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 August 2005 Back to Table of Contents Back to Archives Main Page Section: Being Well Social Security Reform: Dead in the Water? By Roger Cook
“I’ve earned political capital,” President Bush announced after the November election. In the same breath, he said that some of that capital would be spent on making major changes in Social Security. But, by early April, it was clear that his Social Security initiative was stalled — a USA Today/CNN/Gallup poll showed that only 35% approved, while 57% disapproved of Bush’s handling of Social Security. Clearly the general public isn’t buying what the president is selling. Skepticism abounds about diverting a portion of their payroll taxes into “private investment” accounts. While Bush claims that stock market investments will net more retirement income than traditionally guaranteed benefits, the public appears unwilling to gamble. The president argues that cuts in benefits are needed to close the gap between what’s being paid into Social Security and what will be needed by 2042 or 2041 or 2052, (depending on what expert you believe). That’s when the payroll taxes being paid into the system could be less than what’s needed to maintain the current level of benefits. But critics contend there’s a fundamental problem with the president’s plan. The payroll taxes he would divert to private investment accounts would not be available to maintain the benefits of current Social Security recipients and those soon to retire — workers who are 55 or older. Yet, Bush says he will not cut their benefits. So how would benefits be maintained? The government would have to borrow trillions of dollars. Since corporations and wealthy Americans have seen their tax rates cut drastically under Bush, average taxpayers ultimately would have to pick up most of the costs of this “transitional” phase. Younger workers, under the Bush plan, would no longer be eligible for these traditional benefits when they retire. The Congressional Budget Office estimates that average earners retiring in 2065 would see their benefits cut by 45%. The president assumes that they will more than make up for these losses through lucrative Wall St. investments. There are other ways to fix the future gap in revenue shortfalls to keep benefits at current levels. Right now, all earnings up to $90,000 are taxed at 12.4% to fund Social Security. Each dollar earned over and above this cap is completely exempt from Social Security taxes. The Office of the Actuary for the Social Security Administration points out that if the cap were removed and a higher amount of income subjected to Social Security taxation, 90% of the anticipated revenue shortfall could be covered. Additional revenues also could be generated by estate taxes, dedicating those taxes to Social Security for those with estates worth $3.5 million or more, for example. Proposals like eliminating the cap are extraordinarily popular — a Washington Post poll found that 81% prefer this alternative. Other proposals like increasing the retirement age, cutting benefits or raising the payroll tax on employers and employees, by comparison, failed to marshal even a slim majority. back to top back to table of contents Current Issue | About Forever Young | Where to Find | Advertise | Our Advertisers | Community Calendar | Contest | Clubs | Contact Us | Archives | Home |
