by Dale Coberly


WORST CASE:  we wait until 2035 and then have to raise the payroll tax 4.13% (2% for workers, 2% for employers) in order to pay for promised benefits. OR have to cut benefits by 25%.

The trade-off is about 20 dollars per week extra “tax” (really “savings”) for an average worker making 50k per year, versus a 500 dollar per month cut in benefits, from about 2000 dollars per month to about 1500 dollars per month, when he retires.

People won’t be able to live on 75% of promised benefits unless they have other sources of income.  About 50% of retired workers will not have enough other sources.  Please remember that those future retirees would be paying for ALL of the required tax raise.

NOT SO BAD CASE: an “immediate and permanent” increase in the payroll tax of 3.14% (1.6% for workers, 1.6% for employers), or about 16 dollars per week. OR a 20% cut in benefits.. from about $2000 per month to $1600.

This is really the whole story.  Everything else you hear is misdirection: arm waving and shouting “Fire! Fire! We Are All going To Die!”

There is an even BETTER OPTION:  raise the payroll tax a little more than one tenth of one percent per year (about a dollar per week per year). This must be done very soon;  delaying will require a larger gradual increase.  The ultimate increase needed will be about the same 4% that will be otherwise needed in 2035 if we wait.  But that 4% (2% for the worker) will be delayed about 30 years. And the per year increases will be reduced to much less than one tenth percent per year,  because the gradual increase will reduce the “actuarial deficit” each year while providing an Increase in income to the Trust Fund.  
The interest earned by the gradual increase will actually reduce the ultimate tax needed by about 1% of income.  AND it will eliminate the need for  Congress to repay the money it borrowed FROM Social Security over the past thirty eight years.

I can’t see how any sane or not-lied-to person would prefer a benefit cut to the small tax increase needed to avoid it.  Remember that the workers will pay that tax increase themselves, out of an income that is expeced to grow in real value ten times as fast as the tax increase, and they will get their money back twice over when they retire, due to the effecive “interest” from pay as you go financing in a growing economy.  And the insurance value of the SS program is priceless.

Moreover,  I can’t see how any intelligent… not fooled… person would fail to see the advantages of a gradual increase in the tax starting as soon as possible. Not only financial advantages, but avoiding the political stampede that will be caused by the hysteria generated when the Trust Fund finally does run out.

Note to my progressive friends:  calling for an expansion of Social Security benefits, to be paid for by “the rich,” will give the rich what they have always wanted:  turn SS into welfare as we knew it, so they can can cut it down to a size where they can drown it in the bathtub. Every year they will say “we have the will but not the wallet.”  This is exactly what Roosevelt avoided by insisting that Social Security be an insurance program FOR workers paid for BY the workers themselves.  


If progressives really want to help those whose earned Social Security benefits are not enough,  they can create a new program, paid for by general taxes (“the rich”).  Or just use the existing SSI program, which is NOT “Social Security”  but is designed to do exactly what they are calling for.