‘Scrap the cap’ — Warren has right idea on Social Security
— November 26, 2013
The way Republicans and an increasing number of Democrats in Congress tell it, the only way to fix problems in the Social Security system is to cut benefits and/or increase the full retirement age.
But those ill-advised “solutions” would only exacerbate the worries of our senior citizens, who are already struggling to survive in a national economy that has seen their ability to save for retirement plummet, and the dissolution of many defined benefit pension plans. Both are the result of decisions made by the same politicians who have drilled it into our collective consciousness that the Social Security system is broken.
It isn’t. Even if Congress did absolutely nothing to it, the Social Security Trust Fund is projected to be solvent through 2033, which was precisely the goal of the last changes to the system lawmakers made under Ronald Reagan in 1983. After that point, the system will still be able to pay retirees 77 percent of their benefits.
Of course, we shouldn’t wait 20 years to make up the remaining 23 percent. But there is time to develop a rational solution that would make the system solvent through the end of the century and actually increase benefits instead of cut them. The key to doing it – dropping the cap on Social Security payroll taxes, which is now $113,800 – was articulated by freshman Sen. Elizabeth Warren (D-Mass.) in a brilliant speech on the Senate floor last week. She addressed why her alternative is necessary in a way most people should understand.
“There is a $6.6 trillion gap between what Americans under 65 are currently saving and what they will need to maintain their current standard of living when they hit retirement … and that assumes Social Security benefits aren’t cut,” she said. “Make no mistake: This is a crisis.”
It’s actually a fairly simple solution. This “Scrap the Cap” movement isn’t new, and there are several proposals by Democrats to either raise the limit on payroll taxes or eliminate it completely. All would generate additional revenue by making people who earn more than $113,800 a year to pay into the Social Security system at the same rate Americans with lower incomes do.
Passing such changes, though, would require a huge educational push to rid the population of the misrepresentations, distortions and outright lies that politicians have told us about Social Security for years. Unfortunately, some of those attempts to convince Americans that Social Security has to be gutted to save it originated right here in Wyoming.
In 2011, Sen. Mike Enzi (R-Wyo.) told National Public Radio that Social Security is “broke.” It’s a false claim many Republicans make, but not one you’d expect from a senator who’s also an accountant.
“It’s one of those amazing trust funds that the United States has that has no money in it, it has IOUs in it and that should worry everybody,” said Enzi, in reference to the U.S. Treasury bonds that make up the Social Security Trust Fund.
But Enzi knows that far from being worthless, the U.S. Treasury bonds are regarded as the safest investment in the world. Our government has never missed a payment, and it won’t as long as Republicans are kept from using the debt ceiling limit as a hostage in budget negotiations. Far from being broke, the Social Security Trust Fund now has a surplus of $2.7 trillion. Its reserves are still growing and will continue to do so until 2020.
On his campaign website Enzi argues that the federal government spent the money in the trust fund on other things, and that if it continues to run budget deficits, the government will have to raise taxes or cut other spending to finance promised Social Security benefits. “This is gross financial mismanagement,” Enzi charged. Yes it is, senator, and you should admit your responsibility for helping create the situation. Take, for example, the two wars you voted for that were funded off the books, until President Barack Obama insisted that both military operations be included in the federal budget.
Enzi also insists in his statement on Social Security that “a little bit of pain now to shore up the Trust Fund will prevent a lot of pain in the future for those depending on Social Security.”
Why is it that when Republicans talk about the pain Americans must endure for the wasteful and stupid decisions Congress makes, the first people they always target are seniors and children who are living in poverty? Where is the pain for the wealthiest Americans who continue to enjoy special tax breaks while our most vulnerable citizens needlessly suffer?
Let’s not forget some of the whoppers former Wyoming GOP Sen. Alan Simpson has told about Social Security over the years. He’s called Social Security recipients “greedy geezers” and infamously compared the program to “a cow with 310 million tits.” Simpson has described the whole program as a “Ponzi scheme” and claimed Social Security was never intended as a retirement program.
What Wyoming’s elder statesman ignores is that Social Security is an entitlement only in the sense that under the law the federal government is required to pay benefits to working Americans who paid into the program throughout their lives. It’s a promise our nation made to its citizens, and in no way is it a welfare program, despite Simpson’s derogatory declarations.
As co-chairman of Obama’s Commission on Fiscal Responsibility and Reform, Simpson couldn’t wait to get his hands around Social Security’s neck and squeeze. The Simpson-Bowles report that came out of that failed effort recommended cutting benefits by changing the way cost-of-living adjustments are calculated and raising the full retirement age to 69.
Unfortunately, Enzi, Sen. John Barrasso and Rep. Cynthia Lummis have rushed to embrace those proposals, which Republican leaders will try to make part of the upcoming budget negotiations. Sadly, it’s a game that the president seems all too willing to play, even though he campaigned for re-election promising to sustain and strengthen Social Security. Cutting benefits is a completely wrong-headed approach, but Obama and other Democrats seem to think it’s OK if they can work out a budget deal with Republicans.
Warren and the other progressive members of her party know how foolhardy and dangerous it is to reduce benefits when nearly two-thirds of seniors depend on their Social Security checks each month just to remain above the poverty line. “At its core, this is a conversation about our values. It is a conversation about who we are as a country and who we are as a people,” Warren said. “I believe we honor our promises, we make good on a system that millions of people paid into faithfully throughout their working years, and we support the right of every person to retire with dignity.”
Social Security can be preserved and even expanded, but it will only happen if the public insists on it. We can count on current recipients to kick and scream, but they’re going to need a lot of help from the future generations of retirees who – because of the blatant way Social Security has been lied about – are already convinced they will never see any benefits.
Here in Wyoming, we need to be vigilant about telling our congressional delegation not to use the need to revise a few elements of Social Security as an excuse to cut benefits. If they tell you the trust fund is “broke,” don’t let them get away with it. Demand that they scrap the cap instead of treating seniors as second-class citizens who don’t deserve to get what we promised them.
— Veteran Wyoming journalist Kerry Drake is the editor-in-chief of The Casper Citizen, a nonprofit, online community newspaper. It can be viewed at www.caspercitizen.com.
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Well said and to the point. Thanks. Good to know there are others voicing sensable arguments from the wilderness.
Please keep in mind the social security cap has increased from $51,300 in 1990 to $113,700 in 2013. While the rate has in fact been held steady – except for the so called economic stimulus period – more and more dollars have been deposited into Social Security every year because the tax goes up every year.
While no politician will touch this, if you really want to provide more income to everybody that participates in Social Security, then raise all of our rates, not just tack on another tax to the so called 1%. If everybody had to share in the pain of paying higher taxes, you can almost be assured that our political system would be much different than it is today. The liberal element in this country has shifted the economic burden onto fewer and fewer people while providing the opportunity for more and more citizens to be supported with various forms of public assistance. Until we all have to feel the pain, you will continue to the dysfunctional political system that now exists – those that want more handouts vs those tired of providing the handouts.
The funny thing about the job situation – it is the masses receiving the handouts that flock to Wal-Mart over and over again, buying all the cheap Chinese products………….vs those that are made in the USA, assuming you can find them.
Social Security and Medicare Hospital fund can be salvaged for 75 years.
I do believe the politicians who campaigned for major cuts in Social Security, Medicare and no increase in taxes would not want you to see this. The following information was taken in part from the Associated Press release in the Rochester, New York Democrat & Chronicle- 05/14/2011. Fixing Social Security would require an increase in the payroll tax of 2.15 percentage points, or an immediate and permanent 14 percent cut in benefits. Fixing the Medicare hospital fund would require an increase in payroll tax of nearly 1 percentage point, or a 17 percent cut in benefits. It also states both programs would be solvent for the next 75 years. I have never heard any politician state that both of these EARNED BENEFITS SHOULD AND COULD BE SAVED FOR THE NEXT 75 YEARS.
After reading this article, I discovered there was less FICA revenue coming into the system because of our high unemployment. I assume unemployment will continue to rise as long as USA Corporations outsource their manufacturing work and Jobs.
I think if you were to purchase almost any appliance or candy today, you would find they were made in Mexico, China or some other foreign country. Now just think of all those jobs and other production jobs that were allowed to be sent out of our Country. When I think of the FABRIC and STEEL industries back in the 50s and 60s that where here and now are gone. We should have realized then, that money hungry Corporations, Executives, CEOs, and lobbyists used their financial influence to buy many of the politicians’ souls.
Social Security System has always needed periodic adjustments to stay in an actuarial balance. The payroll tax, which imposes a 12.4% tax on income, with 6.2% paid by the employers and 6.2% paid by the employees.
There has not been an increase in payroll taxes since 1990. If you are counting, that’s 21 years. Just think about the many billions of dollars that would have been in the Social Security Trust Fund. With no locked box for the funds, I am afraid the funds would have been used to bail themselves out of whatever financial problems they may have encountered. If an increase in payroll tax were approved now, it would resolve the problem for the millions of people who are presently paying into the Social Security and Medicare System.
When most of us were younger, the cap on FICA (the Federal Insurance Contributions Act) was lifted periodically for Social Security and Medicare to keep it solvent. I am sure if the cap was lifted today, Social Security and Medicare could be saved for at least the next 75 years. My only comment is that we paid into a Federal Insurance Policy that has been misused and abused over many years by many of our elected politicians.
On September 9, 2011 this article was transcribed in part from the Rochester N.Y. Democrat and Chronicle- section 4A Friday, September 9, 2011. (Congressional offer on jobs crisis from President Obama) -Written by Ben Feller, from the Associated Press >The newest and boldest element of Obama’s plan would cut the Social Security payroll tax for tens of millions of workers and for employers, too. For individuals, the tax has been shaved from 6.2 percent to 4.2 percent for this year but is to go back up again without action by Congress. Obama wants to deepen the cuts to 3.1 percent for workers.
(LET US THINK ABOUT THIS). Businesses would also receive a major FICA tax cut. It may look good on the surface, but I hope people realize it is the people’s money. The government is allowing you to reduce your part of your investment into the Social Security System as well as businesses, leaving the SOCIAL SECURITY FUND with even less money for future retirees.
We must realize that there has NOT BEEN AN INCREASE IN THE FICA (Federal Insurance Contributions Act) payroll tax for SOCIAL SECURITY and MEDICARE HOSPITAL TAX LEVY in 21 years, and this was back in 1990.
I know if the Government had increased FICA payroll tax in 1990 to keep with inflation for both the employer and the employee, and kept their hands out of the fund, we would not be facing the predicament we now face.
I also think that large Corporations, lobbyists, Millionaires, and Billionaires wanted to END Social Security because of the escalating cost, which eats into their profits. This may still happen, but only if we let them get away with their plans that will lead to the DEMISE of our Social Security and unknown changes to the Medicare System as well as the elimination of the middle class population.
There always been system abuse by the public, and this abuse has been another devastating and sometimes times a ploy to our great system. These abuses and ploys must be eliminated through the proper monitoring of our governmental agencies, both internal and external agencies. You asked for my website address; just place in your browser usabarend and activate it, which is all you need to do.
“Why is it that when Republicans talk about the pain Americans must endure for the wasteful and stupid decisions Congress makes, the first people they always target are seniors and children who are living in poverty? Where is the pain for the wealthiest Americans who continue to enjoy special tax breaks while our most vulnerable citizens needlessly suffer?”
This congress that makes stupid and wasteful decisions is under the control of the Democrat party. The wealthiest Americans (I would be interested to learn your definition of that term), in my terms, those who have protected their wealth, i.e. Gates, Buffet, etc. who are happy to have Income Taxes raised because that is not where their money comes from. For example Mr. Buffet established non-profit entities that are run by his children, for a multimillions of dollars salary, rather than take that money as income, pay taxes on it; thereby letting the government use the tax receipts that would be generated. Mr. Obama has no hesitancy to invoke his name when asking for tax increases.
Please do a better job in hiding the hypocrisy of your editorial.
warren is better called a balanced realist, don’t saddle her your progressive glop
“There is a $6.6 trillion gap between what Americans under 65 are currently saving and what they will need to maintain their current standard of living when they hit retirement … and that assumes Social Security benefits aren’t cut,” she said. “Make no mistake: This is a crisis.”
I agree, make no mistake, this is a crisis. Why is it my responsibility to maintain the current standard of living for those that choose not to save for their retirement so they can enjoy their current standard of living through their retirement years? We pay in 12.4% of our earnings every paycheck, used to pay the benefits of those currently on Social Security, hoping their might be a little left for the rest of us to collect someday. I pass on the new car, fancy clothes, restaurants, exotic vacations so I have enough money saved in my retirement to live comfortably. Now you want me to give up even more so those that do not plan and save can enjoy their current lifestyle?
The education needs to start with the liberal element in society. The distortion, misrepresentations and outright lies fill the koolaid the liberal element is drinking on a daily basis. We need to stop taking wealth from the successful segment of society and giving it to those that choose not to save for their retirement, those that choose to spend everything they earn. Granted, their is a segment in our society that need a helping hand and that is what Social Security is for, but not 47% of the country getting another handout because they cannot plan and save some of their hard earned dollars to enjoy the lifestyle they have become accustomed to.
The so called Social Security trust fund is laughable. Only the Federal Government could get away with calling the underlying assets of social security a “trust fund.” How can you borrow money from yourself and call it an investment and secure because it is in the form of US Government securities? That in and of itself is the lie our government continues to use to distort the facts. There is no trust fund, just a shell game used by both parties in this country – republicans and democrats. The liberal element drinks this koolaid all day long…………
“misrepresentations, distortions and outright lies”
The ALEC standard, for years politicians have been dipping into the till started by, yep, Ronnie Raygun (EDITOR’S NOTE: Ronald Reagan), ever since then, have been trying to convince the multitude that it is going broke, and it is, because IOUs don’t pay the bills! Since it’s inception, Medicare too, the Republicans have tried to disassemble any help to the social fabric of Americans, except for the “Upper Crust” of course.
Pope Francis said that inequality was the root of social ills, and prayed for world leaders with more empathy and sense of social justice.
http://www.rawstory.com/rs/2013/11/26/pope-francis-rips-capitalism-and-trickle-down-economics-to-shreds-in-new-policy-statement/
The 0.01% run this country and the Right are fighting tooth and nail with them. Ms. Warren is a rare commodity we need to champion,, for our own survival!
Thank You Mr. Kerry, keep up the good works!
I have written and emailed our Congressional delegation numerous times asking them to consider this very concept and I have not received a single response back as yet. I’d say better we, “Scrap the Crap” as they will not even recognize there is a cap. If there is anyone who is good with numbers and knows how this works, I would really appreciate a spreadsheet that show what we have today with the cap and and what we could have if even raising the cap in degrees were considered. I agree we need to also stop Congress from dipping into these funds, but I’ve not figured out how to get any acknowledgement to this issue so far. I would be willing to throw ALL of the rascals out of Congress if we could, but the individuals running against our delegation are often no better and at times even worse. The Dems need to run some solid candidates so we can finally have a choice during the elections as once the primary is over we rarely have any choice for the national elections.
Removing the SS cap is a “no brainer” so that obviously goes over the head of the majority in the House of Representatives. However, I think it is time to realize that entitlement reform is necessary. The population is simply living too long for the money set aside in the trust. They are either going to have to shoot us old geezers at a certain age or raise the benefits age to 65 and scale back the maximum benefits to 68-70. There will need to be some income cap that will preclude SS payments to the wealthy and those still working at 65. Those reforms will save social security until the ‘boomers’ die off and there will be enough younger workers to restore the trust fund.
Dropping the cap is a first step, but as McHenry points out, a good lockbox would also be useful.
As much as the Tea Party calls “I want my country back,” they generally identify the 1950s as idealic. What they don’t understand is that the upper tax rate was 90 percent, which helped pay for the infrastructure (interstate highway, bridges, ports, airports and schools) back then. Good piece, Kerry.
Sen. Warren is also spot-on, calling for an expansion of benefits. As Krugman repeatedly points out, going the European austerity route would be disastrous, not only to the economy and well-being of seniors, but would aggravate the political tensions of today, possibly lead to fascism American-style.
Thanks, Kerry. I can only say amen to Rone Tempest. And more power to Sen.Elizabeth Warren.
Brilliant, complete and insightful as usual. Hat’s off to Wyoming’s best columnist on politics and policy.
Raising the cap some is the best solution. However even that idea or eliminating the cap on payroll FICA is meaningless. Because with a Al Gore ”Lock-Box” all you will do is produce more quote unquote IOUs since extra or excess or surplus payroll revenue will simply stay in the General Treasury of the federal govt and get spent on discretionary spending. The govt needs to STOP operating as a ”unified budget!” Without a lock-box or trust fund budget for SS & Medicare, anything done whether cutting benefits or increasing the cap will ultimately amount to more theft of these programs! Stop the Theft and GIVE US A LOCK-BOX!! Then propose your fix!
Thank you for a well-written, insightful article. I hope it gets published in “The Wyoming Tribune Eagle.”