Boo-hoo, Their Hearts are Simply Breaking
Oh-my, oh-my goodness, gracious! Why they feel so bad that it’s almost impossible not to feel bad for them – almost. Who you ask? Why Mitch McConnell, Paul Ryan and his Republican cadre of course. You know, that gang that’s supposed to have the best interest of working Americans at heart. And the subject as you probably guessed, is social security retirement benefits (SS). So let’s just listen once more as they explain, all the while choking back pretend tears, that they really, really don’t want to have to cut your earned SS benefits. But you know, if we stay on the current trajectory SS will go broke, so listen as they offer that there is absolutely no alternative but to cut your retirement check so the whole system doesn’t collapse. Now, if you are a current recipient, they opine, worry not because your payment is safe. Of course, they predictably don’t mention that this true simply because they know that cutting these voting active, current beneficiaries would be political suicide. But all other Americans, even those perhaps as old as 55, are definitely on the hit list. It doesn’t matter in the least to them that the retirement needs of these Americans will be just as great or greater one day. In fact, these are the generations of our fellow citizens that have the inglorious distinction of having their standard of living taking a great step back in relation to their parents. Suffering from poor wages, excessive health care costs, reduced employer sponsored retirement plans, and outrageous tuition costs, all due to anti-middle-class economic policies precisely like the one Republicans would implement for SS if they had their druthers. But what the heck, working Americans of today have been beaten up so thoroughly economically why not just sabotage the one thing they thought they could always depend on – SS.
So, what is the great farce? It’s not that if nothing is changed from today that SS will go broke. It will. It’s that these Republican leaders know better. They are smart (enough anyway) and most are rich, and they know how to count beans and they also know darn well that there are two ways to balance a budget – reduce payments out, or increase money in. It’s that second part, increase revenue, that has them absolutely quaking in their expensive boots. It doesn’t matter that this is the best solution by far for our people, economy, and country. Their wealthy donors, their puppet masters really, would never allow it so they once again disavow their backbones and our nation and run and hide from this solution and pray that no one will ever bring it up. For you to thoroughly comprehend what I am talking about requires a basic understanding of how SS is funded. So please allow me to do that in the next section. But once you have this knowledge, I am certain you will be as angry as I am and ready to pledge that this assault on America’s working and middle classes ends right here, right now.
Three Ways that Current Funding for SS is Grossly Unfair:
Payroll Tax: This is the primary funding mechanism for SS and the system is really quite simple. For each dollar you earn on your paycheck, up to $128,400, you pay 6.2% of it in SS payroll tax. Likewise, your employer kicks-in this same amount on your behalf so actually for each buck you make 12.4% (or just over 12 cents) is added to your account under the SS system. Now, did you catch the part that leads to the grossly unfair? For every dollar you earn over $128,400 you pay absolutely no SS tax. Therefore, as it turns out, the wealthy in our country pay considerably less as a percent of their income into the SS system than lower wage earners. Take a look at the chart below. Basically, after reaching the $128,400 threshold, the more you make the less you pay. In fact, once you take in a bit over $16 million (don’t laugh, many in this country do), if you round to the nearest 0.1% you statistically pay nothing in SS tax.
------ ---------------------------------------------Annual Income ---------------------------------------------
20K 70K 120K 250K 1 Million 5 Million 10 Million 16.3 Million or more
% Paid in
SS Tax 6.2 6.2 6.2 3.2 0.8 0.2 0.1 0.0 .
There is another issue with the payroll tax besides the very rich paying a far lower percentage of their income into SS. For the last several decades, many employers have been degrading the quality of retirement plans they offer their employees and contributing less to them. This has resulted in a situation where a large majority of Americans, even those nearing their golden years, do not have savings even close to being sufficient for retirement. This leads to great justification to increase the amount that employers contribute to SS on behalf of their workers. In other words, the employee tax would remain the same at 6.2%, but the amount the employer provides to match would go up 2 or 3 points to say about 8.7%. Don’t believe the incessant whining you will hear from corporations and Republican lawmakers when this proposal is made about how they just can’t afford it and it will costs jobs - blah, blah, blah. In the last 40 years wages of American employees have stayed flat while compensation for CEOs has risen about 1000%, profits for businesses overall have been great, unemployment is very low, and as indicated corporations and government agencies have been contributing less and less to their workers retirement. They can afford it with little problem, and they know they can.
Capital Gains, Dividends, and Interest: These are three types of income that are completely exempt from SS tax. Capital gains is selling stock or some other types of property at a profit, and dividends in this case refers dividends from stock. Incidentally, not only is capital gains income exempt from SS tax, but in the higher tax brackets it is levied at about half the rate of earned payroll income (you know, the type that most of us make). Now what all three of these types of income have in common is that they generally comprise a non-existent or small component of the income of working and middle-class Americans. But, as you might have guessed, often a very significant portion of the revenue of the very well-to-do. Now the supposed justification for the lower income tax rate on capital gains and complete exemption from SS tax is that we want to encourage people to invest. Well isn’t that precious? I thought we wanted people to work too but we sure sock the paychecks of regular Americans, most of whom have much less, with more types of taxes. The truth is there is no underlying moral justification for taxing capital gains less. It is sheltered from taxes because: (1) it is a common income of the rich and many members of congress are rich, and (2) big money donors gave the campaigns of congress people fat checks in order to buy themselves unfair tax breaks.
Low Wages: The great majority of American employees today, all the way up to mid-management level, are substantially underpaid. We have already mentioned that American workers, when adjusted for inflation, have not received a significant raise in the last 40 years. Likewise, do you realize that if the minimum wage had kept pace with increases in the productivity of workers since 1968 It would be about $19/hr. today? Employees are the “wealth creators”. The vast majority of corporations and businesses, small and large, do not make a dime without the effort of their workers. Yet these employees, who by and large have been very productive, have been getting stiffed by businesses in our country for the last four decades. I’m not talking about socialism or claiming that everybody should make the same. The rich will always be the rich and the laborers the laborers, but employees deserve a fair share of the wealth they create and when the economy grows all economic boats should be lifted instead of just the largest. If wages of American workers had grown in a fair manner over the years, SS today would be much better shape simply because those who earn more pay more into the system.
Time to Make a Stand
The plain fact of the matter is that there is absolutely no reason that SS retirement benefits could not be increased for our elderly right now and in the future and be completely paid for. All it takes is fair wages and fair taxes. But to accomplish that we need politicians who care more about our people and country than they do about their petty politics and big money lobbyists.
Correct any combination of the injustices previously explained in an effective way to fund the increase in benefits. For instance, require that the standard SS payroll tax apply to incomes over $500,000, including the employer match, and increase the amount that employers contribute on behalf of their employees. Or, have some percentage of SS tax apply to capital gains income, and implement a living wage in this country. This type of change is justified and should be done. With a little innovation and considered thought, it could even be changed to benefit the tax situation of working Americans and small businesses. For instance, applying the SS tax to some or all incomes over the threshold may allow a reduction in the tax for earners beneath the threshold without a loss in retirement benefits. Likewise, many small business people are burdened today by a double-whammy, having to pay both the employee and employer portions of the SS tax out of their income. Perhaps this rate could be lessened by implementing some of the prudent solutions to the current SS tax situation already outlined.
What it boils down to is do we want to provide our retired loved ones dignity and a decent standard of living, and our children good hope for the future, or do we want to preserve the option of the rich, and often the extraordinarily rich, to not pay an extra nickel (figuratively) in taxes. Our retirees have earned it, and we will have earned it one day also. Corporations and many of the wealthy have benefitted greatly and unfairly in recent decades from substandard wages and diminished pension benefits provided to employees. Time to compensate for this injustice that never should have occurred in the first place. Taking good care of our elderly is also morally and economically good for our country. Do we really want to see our parents and grandparents struggle to feed themselves, afford decent medical care, or to be homeless? Doesn’t this just place additional burden on the social safety net, government budgets, and all taxpayers when the ones that profited from the life-long, under-compensated labor of these retirees should simply finally be chipping in their fair share? And providing a decent, well-earned, SS retirement check clearly benefits our economy and the financial solvency of our government also. People in their golden years who can afford housing, medicine, and the many other life’s needs become financial drivers of the economy and contributors to the tax base rather than the opposite.
Democratic politicians, make this a defining issue of your campaigns and party. You were once broadly considered the party that grew, and championed the middle class and working people in this country. Yet in more recent times you have foundered in your message, often being no more than milder versions of Republicans, and lost nearly unprecedented numbers of elected seats. Stand for something once again! Stand not just for saving SS, but increasing the SS retirement benefit now and in the future and having it paid for by fair wages, and fair taxes on the wealthy. Draw a clear line of distinction between you and the other party with this and other important middle-class issues, and start winning elections and benefitting working people all across this land once again.
The standard of living for the American middle class has been consistently bludgeoned for the last 40 years. Wages, retirement benefits, healthcare, employee rights, college tuition, virtually all degraded and less favorable for working people. Economic prospects and expectations for our children worse than they have been in this country for a long time. This despite the fact that our labors in recent decades have brought nearly unprecedented wealth to corporations and the rich. Make SS a hill to die on. Aggressively push back against any politician who so much as implies a threat against SS. If they even use the word “entitlement” to describe your earned SS benefits call them out. When they use that word all they are trying to do is diminish your work efforts and contributions to SS over your career to try to soften the ground for proposed cuts. Let them know that simply saving SS is not enough. That it is time for working people to move forward again and insist on increasing the SS benefit and having it paid for. Then back this up by refusing your vote for any candidate that does not explicitly support this and make sure they know it. The middle class was not a birthright for working Americans that was simply bestowed upon us. It was strongly fought for by our fore-fathers and mothers with their blood, sweat, tears and more than few times their very lives. Let’s honor their sacrifice, advance a giant step toward rebuilding the middle class, and guarantee that a dignified, economically-just retirement for ourselves and our children will be more than simply a hope.
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