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In recent years there has been a hue and cry about the "dire" situation "entitlement" programs such as Social Security are in. Even among non-right winger moderates, there is a belief that Social Security is simply not sustainable long-term.

This is to say nothing about the patently absurd claims by high-profile GOP candidates such as Rick Perry, who have gone so far as to claim that Social Security is a "Ponzi scheme".

Even more unsettling than Rick Perry's mind-boggling assertion is by itself, it's that he is not alone in making this reality-challenged claim. More than a few other lights in conservative circles have publicly signed on to this false bit of nonsense.

Of course there is nothing even close to being true about it.

Yet concern among voters about the solvency and long-term health of the most successful New Deal program persist. Despite the bamboozlement of such people as Rick Perry, there is a factual basis for concern about the ability of the program to meet its full benefit obligations in the long-term. Particularly while the trust fund is spent out (which it was intended to do in order to deal with the baby-boomers retiring).

So what's the problem?

As the CBO showed in its Social Security Policy Options report (PDF) which was published last summer:

Because the earnings of workers in the highest income groups have grown faster than average earnings in recent decades, the share of all earnings from jobs covered by the Social Security program that were below the taxable maximum has fallen from about 91 percent in 1983 to about 83 percent in 2009.

In short, more of the money in the economy has shifted upward, beyond the current maximum amount of earned income which is subject to FICA withholding (currently $106,800 per year).

Not only is it an issue of almost 9% of total earnings in the entire nation moving into the pockets of people making above $106,800 per year, but it is also the kind of income they "earn" which is affecting the overall revenue of Social Security.

Since unearned income such as dividends, capital gains, etc. are not at all subject to FICA (unlike actual wages) every dollar the investor class gets in the form of unearned income doesn't have a single penny withheld from it to be put into the Social Security trust fund like wages do.

A rather simple set of changes to the current system would not only make the program solvent in perpetuity, but can even be made to run at a profit in a fair an equitable manner. The first change is simply removing the cap on how much earned income (wages) are subject to FICA (the withholding tax that funds Social Security).

The CBO report shows that by removing the cap, Social Security’s total revenues would increase by 0.9 percentage points of gross domestic product (GDP) in 2040, or by 19 percent relative to current law, and outlays would increase by 0.3 percentage points of GDP, with further increases in subsequent years. This option would improve the 75-year actuarial balance by 0.6 percentage points of GDP (almost the entire amount to close the funding gap) and extend the trust fund exhaustion date to 2083.

The second is to subject unearned income to FICA withholding which gets us the rest of the way there.

Removing the cap and including unearned income to FICA withholding would make the fund solvent in perpetuity. In fact doing both would allow for an across the board increase of Social Security benefits, a slight decrease in the amount of withholding most people would have to pay, or a combination of the two. All this without raising the retirement age, cutting benefits, or reducing cost-of-living increase formulas.

Sounds like a good idea, right? But how can we get the administration to take this idea seriously you may ask?

What we can do about it.

Fortunately there's an easy way we can get the ball rolling.

Recently the Obama administration created an online tool called "We the people: Your voice in our government" for people to petition the administration about important issues they would like to see the administration address.

Late this past Friday (September 23) I created a petition on the White House's website using this new tool. It is about proposing the simple fixes to Social Security I talked about above. The tool only allows a maximum of 800 characters and in whittling it down I managed to bungle the wording slightly, but the text is as follows:

Make Social Security solvent in perpetuity without having to cut benefits or raising the retirement age.

As more income in our economy has shifted to upper brackets and as income that's not subject to Social Security withholding. Furthermore, capital gains (income generated through investment) are not subject to withholding.

Combined with the Bush tax giveaways, the very wealthy pay an overall effective tax rate that is less than middle and lower income wage earners.

It's led to the Social Security being in trouble long-term. Instead of cutting benefits, or increasing the retirement age simply remove the cap (currently the first $106,800 wages) & subject ALL income to withholding.

Lifting the cap & subjecting capital gains to FICA withholding would increase the revenue enough to make it not only permanently solvent but would run at a profit & allow benefits to be increased (for everyone).

Now here's where you come in.

I would like to ask that everyone who cares about keeping Social Security solvent in perpetuity, and reintroduce basic fairness into the program at the same time, sign the petition so if it gets 5,000 signatures and thereby get looked at by the administration so they will issue an official response to the idea.

The link is: www.wh.gov/gLJ

There is a 150 signature threshold before it is publicly viewable on the White House website. So far, we have managed to get over a dozen signatures, even when my timing on launching the petition was less than opportune (late at the start of a weekend is not ideal).

If everyone could sign it and share the link (www.wh.gov/gLJ) on Facebook, Twitter or anywhere else it might get exposure, that would be great. Actively reaching out to the people in your social networks and getting them to sign the petition as well getting them to share the link with their friends and family can make a real difference.

Thanks in advance if you sign, and help spread the word!

Originally posted to Kossack Initiated White House Petitions on Tue Sep 27, 2011 at 07:25 AM PDT.

Also republished by Daily Kos Oregon.

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Comment Preferences

  •  Tip Jar (5+ / 0-)

    cheers,

    Mitch Gore

    Who is a Tea Partier? Someone who listens to Glenn Beck. Who's an anti-Tea Partier? Someone who understands Glenn Beck

    by Lestatdelc on Tue Sep 27, 2011 at 07:25:02 AM PDT

  •  There's a similar petition that has exceeded (2+ / 0-)
    Recommended by:
    Lestatdelc, highacidity

    the 150 threshold.  I signed your petition.

    Support Sen. Bernie Sanders bill to fix Social Security by removing the cap on income subject to the SS tax.
    Unlike most government programs, Social Security has its own dedicated tax and is solvent until 2036.

    Sen. Bernie Sanders, in S. 1558, has proposed gradually removing the income subject to the Social Security tax, which would make it solvent for 75 years, and able to pay full benefits.

    Removing the cap would also make this a flat rather than regressive tax.

    Support this bill and refuse to support any "reform" such as privatizing, means testing, or raising the eligibility age that would weaken it for those who need it most in the working and middle class.

    Sen. Sanders reform would strengthen the program whereas anything proposed by Wall St. would would take the "security."

    Washington has done enough for Wall St. It's time to protect average Americans from them.

    Link to Sanders petition

  •  Income Inequailty is Root of SS Woes (1+ / 0-)
    Recommended by:
    Lestatdelc

    Great petition.  I signed it.  The top CBO quote about income inequality explains, quite simply, why Social Security will run out of money in 25 years.  I did a back of the napkin calculation on the effect of the income shift on Social Security revenues and here it is in a nutshell.

    $12.5T = total US income in 2010
    $1.85T = 15% of total income shifted to richest 1%
    $232B = 12.4% of income shifted to richest 1%

    Thus, the $232B represents money that working Americans would have paid into Social Security in 2010, if we didn't have the income shift to the richest 1%.  Back in 1979 the richest 1% took 9% of the income pie, today they are taking almost 25%!  Since all of the money the richest 1% take for themselves is above the $106k cap, none of it goes to Social Secuirty.  

    Give the American workers the raises they have earned and been denied for the last 30 years and you solve the Social Security "problem".

    Poor man wants to be rich. Rich man wants to king. And the king ain't satisifed until he rules everything. B.Springsteen

    by howd on Tue Sep 27, 2011 at 09:09:31 AM PDT

    •  I have not yet been able to run down (1+ / 0-)
      Recommended by:
      howd

      reliable figures for how much money has shifted out of wage income to unearned income (which is not subject to FICA) in total nationally.

      I would love to have the data on that to see how much additional revenue subjecting that to FICA would bring in.

      cheers,

      Mitch Gore

      Who is a Tea Partier? Someone who listens to Glenn Beck. Who's an anti-Tea Partier? Someone who understands Glenn Beck

      by Lestatdelc on Tue Sep 27, 2011 at 10:27:47 AM PDT

      [ Parent ]

      •  Unearned Income (0+ / 0-)

        I love the use of the extremely accurate "unearned income" term.  It should be used each and every time it can be worked into a sentence.  

        Yeah, I'm always looking for reliable numbers on income and wealth distriubtion.  I think it helps make the point to include actual numbers when talking about income inequality.  

        Poor man wants to be rich. Rich man wants to king. And the king ain't satisifed until he rules everything. B.Springsteen

        by howd on Tue Sep 27, 2011 at 11:15:38 AM PDT

        [ Parent ]

  •  Thanks. I signed this one as well as the (1+ / 0-)
    Recommended by:
    Lestatdelc

    Sanders one. This one is preferable because of the addition of "unearned" income to the FICA tax base. It is time to stop the preference for capital over labor.

    Further, affiant sayeth not.

    by Gary Norton on Tue Sep 27, 2011 at 09:30:09 AM PDT

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