Why is Social Security being cheated?
Social Security has been one of the most successful programs in United States history, but within the next 20 years or so it could go broke, much to the delight of the right-wing, who despise the government, in general, and social programs most of all. For the past 15 years or more there has been much hand-wringing and posturing about how to save the program from going broke, but has anyone bothered to examine why that possibility exists?
The are several obvious reasons that come to mind for Social Security being in trouble. First, of course, the baby boomers, the largest generation in history, is rapidly approaching retirement age, which will leave fewer workers supporting them. Second, the money that has been paid into Social Security all these years by the baby boomers, has been diverted for other uses; meaning money that should have been waiting for the boomers is long gone. You may recall that prior to the 2000 election Al Gore proposed a “lock box” so that the money collected for Social Security could only be used for that purpose, but sadly, despite winning by 500,000 votes, in what history will surely note as a great tragedy for America and the world, he lost.
The issue that you don”t hear much about is that most hourly workers are paid relative to the minimum wage, meaning that if your work is considered to be worth double the minimum, you get just that. The problem is that minimum wage has not come close to keeping up with inflation during the past 30 years. In fact, wages for all middle class workers have been stagnant during that time. Only the wealthy have seen their incomes skyrocket, and most of what they earn is not subject to withholding for Social Security, since they only pay on the first $100,000 or so of income. For those with incomes of $1 million, they only have withholdings on the first 10 percent of their income, while the average workers have withholdings on 100 percent of theirs. Meanwhile Social Security payments have been adjusted higher for inflation every year (until now). If the minimum wage had been keeping pace for the past 30 years, it would now be about $18 per hour. Everyone working for an hourly wage would be earning much more and paying much more into the system, as well.
It”s now time to make some tough decisions to save what has proven to be one of the most successful and popular programs in our history. Could you imagine how one-sided the vote would be if any politician had the audacity to try to repeal Social Security? It”s considered to be the “third rail” of American politics. When G.W. Bush proposed making just a small percentage of it private, he was unable to get to first base, even though he controlled both houses of Congress and the Supreme Court. Imagine also how much damage would have been done to the fabric of America if he had succeeded, leaving so many to the mercy of Wall Street. It seems to me that it”s time for the lock box to be created so that money paid into the system stays with it. It also makes sense to take the lid off the amount of income subject to withholding. How can it be fair that the wealthiest pay the least on an overall percentage basis? Why not reduce the percentage to be withheld by half, but make all income subject to the new lower rate? This would create something much more fair and much more sustainable into the future.
Lowell Grant is a local real estate broker.
