Wednesday, January 26, 2005

Social Security Reform

In the upcoming days, I plan to address several of the issues Republicans - who have the power to set the agenda - are planning to bring before the country these next two years. They include simplifying the tax code, tort and malpractice reform, the creation of health care savings accounts, and others. Today, though, I'm dealing with Social Security/Medicare, since it's the hot-button issue out there.

Republicans are telling us Social Security is about to go down the tubes. Democrats tell us that everything's hunky-dory, so why bother? Of course, we sentient beings realize that neither side is being forthcoming with us. Social Security is in trouble, but it's not immediate trouble. In fact, if medical costs remain inflated, Medicare is likely to go bust before Social Security.

So let's look at the Republicans' plan. They want to divert payroll tax funds into private accounts, essentially setting up a mandatory retirement fund. This will create a $2 trillion cost over the first decade - but alleviating what supporters say will be a $11.2 trillion cost down the road (according to Cato, anyway).

It seems to me, though, that this is a fairly absurd plan. It is a dishonest attempt to gut the Social Security system. If you have it in for Social Security, as Republicans seem to, you should have the courage to eliminate the payroll tax and do away with the whole system. As it is, Republicans have come up with something that doesn't make a whole lot of sense to me. Who's going to manage these accounts, anyway? If we're going to manage them ourselves, why not just give us a payroll tax cut and let us do what we want with the money we get? And what sense would it make to have the government manage them? Couldn't the government just start investing money anyway without all this hullaballoo about "starting private accounts"?

(Of course, because of our deficit, that would lead to the somewhat amusing situation of our government issuing bonds to get money to invest. I wonder what would happen if the government invested in its own bonds - would everything disappear in a puff of logic, as Douglas Adams would say?)

It seems to me there are solutions that allow us to save Social Security without destroying it. My favorite idea is reorganizing the ridiculously regressive payroll tax, thus making the system fairer and raising the money to save the system. Right now, Social Security is an upward redistribution scheme - taking money from the working class and giving it to the richest segment of the population. Another possibility is to cut benefits to the financially independent elderly, making Social Security a need-based program.

Anyway, that's my take on it. More ideas as they come to me.


Anonymous said...

I don't get the republican plan either.

Personally I'm in favor obliterating the system entirely. And if you're concerned about this solution's impact on the people dependant on the system now, Harry Browne had proposed a solution to alleviate those concerns.

As far as i'm concerned, any republican or democrat proposal for "reform" will simply mean more money sucked out of us that could have been used to secure our own retirements. Like you said, they are not forthcoming of the actual goings on of the social security system and never will be (remember when they tried to give the impression the money put in was in a "lockbox"). I'd much rather the system get blown up, even if it means screwing retirees now, because if it isn't, then our generation is the one getting screwed instead.

- Miguel

Mike said...

The thing people don't seem to realize is that when Social Security began, it was never designed to be a permanent institution. But yes, the payroll tax does need just a bit of tweaking. The need-based solution also seems to make sense, but the trouble there is entitlement. Those who least have need of Social Security payments are also generally those who put the most in, and they feel (not without reason) that they deserve them in return.

I say we listen to Tom Brokaw. If the generation currently receiving the bulk of Social Security really is "the greatest generation", then let's just end it now and they can suck it up. (I'm mostly kidding.)