reforming social security13 Jun 2005
A bit of food for thought over social security reform:
Brooke Oberwetter of the Cato Institute (ahem) makes some very good points in a very disingenuous fashion with regard to reforms needed in the social security system. However, they have nothing to do with why Robert Wexler is defending what he calls “the most successful government program in history”, which is what Oberwetter appears to have a problem with. The problems he (Oberwetter) addresses are real, and should be corrected, but they have nothing to do with the viability of social security, or the practicality of raising the payroll tax.
And, on that note, Mark Schmitt has some good commentary on reasons why raising the payroll tax cap may not be the best idea:
… the basic argument is that the payroll tax is not a tax so much as a premium in a system of insurance. And the cap ensures that the insurance policy is basically a good deal for everyone. That’s always been the bedrock of its political success. You might be able to get a better deal, in exchange for more risk, through private accounts. But no matter how you cut it, in general Social Security is a net plus for almost everyone, whether through retirement or survivors benefits. On the other hand, if you lift the cap, and people who make $120,000 are paying almost $15,000 a year in FICA taxes (including the employers’ share), they would start to see it as a very bad deal. They would have to be alive and retired for almost as long as they were working in order to see a positive return.
Put another way, lift the cap, and suddenly all those “calculators” at the Cato Institute and even the real calculators start to look pretty ugly, and private accounts start to look a lot better, for a lot of influential middle- and upper-middle class people. When the privatizers come after Social Security next time, their job will be a lot easier.
This is always the danger with any solution to social security’s woes that make it more progressive – that basically social security has always been pitched to the socialism-fearing American public as an “insurance” program that is a good deal for everyone (and it is). Once it starts looking more like a system just for keeping the poor and unhealthy alive and well, sadly, people start to lose interest.