Debra Shea wrote:
"It's especially grating because only wages up to $80,400 are taxed for
Social Security, so it's not a program that any of Dubya's pals are putting
much money toward.
Dubya's main concern with this program will be how he can benefit his
wealthy pals and one way is to privatize part of Social Security. So he's
been suggesting that very thing. With that, his pals will not only pay a
relatively tiny amount of tax they can also make money off of the people
paying the most tax. The banking industry will LOVE that!!! "
Well, there may be something to the second paragraph above - depending on
one's definition of privitzation - but the first paragraph sounds pretty
spurious to me. It is true that Social Security taxes in and of themselves
are regressive - lower income people pay a larger percentage of their pay
than higher income people do. However, the benefit formula is significantly
more progressive than the tax is regressive, with the result that Social
Security benefits provide a much bigger bang for the buck to those making
less than the wage base than for those making more than the wage base. This
is especially so for those making much less than the wage base, and for those
who work much less than a full (35 - year) career.
Now I am a pretty conservative guy, Debra - and, as I confessed once before,
an actuary - but I admire the clever structure of our SS system. It goes
something like this:
The lower paid get a good deal, paying in relatively few dollars and taking
out relatively more, but feel good about it since after all they are paying
into the system.
The higher paid get a relatively bad deal, paying in more dollars than they
take out - most of which goes to pay off the past service liabilities of
their parents, who created the system and are really taking out a lot more
dollars than they ever put in in taxes (they were, after all, the 'greatest
generation' ) - but do not really mind getting hosed a bit on this score,
since noone likes to see anyone's parents -especially their own - on the
street. And they do get something out of the system, after all.
The biggest beneficiary of the current Social Security system is the family
structure, however, since non-working spouses ( mostly women ) derive
benefits from the working spouse. In some cases women get even better
benefits based on their limited workforce employment before and after their
child raising years (and their part time efforts during such years). To my
way of thinking, this is good for all of us, since it produces better
balanced kids. Individual accounts cannot come close to replicating this
result, and have numerous other flaws and problems as well. A terrible idea,
really, IMHO.
Now, the trust fund could be invested partly in equities ( a broad market
based index without any political tampering could be selected ) to try to
enhance the earnings of the trust fund. This would please the investment
community less than the individual account approach with 'participant
direction' of accounts, of course. And there are many ways of tweaking the
system - reducing the COLA, increasing the age for full benefits, etc. -
without altering its basic structure.
So who's on the presidential commission that is now recommending individual
accounts ? Well, to name one name back at you, former NY Dem. Sen. Daniel
Patrick Moynihan, who has apparently lost both of his remaining marbles
during his brief retirement. But then again, I am not sure whether he gets
Social Security benefits - was he ever in the workforce ? And the AP story on
this today is just fraught with meaningless statistical citations.
Infuriating. But not as annoying as Bush's stance on this issue. Especially
in the context I noted above about its importance to the family structure.
(See, I was on Gore's side of this issue, but he was just too revolting for
me to vote for).
So since we both prefer SS the way it is rather than the unwise individual
account approach (which is a disaster for women who raise children), let's
not pound away at the $80,400 wage base. If you ask for a bigger hosing,
we'll end up getting individual accounts.
Bob S.
