Posted by AzBlueMeanie:
A couple of weeks ago I warned you about An annual ritual of spring: 'The sky is falling! The sky is falling!':
The Arizona Republic today published an annual ritual of spring, the gloom and doom forecasts for the social security and Medicare trust funds. Social Security heading for insolvency even faster. The sky is falling! The sky is falling!
First, you need to keep in mind that there is an entire cottage industry in conservative circles that has sought to do away with the social security and Medicare trust funds since the funds were first established.
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And then there are the media enablers of this conservative opposition to social security and Medicare.
Like the Arizona Republic. Right on cue, the Republic last Saturday (4/28) fulfilled its role as a cog in the right-wing noise machine by publishing this "the sky is falling!" editorial opinion on the social security and Medicare trust funds. Hard choices have to be made.
At least the Republic stopped short of endorsing Rep. Paul Ryan's "Roadmap to America's Ruin" that proposes to turn Medicare into a coupon voucher system to purchase private health insurance plans, and the GOP dream of privatizing social security into individual retirement investment accounts so the banksters of Wall Street can rip you off and leave you destitute remains alive.
As I previously posted above regarding the Medicare trust fund, Sarah Kliff at Ezra Klein's WonkBlog tells everyone to take a deep breath and chill, Reports of Medicare’s death are greatly exaggerated.
Now let's hear from a tax expert, David Cay Johnston, on the social security trust fund. Social Security Is Not Going Broke:
Which federal program took in more than it spent last year, added $95 billion to its surplus and lifted 20 million Americans of all ages out of poverty?
Why, Social Security, of course, which ended 2011 with a $2.7 trillion surplus.
That surplus is almost twice the $1.4 trillion collected in personal and corporate income taxes last year. And it is projected to go on growing until 2021, the year the youngest Baby Boomers turn 67 and qualify for full old-age benefits.
So why all the talk about Social Security “going broke?” That theme filled the news after release of the latest annual report of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, as Social Security is formally called.
The reason is that the people who want to kill Social Security have for years worked hard to persuade the young that the Social Security taxes they pay to support today's gray hairs will do nothing for them when their own hair turns gray.
That narrative has become the conventional wisdom because it is easily reduced to a headline or sound bite. The facts, which require more nuance and detail, show that, with a few fixes, Social Security can be safe for as long as we want.
Let's look at how Social Security taxes have grown in the last half century - a little-known tale of tax burdens shifted off the rich and onto workers. From 1961 through 2011, the year covered in the last Social Security report, Social Security taxes exploded from 3.1 percent of Gross Domestic Product to 5.5 percent.
Income taxes went the other way. The personal income tax slipped from 7.8 percent of the economy to 7.3 percent, with most of the decline enjoyed by people in the top 1 percent of incomes. The big drop was in the corporate income tax, which fell from 4 percent of the economy to 1.2 percent. Notice that the corporate income tax fell by 2.8 percentage points, an amount almost entirely offset by a 2.4 percentage point increase in Social Security taxes.
The effect has been to ease the taxes of the wealthy, while burdening the vast majority of workers. Considering how highly ownership of stocks is concentrated, the benefit of those lower corporate taxes went overwhelmingly to the top 1 percent and, especially, the top 1 percent of the top 1 percent. Considering that the Social Security tax is capped, most of the burden of the increased payroll tax went to the bottom 90 percent.
Now let's look at how that $2.7 trillion Social Security surplus arose. In 1983, President Ronald Reagan sponsored an increase in Social Security taxes, changing the program from pay-as-you-go to collecting much more taxes than it paid in benefits. The idea was to have the Boomers prepay part of their old age benefits. The extra tax was supposed to pay off the federal debt and then be invested in federal bonds. Instead, Reagan ran huge deficits, violating his 1980 promise to balance the federal budget within three years of taking office.
In my view, building the Social Security surplus has had two major effects.
One effect was to finance tax cuts for those at the top, whose highest tax rate fell during the Reagan years from 70 percent to 28 percent, and for corporations, whose rate fell from 50 percent of profits to 35 percent. Those with less subsidized those with more.
The other effect was a huge increase in consumer debt, as Americans saddled with higher Social Security taxes took out loans to cover other needs. Stagnant wages played a role, but the $2.7 trillion Social Security surplus is also a factor in a $1.5 trillion increase in consumer debt since 1984.
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With the coming bulge in retirees, Social Security will start to pay out more than it takes in 2021, according to projections in the latest annual report. Under current law the program would be able to pay only about three-quarters of promised benefits starting in 2033. But that scenario can easily be avoided through a combination of four policy changes that would ensure full benefits continue to be paid, though I fear Congress will continue to do nothing.
One would be restoring the Reagan standard that 90 percent of wages are covered by the Social Security tax, which now applies to only 83 percent of wages. If we went back to the Reagan standard, the Social Security tax would apply to close to $200,000 of wages this year instead of $110,100.
Two would be raising the Social Security tax rate by two percentage points. That tax hike could be smaller or even avoided if, three, we reignited the growth in wages. Median wages have fallen in 2010 back to the level of 1999. And, four, it would help just as much if we created millions more jobs, which since 2000 have grown at only a fifth the rate of population increases.
There was actually what some have referred to as the "grand bargain" in 1983: the working classes would fund the tax cuts for the wealthy and corporations today through higher payroll taxes which would spur economic growth and job creation, and when the "boomers" were ready to retire in the future (now), the wealthy and corporations would pay more in taxes. It was based upon the now entirely disproved and discredited faith based supply-side "trickle down" GOP economics.
What happened instead was the greatest transfer of wealth upwards from the working classes to the wealthy class, resulting in the greatest income disparity this country has seen since before the Great Depression in 1929. The rich got your money and -- surprise! -- they're keeping it, screw you!
The wealthy and corporations have resisted every effort to make them live up to Reagan's "grand bargain" and to begin paying their fair share in taxes. Instead, these greedy bastards want it all. Hence Rep. Paul Ryan's "Roadmap to America's Ruin" that proposes to turn Medicare into a coupon voucher system to purchase private health insurance plans, and privatizing social security into individual retirement investment accounts so the banksters of Wall Street can rip you off and leave you destitute.
There's a class war alright, and it has been waged by the privileged wealthy class against the working classes of this country. Social security and Medicare will be just fine if we tax the wealthy and corporations that are not paying their fair share in taxes. It's time for them to give back some of your money that they have been taking since 1983.