Wednesday, February 23, 2011

Social security update

I received a mailing from the Social Security Administration today that contained the following (click to enlarge):

Barring an unforeseen financial windfall, I will not retire until after 2037 so this applies to me. The good news is, Social Security will still be around (as if there was any doubt a government program might actually end)! The bad news is, I might only get paid 76 cents on the dollar. Good thing we avoided reforming the program while George W. Bush was in office -- way to dodge that bullet. That's not to say President Obama doesn't have any ideas on how to fix the program -- he most certainly does. Namely, raise taxes:
OBAMA: What I have proposed is that we raise the cap on the payroll tax, because right now millionaires and billionaires don’t have to pay beyond $97,000 a year. Now most firefighters & teachers, they’re not making over $100,000 a year. In fact, only 6% of the population does. And I’ve also said that I’d be willing to look at exempting people who are making slightly above that.
Keep in mind that when Social Security was first unveiled in 1935 the payroll tax to support it was 1% and only applied to the first $3,000 of income ($46,400 in 2009 dollars). It's currently 6.2% paid by the employee and 6.2% from the employer (which in reality is borne by the employee as this raises employment costs, thus reducing money available for salaries) on the first $106,800 of income. Now the current White House occupant wants to increase them even more. Even a blind man can spot this trend.

But we shouldn't be surprised the payroll tax has been increased since the program's inception, as making it actuarially sound was only a secondary consideration for the program's creator, Franklin Roosevelt. It's main purpose was to create an entitlement mentality:
“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program” -- President Franklin Roosevelt recalling why social security was based on payroll contributions, 1941
Plainly he has succeeded, to the detriment of us all.

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