A Stitch in Haste

The Social Security Administration recently announced its annual (and automatic) increase in old-age benefits: 5.8%, the largest in recent memory, thanks to the recent (and temporary) oil price spike.

Of course, as is always the case, year after year, one has to read a bit further down to find any mention of the flip side of that annual (and automatic) increase:

Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $106,800 from $102,000. Of the estimated 164 million workers who will pay Social Security taxes in 2009, about 11 million will pay higher taxes as a result of the increase in the taxable maximum.

So much for Barack Obama’s pledge not to raise taxes* on anyone making less than $250,000 per year. Of course, he doesn’t have to raise your taxes* — the government already does it for him automatically.

Additionally, so much for Obama’s vague plan for a “donut hole” in Social Security taxes. Recall that I raised the question of the automatic increases in the wage cap back when the “donut hole” was first mentioned: Would the upper end of the “hole” increase automatically as the lower end increases automatically, or would the automatic increases merely shrink, and eventually eliminate, the “hole”?

In reality, you don’t here much about the “donut hole” from the Obama campaign anymore. Instead, we get assurances from the candidate of “change we can believe in” that there will be absolutely no change in Social Security, under any circumstances, ever:

Despite the cries of privatization proponents, Social Security is not in crisis — it has a manageable cash-flow issue that we can ably solve over the upcoming years and decades.

Obama is confident that we can come together to find a workable solution. He believes that one strong option to improve Social Security’s long-term solvency is asking people who earn more than $250,000 to pay a little more into the system. But Obama will not raise the retirement age or reduce Social Security benefits.

Even more important, Obama strongly opposes the privatization schemes that George Bush championed; Americans’ retirements should not be subject to the whims of the stock market. Social Security is one of the most successful government programs in our nation’s history.

Some hasty stitches, none of which are new:

• The next time you can’t pay your bills, thanks to your own fiscal recklessness (say sometime around 2017), tell your creditors — as this Obama operative tells taxpayers — that you face, not a “crisis,” but a “manageable cash flow issue.” See how far it gets you.
• If one insists, ex ante, that raising the retirement age or reducing benefits are not options, then only two other options remain: raise taxes or raise the deficit. This, apparently, constitutes “ably solving” the (non-)crisis.
• What, exactly, constitutes “a little more”? (And while we’re on the subject: What, exactly, constitutes “asking”?)
• Regardless of how much constitutes “a little more,” how is it moral to “ask” the people who already pay almost all the taxes* to do all the “little more paying”?
• Would the “little more” that Obama would “ask” the highest-income taxpayers to pay into Social Security earn them higher benefits? If so, then how does that (i.e., taking in more, only to pay out more) address the underlying problem? If not, then how is it not naked, brazen, class-warfare income redistribution?
• Why is the Obama campaign lying and fear-mongering by suggesting that a voluntary, partial privatization reform plan “scheme” would (a) not be voluntary, (b) not be partial, and (c) necessarily entail investing in “the whims of the stock market” (as opposed to, e.g., money market and other low-risk investment options)? Is lying and fear-mongering “change we can believe in”?
• What, exactly, is the basis for claiming that Social Security is “one of the most successful government programs in our nation’s history”? How does burdening the working poor with a 12.4% payroll tax, with no deductions or exemptions, constitute a “success”? Is vacuous chanting of tired (and false) bromides “change we can believe in”?
• Oh, and what happened to the “donut hole”?

—

*I’ve been enjoying the rather comical exchanges recently between supporters and opponents of Obama, fencing over talking point terminology regarding who pays “taxes.” There is, of course, plenty of truth, half-truth and falsehood to go around. Here are the true facts:

• Approximately 32% of households, representing over 40% of the population, have no federal income tax burden.
• You cannot “lower income taxes” for those who pay no income taxes.
• You cannot give an income tax rebate to those who pay no income taxes; you can only give them welfare checks.
• The working poor (most of whom, remember, pay no federal income taxes) do pay other federal taxes: most notably Social Security tax and Medicare tax, but also federal gasoline tax, excise taxes and other taxes (hence my use of “taxes*” where what is really meant are “income taxes”).
• Those Obama supporters who have been so quick to point out the asterisk in “taxes*” (i.e., that the working poor do indeed pay federal “taxes”) are the same apologists for Obama’s sotto voce (“ask” them for “a little more”) class warfare on income tax policy and Social Security (non-)reform. I suppose Obama believes, as did Emerson, that a foolish consistency is the hobgoblin of little minds.

—

Previously:
–Has Social Security Been a “Success”?
–The Working Poor, Retirement and Social Security
–Questions — Special “Obama Donut Hole” Edition
–Obama’s “Little Bit More” for Social Security

Filed under: Politics, Progressive Taxation, Social Security