Fixing Social Security, a long road to travel–raising taxes is not the only answer

The National Commission on Fiscal Responsibility and Reform is looking at ways to fix Social Security; those suggestions are likely to include changes in the benefits and higher taxes as reported in an article in the Wall Street Journal but as usual…

Liberal Democrats are already organizing to head off any proposal that cuts Social Security benefits, including any plan to raise the retirement age. They argue the program’s finances can be fixed with tax increases alone and that benefit cuts would harm low-income seniors who have little savings.

“People would rather pay more or have revenue raised than cut the benefits,” said Rep. Jan Schakowsky (D., Ill.), a commission member. She said she was fairly confident a proposal that included benefit cuts would not garner the needed 14 votes.

Others in Congress want to adjust the cost of living calculation for Social Security, not to make it more reflective of the actual expenses that rise for seniors, but to change it so that the increase is higher than under the current formula.  This is suggested on the basis that the cost of health care and prescription drugs rise more than general CPI.  Excuse me; didn’t we just change Medicare to deal with those issues?

Is the answer to everything to spend more and do so by either raising taxes or increasing deficits?  To stay solvent and profitable private business does all kinds of things it would rather not do, like layoffs, cutting wages, stopping pay raises, suspending 401(k) matches or cutting other benefits.  To the liberal mind, it appears that taking away anything, affordable or not, is unthinkable.

Then there is the issue of raising taxes.  High on the side of possibilities to “fix” Social Security is eliminating the cap on wages subject to the FICA tax, currently $106,800.  Some Democrats are describing the cap as a windfall for the wealthy, not paying their fair share and all that. Instead of the self-sustaining program envision by FDR, we have and will further turn Social Security into a welfare program.  What happens when you keep raising taxes, it seems to me that those taxed have less to spend on goods and services, on home mortgages, on college for their children, on charity, on saving for their retirement and more.  Is that a good thing?

Social Security was never intended to be as expansive as it is or as costly.  In fact, it was intended to be self-funded based on worker contributions.

Fixing Social Security starts with fixing the benefit structure first then looking at the need for additional revenue. For example:

  • The earliest age at which a person can collect Social Security (except for certain cases of disability) should be raised to 65 rather than 62 (even considering the actuarial adjustment made before age 65).
  • The normal retirement age needs to be raised gradually to age 70.
  • The cost of living adjustment needs to be adjusted to reflect the real cost of living that affects seniors.  In addition, the COLA should not apply until a person has been collecting Social Security benefits for five years.
  • The use of Social Security by divorced individuals should be re-evaluated.  Currently several ex-spouses can collect the full benefit earned by one worker.
  • Disability benefits should be evaluated; currently individuals who never contribute to the program can collect full benefits under certain situations.
  • If changes to the program alone cannot fix Social Security, additional taxes should be raised on a uniform basis from all Americans.  That is, lower the percentage from 6.20 [1] to some other amount and apply it to all earnings.
  • Finally, prohibit Congress from making future changes (improvements) unless they are fully funded at the time of enactment.  Simply put that means paying for them with cuts in other areas of SS or immediately enacting tax increases to fully pay for the changes and explain such action to the American people.


[1] The initial tax rate in 1937 was 1.00%

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