Social Security has Nothing to Do with Debt or Deficits

Dale Coberly lead-in to his discussion on Social Security is something which has been debated back and forth by politicians, those who wish to cut it, those who seek to end it, and those who have done all of the above such as Andrew Biggs. Social Security for the today’s elderly and those who will retire in the future can be fixed rather inexpensively. Dale, Bruce, and Arne etc. have argued the points extensively on Angry Bear.

Dale has given me some latitude on this commentary, so I am going to add to it with regard to healthcare.

I just completed an exchange with a commenter on the costs of commercial healthcare plans such as found on the PPACA. The PPACA is another government plan. It includes commercial healthcare insurance who are supposed to compete against each other to provide insurance to citizens who are above a certain income level where Medicaid steps into the picture. In other words, the PPACA is not perfect.

You are limited to where you can go with your plan. Prices increase as you age. However, it can not penalize you due to pre-existing conditions. It can restrict you to where you go for care and what doctors you use. Complexity makes it difficult to use. The one factor which might have changed all of this was purposely stymied by the Senator from Aetna Joe Liberman in 2008 who promised a filibuster if the Public Option was not removed from the PPACA. Todays he threatens with the No-Labels party. Some things never change and some people are who they are . . . PITAs. We need something like Social Security in healthcare.

On to Dale Coberly’s points on Social Security.


Social Security has nothing to do with the Debt/deficit.  It is, and always has been, paid for entirely by workers who are paying in advance for their own longer life expectancy after they can no longer work. Living longer costs more but does not mean they will be able to work longer. And it is quite possible “longer life expectancy” will be longer for those with higher incomes than for those with less.

That means workers should anticipate their needs for greater . . . that is, longer . . . benefits by saving more while they are still working.  The safest way for them to do that would be for them to increase the amount they save by raising their own payroll tax a total of two percent . . . best reached by increasing their tax one tenth of one percent per year.  That is about a dollar per week per year for a worker making fifty thousand dollars per year.

The Congress, the pundits, the journalists, and the “non-partisan experts” are ignoring this solution even though it has been published by real experts such as the American Academy of Actuaries.  That makes me think the fix is in.  Sorry if that sounds paranoid, but after twenty years paying close attention to the issue I think it would be insane NOT to distrust the Congress and the people who call themselves experts.

What this means is that “the rich” instead of paying the Debt created by not paying for the things they bought with deficit spending, they intend to place the entire burden of that debt on the backs of retirees by cutting their benefits and forcing them to work longer . . . with no guarantee they will actually hire people who are old.

The Debt was created by Congress not paying for the things it bought . . . presumably to hold taxes down at least for the present.  That may have made sense at the time:  capitalism works by borrowing money. But if the Debt/deficit and the interest on the Debt are reaching unsustainable levels as claimed by Congressmen and other deficit hawks, it may be time to start paying back the money Congress borrowed.  The honest thing to do is to pay for it by raising the tax on the people who got the tax breaks from deficit spending in the first place.  

Therefore I suggest . . .

A “Patriotic Debt Emergency Surtax” of 10% on income tax liability (what you would otherwise owe in income tax) until the Congress decides the Debt Emergency is over . . . that is, the Debt has been reduced to sustainable levels.

This would mean the Debt would be paid off by the people who created it, instead of being used as an imaginary and lying excuse to cut Social Security and thereby place the entire burden of the Debt on retires, who did not create it, but instead paid for their own retirement in advance.

The surtax would be quite small for lower income taxpayers . . . hopefully zero on those below the poverty level…and increase proportionally along with the progressive income tax on higher incomes. 

Any thoughts?