Re­move So­cial Se­cu­rity from fis­cal cliff chop­ping block

Austin American-Statesman - - BALANCED VIEWS - Poplin is a physi­cian, at­tor­ney and pol­icy an­a­lyst in Bethesda, Md. She wrote this for the Baltimore Sun. poplinaya.yale.edu.

We

are now hurtling to­ward the so-called fis­cal cliff, a package of au­to­matic tax in­creases and spend­ing cuts for 2013 de­signed to stam­pede Congress and the pres­i­dent into a “grand bargain” on deficit re­duc­tion, to in­clude new rev­enues (trans­la­tion: taxes) and en­ti­tle­ment re­forms (trans­la­tion: cuts to Medi­care and So­cial Se­cu­rity).

So­cial Se­cu­rity con­sti­tutes roughly 20 per­cent of the fed­eral bud­get. Deficit hawks in­sist that the U.S. can­not af­ford ben­e­fits at the cur­rent level. They are wrong. Most mid­dle-class Amer­i­cans, now and in the fu­ture, will de­pend on So­cial Se­cu­rity for a dig­ni­fied re­tire­ment.

We should take So­cial Se­cu­rity off the ta­ble in this de­bate.

So­cial Se­cu­rity is sur­pris­ingly mis­un­der­stood. Those who think the pro­gram pri­mar­ily ben­e­fits the poor should know that it is ac­tu­ally a pub­lic pen­sion plan for the mid­dle class, tied to work. Work­ers (and em­ploy­ers) con­trib­ute a sub­stan­tial per­cent­age of wages and salaries — 12.4 per­cent (ex­cept dur­ing the cur­rent pay­roll tax “hol­i­day”) — through­out their work­ing lives to cover ben­e­fits in their re­tire­ment years. Even the poor­est work­ers pay this tax, no mat­ter how lit­tle they earn. Those who don’t work can’t col­lect.

The word “en­ti­tle­ment” is of­ten thrown around like a slur th­ese days, but the fact is, re­tirees are in­deed en­ti­tled to their ben­e­fits.

The ben­e­fits are mod­est; the me­dian an­nual amount in 2010 was $15,701. The me­dian in­come for re­tirees over 65 was $25,767, lower than for those still work­ing.

So­cial Se­cu­rity pay­ments are par­tic­u­larly valu­able, though, be­cause they are backed by the full faith and credit of the U.S. government.

This brings us to the most mis­un­der­stood fea­ture of So­cial Se­cu­rity, the Trust Fund. So­cial Se­cu­rity is of­ten de­scribed as a pay-as-you-go sys­tem, with taxes from cur­rent work­ers go­ing to pay ben­e­fits of to­day’s re­tirees. Con­ser­va­tives con­clude that since the ra­tio of work­ers to ben­e­fi­cia­ries will de­cline as we boomers re­tire, ben­e­fit pay­ments must be re­duced.

That ar­gu­ment fails to take ac­count of the Trust Fund. To deal with the pro­jected re­tire­ment of the huge baby boomer gen­er­a­tion, in 1983 Congress raised the pay­roll tax and ex­tended the re­tire­ment age for boomers from 65 to 67.

The ex­tra rev­enue was not needed for 1980s re­tirees; it was set aside to fund the boomers’ re­tire­ment — in the Trust Fund. The money was saved as all money is saved in a mod­ern econ­omy: the trustees in­vested it in safe fi­nan­cial as­sets, U.S. Trea­suries.

Con­ser­va­tives claim that the Trust Fund is a fic­tion — that the So­cial Se­cu­rity sur­plus was spent, not lent. That is wrong. The government bor­rows from the Trust Fund just as it bor­rows from China. If th­ese bonds are not re­deemed or rolled over when they come due, the U.S. will de­fault. Any other re­sult would be a be­trayal of Pres­i­dent Ron­ald Rea­gan, Congress, and mil­lions of boomers who paid tril­lions of dol­lars in ex­tra taxes over four decades to se­cure a dig­ni­fied re­tire­ment.

Since the 1980s, most em­ploy­ers have switched from de­fined ben­e­fit plans, in which em­ploy­ers guar­an­teed qual­i­fied re­tirees a monthly pay­ment for life, to much cheaper 401(k) or de­fined con­tri­bu­tion plans, which al­low em­ploy­ees to set aside some earn­ings in a tax-shel­tered re­tire­ment ac­count. Now, work­ers must save ex­tra to cush­ion them­selves against longevity risk.

Yet, with me­dian in­come stag­nant over the past 30 years, it is dif­fi­cult for many to save such large sums. That is why So­cial Se­cu­rity, which guar­an­tees sta­ble pay­ments for life, is so valu­able.

The Trust Fund is ex­pected to run out in 2035, and Congress should make pro­vi­sion for the out years, as it did in 1983 for the boomers.

But So­cial Se­cu­rity did not cause the fed­eral deficit and should not be part of any “grand bargain” to fix it.

Two months af­ter city lead­ers re­jected a de­vel­oper’s $1.2 mil­lion of­fer for a small city lot on Rainey Street, de­bate is still sim­mer­ing about what to do with the land — and whether the city should re­think the street’s fu­ture. We asked: Should Austin re­con­sider sell­ing the lot for high­rise devel­op­ment?

Jaden Honey­drip­per Davis: No.

Yvonne Cortez Flores: No...

Denise Dour: No.

Rick Her­nan­dez: Why not ... you al­ready pimped out the other half of Rainey St. when you over­in­flated the house prop­erty val­ues up to 600K to force peo­ple out who had been there 50+ yrs be­cause they couldn’t af­ford to pay the prop­erty taxes. It was noth­ing

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.