workers’ paychecks to pay for other things.
- Calculate interest on this debt, at a modest rate, compounded yearly from the time those taxes were deducted from paychecks until the present. Include this also in the National Debt.
C: These two amounts, calculated for each year of the existence of Social Security, added together, represent the actual present value of the Social Security Trust fund. This is the amount that has been borrowed directly from workers to pay other expenses of the U.S. Government.
(As interest rates have varied widely across time, perhaps it would be equitable to tie the interest portion of this debt to an existing known historical government benchmark, such as the rate on thirty-year bonds, or perhaps the minimum rate charged to students in a given year for the repayment of their loans.)
D: When this calculation has been done for all years up to the present, determine what combination of non-Social Security tax increases and cuts in non-Social Security expenditures will be needed to repay this debt.
To be equitable, any tax increase levied for the purpose of repayment of this debt that was borrowed from workers at the lower end of the income distribution (below the ceiling on income liable for SS taxes) should not come from these same workers, but should come from persons who benefited from those borrowings, namely, those whose taxes were kept artificially low as a result of being subsidized by the paychecks of Social Security taxpayers. That includes high-income-earners, and corporations.
Similarly, any program cuts must come from those parts of Government that those who make Policy do not consider important enough to pay for by raising taxes. In the current ( February 2007) political climate, that apparently includes the military.
Another option would be formalize this Debt by issuing new Government Bonds (borrowing money) for the express purpose of using that borrowed money to establish an actual Trust Fund, ensuring for all to see that this Debt is fully backed by the credit of the United States. This would also make it impossible to continue to hide the true amount of the national debt. Then the question of how to pay those obligations could be dealt with as a separate issue.
What should ABSOLUTELY NOT happen is for the Cash Cow of the Social Security program to be slaughtered as soon as the fresh annual milk of tax surpluses runs dry. Yet this is what some are calling for.
What I mean is this: while the dominant rhetoric has been that SS will “run out of money” as Baby Boomers retire, what will really happen is only that current Social Security revenues will STOP PAYING FOR OTHER THINGS and those parts of the Government that have run up these decades of DEBT TO THE WORKERS will have to start (a) paying their own way with other revenue sources, and (b) REPAYING THE WORKERS as they retire.
This idea that dominates the political rhetoric is based on limiting the view to a “current accounts cash-flow” way of thinking, when only the current year’s receipts are compared with the current year’s outlays. But what needs to be looked at instead is the totals over the life of the program. Only when the cumulative total of amounts paid in benefits approaches the cumulative total of payroll taxes received (plus appropriate interest) will it become legitimate to begin talking about the program “running out of money.” This will not happen for many, many years. Thus, there is no fiscal problem with Social Security; indeed, its surplus has served to solve (and hide from view) the real fiscal problem, which is with the general budget. It is from that general budget, however the funds for it are raised, that the amount that has been raided from Social Security must be repaid.
Finally, it should be clear by now that what needs to be fixed is not Social Security, but the General Fund; that it has been subsidized for far too long on the backs of Social Security taxpayers, who deserve to get their money back when it is due them; and that those who want to default on this obligation are in fact intent on class warfare, an assault on the working class.
On the internet, I rarely shout. But this is waaaay too important to be quiet about.