The end of Social Security?Don't reform it, replace it

[papau]

This is the fellow I debated (via phone) on NPR's WBUR "On Point" re his bull shit book "The Coming Generational Storm" where he proclaims a Social Security and Medicare "generational imbalance and the coming demographic/fiscal collision", using numbers from a fellow that he did not even know was not a fully qualified actuary (the half educated/half certified hack to whom Bush gave the title of Chief Actuary of the Social Security System). I guess I did not convince him. The real problem I have with arguing with him is the fact that he is a nice guy and not out to screw the poor and aged! Sigh... :-) Enjoy the article!

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2004/11/21/dont_reform_it_replace_it/

The end of Social Security?
Don't reform it, replace it
By Laurence J. Kotlikoff | November 21, 2004

After a long campaign season of spin, smear, and slogan, we're finally having a serious debate over domestic policy. President Bush has set the agenda -- Social Security's privatization and tax reform. The president wants to cut Social Security's payroll tax and have workers invest their tax cut in stocks and bonds within private accounts. And he wants to replace the federal income tax with a tax on consumption.

Both proposals drive Democrats nuts. In their view, Social Security and the income tax are the only things keeping the elderly out of the poor house and the rich from gaining all the spoils. But Social Security is broke, and the income tax is a mess. So the Democrats must engage and stop treating these institutions like sacred cows.

In his quest to privatize Social Security, the president is poised to support one of three plans developed by his 2001 Commission to Strengthen Social Security. The plans differ in important ways, but each diverts payroll taxes to private accounts. Obviously, this limits Social Security's ability to meet its benefit obligations.

The trillion-dollar question is, thus, how to finance this tax cut, particularly given Social Security's dire financial position. As things now stand, Social Security doesn't need an immediate and permanent tax cut ranging, depending on the plan, from 16 to 33 percent. Instead, it needs an immediate and permanent 28 percent tax hike to cover its short- and long-term benefit commitments.

One way to make up for the loss in revenue from privatization as well as cover the existing revenue shortfall is dramatically but gradually to cut Social Security benefits. Such cuts are part of each of the commission's plans. The commission's report uses artful language to hide this fact. But the proposed cuts are huge. The second plan, for example, indexes the initial receipt of retirement benefits to prices, rather than wages, as is currently the case. Over time, this means that Social Security benefits would replace an ever smaller share of workers' pre-tax wages. In the long run, Social Security would protect those in abject poverty, but that's it.
<snip>

(The rest is long - and I think wrong - but a good read :-) )

Laurence J. Kotlikoff, chairman of the Department of Economics at Boston University, is co-author of "The Coming Generational Storm."

[grease_monkey]

1. increase benefits, lower retirement age and pay for it by income taxes

We could increase benefits, lower the retirement age, and provide all sorts benefits for needy people, if we can increase revenues.
Here is how you do it:
raise the top tax rates on earned and unearned income taxes. No need to raise taxes on working people like those who work in restaurants and shopping malls. These people cannot afford to pay the taxes they already pay. Instead just raise the taxes on high income earners.

2. Remove the cap on the payroll tax. Right now income above 87 is not subbject to the payroll tax. Remove that cap. Subject all earned income to the 8% payroll tax.

Problem solved.

[papau]

2. Remove the cap on the payroll tax? A flat tax that taxed the rich - NEVER

I would add to your thought that the flat tax should treat investment income and wage income equally.

I am tired of wage earners subsidizing the rich who live off their investment earnings - via the GOP's "tax incentives to save" programs.

[PsN2Wind]

3. One of the causes of Social Security problems

is job export. At one time a guy could finish, or even quit high school, go down to the plant where the old man worked, hire on and after 4 years or so of apprenticeship be making a pretty damn good living. Many, if not most of those jobs, where the hypothetical guy I speak of here would have gone to work have gone off shore. Many of these jobs had people whose main qualification was a willingness to work paying at or near the max in FICA. The loss of these well paying jobs, available to semi-skilled workers, means that these people contribute much less.
I would like to see an import tax placed upon foreign manufactured goods equivalent to the FICA that would have been paid if that labor had been performed here and the money realized go into bolstering the current Social Security system.