Social Conscience

House Republicans unveiled their budget strategy this week and it was…dramatic. I don’t have my arms around most of it yet (and I may never need to since House budget resolutions are notoriously wacky and are usually dramatically revised when they settle into negotiations with the Senate). But I did a little reading today about the plan for stabilizing Social Security, largely because I was pretty sure they were going to do something unsavory to it. It seems like Republicans don’t like Social Security. I’m not sure why, exactly. Maybe because it’s a tax and they hate taxes? Maybe because it amounts to a forced savings plan for all workers and they think workers would be better off doing their own savings for retirement instead of relying on the government to do it? Maybe because it was FDR’s idea and they want him to be wrong? I just don’t know.

There’s no doubt that Social Security is very expensive but it (almost) pays for itself. Everyone who works puts money into Social Security. The government hands that money over to people who can’t work anymore – the elderly and the disabled. And the social compact is that the government will use your money now for others with the promise that they’ll use the next generation’s money to support you. It’s been going on since 1935 and it works pretty well. It’s not perfect but it’s been more durable than it was intended to be and, for many Americans, it’s the only retirement savings plan they have.

You hear a lot about long-term solvency of the program because there are lots of elderly and disabled people who are entitled to their benefits (because they paid into the system already, doncha know) and the revenue from Social Security taxes is lagging a bit behind expected payouts. There have been a number of solutions proposed to this problem, including the one the House Budget Committee gave us this week. It’s eye crossing in its complexity and deals with lots of math related to age of benefit collection, income level, benefits to be payed out and possibly a partridge in a pear tree. I got a headache and had to lie down midway through the article.

I’m certain that lots of smart people were involved in coming up with all the calculations for this plan and I bet they did their very best to come up with a plan that was all things to all people but really? I think it’s missing a big point. Economist Robert Reich has a plan that solves all the problems of solvency without cutting benefits to anyone or raising the retirement age or raising the percentage of income individuals pay into Social Security. All we need to do is apply the same percentage of taxation to MORE of income.

See, here’s something kind of sneaky about Social Security taxes. You only pay them on the first $106,000 of income. So, if you earn, say, $212,000 per year, you stop paying Social Security taxes in June. It’s like a nice little mid-year pay bump to people who make anything above $106K.  Unfortunately, the way income is distributed now the current cap is insufficient to cover the needed revenue for benefits outlay. According to Reich, raising the cap from $106K to $180K would fix it. And Reich is at least as smart as the people who worked on the budget. Probably smarter.He’s figured out how to be an economist AND be entertaining, after all. That’s no easy feat. There’s a reason economics is called “the dismal science”.

Now, there are those who say we should leave the rich alone and let them keep more of their money to stimulate the economy and yadda yadda yadda. But think about it this way: a minimum wage employee pays Social Security taxes on 100% of their income. A Beverly Hills plastic surgeon clearing a million dollars only pays Social Security taxes on 1/10th of their income. Would paying an additional $4,588 (6.2% of the 74K additional income subject to withholding) hurt the plastic surgeon’s standard of living? It would probably hurt less than than reducing benefits to lower-income workers, especially those who lacked the mean for other retirement savings. A millionaire who has to wait an additional 6 months for a new Mercedes tugs my heart strings a lot less than a retiree trying to figure out how to survive on the $1,009 a month a person who earned $43,000 per year as a worker would be entitled to if they retire in 2050 under this new proposal. $12,108 per year. The poverty line for an individual over 65 is $10,286. So that person will be above the poverty line, but only just. The retired millionaire is probably sill a millionaire.

Maybe I’m a big sap, but I don’t mind paying Social Security taxes because I think they go to a good cause. Even if if I earned $200,000 or $500,000 or $1 million, I’d be ok with paying Social Security on all of it. And the reason I’m ok with it is because I know that it isn’t just about me and how much money I take home in my paycheck. It’s also about Maria who cleans my office and once told a colleague of mine that she couldn’t afford health insurance for her child. If she can’t take care of her current needs, how can we expect her to be saving significantly for the future? She’s an hourly wage-earner, apparently with no benefits and probably without an employer-sponsored retirement plan. Social Security is her best option. I can’t think of a good reason to take even part of it away from her, even if it means a few dollars out of my own pocket every week.

(Oh, and one more thing that I have to add here because I love “teh gays” and I’ve gotta point out injustices they face: if my husband pre-deceases me, I’m entitled to his Social Security benefits. If my lovely reader C’s (Holla Ohio!) partner pre-deceases him, he gets bupkes because federal law prohibits recognition of same-sex partnerships, even if a state recognizes them as marriage, so no Social Security survivor benefits to the widowed spouse. Sucks, doesn’t it?)

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13 comments for “Social Conscience

  1. Ima No. Suzyhomemaker
    April 5, 2011 at 9:31 am

    I’m all in favor of giving gays equal rights under the law, but what about straight couples in long-term relationships? Some states grant common-law status, and some do not. I am not entitled to my 15-year partner’s SS (and vice versa) just by virtue of our disinterest in ceremony.

  2. April 5, 2011 at 10:36 am

    Whoa, so what you’re saying is that AGAIN, the people who earn the most, pay in the least? I had no idea about the Social Security cap.

  3. Rebekah @ Mom-In-A-Million
    April 5, 2011 at 10:53 am

    @Layne, please understand that high-earners only receive benefits scaled to that $106K figure – they don’t get benefits based on non-taxed portion of their income.

  4. April 5, 2011 at 11:16 am

    Politics is giving me a headache these days! Thank for explaining this so I could understand it!

    Xo susie

  5. April 5, 2011 at 12:15 pm

    I had NO IDEA that they stopped taking benefits at a specific income level that is CRIMINAL to those of us who make far below that mark.

  6. Sara
    April 5, 2011 at 1:26 pm

    I don’t know why it surprises me that the government doesn’t recognize when one person comes up with an idea that would work, but it does. Great take on the issue, Rebekah.

  7. amy
    April 5, 2011 at 3:07 pm

    Thanks for enlightening me since I had no idea that there was a salary cap to paying social security. Why do the people who make the most get away with so much…oh yeah fat cat business men who pay the politicos to let them get away with it.

  8. April 5, 2011 at 3:58 pm

    Holler at your boy!

    Also? I’m not super worried about not getting Mike’s Social Security. I have enough life insurance on him so that, when he “accidently” gets pushed down the stairs and “accidently” is repeatedly beaten to death, I won’t need it.

    You know, accidently.

    But, you know, some extra money from the federal government wouldn’t be turned away!

  9. Mary
    April 5, 2011 at 3:58 pm

    That plastic surgeon probably employs at least four or five people and contributes greatly to the economy and pays for his/her own healthcare, education, childcare, etc… We need to stop bashing folks just because they worked hard, got an education and earn a really good living.

    The minimum wage worker is paying $900 into social security, the high achievers are paying almost $6,600 per year. Successful people do pay more taxes, they always have and they always will.

  10. Rebekah @ Mom-In-A-Million
    April 5, 2011 at 4:22 pm

    @Mary The minimum wage worker also spends a greater percentage of personal income on consumable goods than the millionaire. Even the poor contribute to the economy. It’s a question of scale.

    Also, I’m curious. You have commented here before and it’s clear that you disagree with me substantially. Why do you read my blog if you don’t like what I have to say? I write opinions. I’m not a news source so I’m not a great site to come to for research. I understand about enjoying reading opposing viewpoints and I do it myself but I never comment when I disagree with a writer. I just read and move on because I don’t see the point, unless they specifically request dissent. Are you trying to antagonize me? If so, why?

  11. Casey
    April 6, 2011 at 6:19 pm

    First, I heartily hope that you get a response from Mary….cause she’s rubbin’ me the wrong way too! Second, thank you so much for writing this. I especially appreciate the math you did for us (I try to avoid it all costs). Frankly the whole thing makes me throw up in my mouth a little and then I just want to cry while rocking in the corner in the dark. I am a social work student (at 41 y.o.) and I look at these social problems every day. The saddest thing is that we are a very rich country and so many of our social problems, including poverty, living wages, health care, retirement, etc. are ALL SOLVABLE!! Our country has ample resources to provide generously for our citizens, but chooses not to. That top 5% doesn’t want to lose their power/wealth/influence, so they make sure that there is no threat from “the little people,” otherwise known as 95% of our citizens. I’m getting all whooped up into a frenzy and I feel some growling coming on, so I should probably stop before I stop frothing at the mouth. But, THANK YOU!! for placing the spotlight on these issues. It warms my little socialist heart :o)

  12. anthrogrrl
    April 8, 2011 at 1:47 pm

    Here’s a question for Mary, if she comes back — if that plastic surgeon doesn’t pay one of the four or five people he employs (say, the woman who cleans his office) enough so that she can also pay for her own family’s healthcare, get a college education, pay for childcare, etc., then whose fault is it that she may need to rely on Social Security? His, or hers?

  13. November 26, 2012 at 10:43 pm

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