Wednesday, June 25, 2008

Obama's Social Security Plan

Okay, that's not exactly fair, since he hasn't presented one yet. But he has given us hints, in that he intends to remove the Social Security tax on all of those now paying it, and transfer the entire burden to those making over $250,000 per year. This has the instant appeal of being a 6% tax cut for all those paying the FICA tax presently. Whoo Hoo. How are you going to spend that windfall?
But what is the net effect of using this proposal? Since those making $250k are in the top 1% of all earners, I would have to assume that they will be paying around 30% of their pre-tax income for this tax in order to keep it revenue neutral. Besides, what are they going to do with that approximately $75k anyway? Sure, they might not buy a new car this year causing unemployment in the auto industry, or they may not construct a new house causing further contraction in the construction industry. Or they may not invest it in a company preventing further enhancements to keep the company competitive, allowing all of that business to be speedily and orderly transferred to China. No, the rich won't miss that money.
But we will.
Another problem with this proposal: Does it change the basic social contract? For instance, at the moment everyone who works pays into the Social Security trust fund and expect to receive money back when they retire. The more you make, the more you are able to draw in retirement. But all workers would receive something more than just the equivalent of Social Security Supplemental Income, otherwise known as "federal welfare."
Under Obama's plan, what would be your claim to receive benefits? That you worked? So what, so did everyone else. How about that you deserve it because you were promised it for your entire working career? But the new system would not count for more if you worked hard and made a lot of money. It would be nothing more than welfare. And as such it could be means tested, since you didn't contribute to the plan, but instead relied solely on the contributions of others. (Admittedly, this is when the current workers have cleared out of the way, and the entire burden is financed by the over $250k crowd).
This rending of the social fabric that would turn once proud workers into welfare recipients strikes me as appalling. I can only hope that Obama's comments on his plan carry the same weight as support for Rev. Wright, or NAFTA, or clean campaigning, or campaign finance reform, or . . . well, you get the drift.

6 comments:

Mark T said...

Wow. Start with a false premise, and all that follows is false.

I think that I'll link to this tomorrow. You're a good example.

Steve said...

I look forward to it.

The Viceroy's Fuguestate said...

You don't even have a blog Ralph..

Mark T said...

AH, never mind - I'll just answer you here. Obama's plan is to create a doughnut hole - middle incomes between $102,000 and $250,000 would not pay the tax, while incomes over $250,000 would. It's politically expedient, and addresses a problem we will encounter with Social Security along about 2040 or so, that there is not enough on hand at that time to pay off the remaining baby boomers (I plan to be gone by then).

I was going to write about the deceptive nature of the tax, the way it is used to sap the earning strength of wage earners and self-employed people while exempting investors, the huge deception in claiming that it creates a dedicated revenue stream to fund benefits, about how, under Bush, the Social Security tax has been raised seven times now and he hasn't said a word about it, yada yada ... Your post was riddled with trickle-down mythology, and started with a false premise anyway. Workers earning up to $102,000 would still pay the 14.2% (not 6%) tax anyway.

goof houlihan said...

Yeah, I think the tax, both the employer and the employee tax, should be considered together.

I don't support the donut hole, and I don't spell donut with a ugh, either.

However, I DO support a flat tax on all income, to replace SS and income tax.

And yes, I'd change the contract and means test SS. No point in sending a check for "social security" that gets stashed for next year's trip on the Queen Elizabeth II.

I've never thought taxing young families trying to save for a home, so that the richest segment of our economy, yes, that is the elderly, can take another cruise, is smart economic policy.

Mark T said...

Seems we have grounds for agreement in part. I'll just stop now.