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The Lie Upon Which Rubio’s Social Security Plan is Built
Marco Rubio has laid out his plan to save Social Security in the 21st century at National Review Online. As with pretty much every other Republican candidate’s plan save Huckabee’s, it basically entails three steps.
The first: Raise the retirement age for receipt of Social Security benefits:
With Americans now living longer than ever before, the strain on Social Security’s finances is steadily increasing. … First, we must gradually increase the retirement age for individuals under 55.
This is often (nearly always) the first idea. Were this healthcare, it would be called rationing. Yes, people live longer today than they did when the system began. The system was never designed to pay a person for 20 years of inactivity in the labor market. Well, duh: The system was never really designed to pay out at all. It was merely a tricky, feel-good way for the government to confiscate even more of a person’s wages. People were to pay into the system their entire working lives, and if they won the genetic lottery, maybe collect a few years of benefits before the Reaper made his appearance.
Well, innovation has again thwarted the money-grubbing politicians, and people are living long enough to force the system to make good on its so-called promise. The most immediate and obvious solution is to change the promise. Sure, government may have said you were paying into an “insurance” program, investing in your own future with the backing and surety of the United States Government, but it was a lie. The Supreme Court long ago decided that taxes paid into the Treasury belong to the government; the government is at liberty to spend the money as it sees fit; and taxpayers have no rightful claim on any money once the government takes possession of it. Government can, should it will, simply alter the time and amount of “return” you get after a lifetime of seeing 12.4% of your wages confiscated and squandered by the government. This leaves the question of whether or not it should.
To those who have never done physical labor, it probably makes sense just to inch up the retirement age. Sitting at a desk shuffling papers and staying awake through gawdawful PowerPoint presentations is one thing, humping load chain and slinging it over cargo on a flatbed is something altogether different. Working past 65 because you’ll live beyond that (with whatever quality of life that entails) is a completely different experience for different people in different occupations. At 43, I already fear doing my job at 53, and I cannot imagine being physically capable of performing it at 63 or 70.
This ties into Rubio’s second step, means-testing Social Security benefits:
[W]e should do more to protect seniors on the bottom of the income scale, who are too often consigned to poverty in old age. This can be done by reducing the growth of benefits for upper income seniors while making the program even stronger for lower-income seniors.
Again, this is a very common approach to the problem. Return more to those who require more. The stink of Marx is all over the idea, but that’s another problem. Those to whom this is directed are likely the very same ones the first idea tries to kill by keeping them in the labor force longer. The amount of physical exertion required in an occupation seems to often be inversely proportional to the compensation received for it. Like the first, this suggestion is rationing. It is worse because it returns more to those who contributed less financially, and makes the redistributive quality of the program more blatant without acknowledging it plainly. It embodies the Marxist maxim, “From each according to his ability, to each according to his need.”
Rubio’s third idea (also standard conservative dross) is the least bad of the set, but comes with its own negatives. He calls for private retirement:
[W]e must empower our people to save more for retirement. Social Security should be one component of retirement security along with employment-based plans and personal financial assets like IRAs, mutual funds, and personal savings accounts. Americans should also be able to save for retirement without paying taxes on their retirement investments. My tax-reform plan eliminates taxes on interest, capital gains and dividends. Educating Americans on the benefits associated with retirement saving and planning is also important.
This is a model the government is already mostly behind, at least for its own workforce. People make a big deal of federal government pensions, but for a couple of decades these have been a tripartite system comprising a small pension, Social Security, and the Thrift Savings Plan (a contribution-based retirement account with some employer matching contributions). If such a system is good enough for the Feds, surely it’s good enough for everyone else. What the Senator describes is exactly what is already in place for him and his staff. In this system, Social Security becomes less important to one’s retirement. The individual is mostly left to sink or swim based on savings and wise choices about how that money is invested and grown.
Mind you, the same disparity exists here as it does in the other points of reform. Those who make less have less to save; their physically useful work life limits the amount of time they can contribute to their own savings; and, let’s face reality here, they may not have the wherewithal to give appropriate attention to the husbandry of their retirement accounts. The same people who work harder will still have less to show for it, and they will be just as dependent on the benevolence of government in the end. Things could turn out better for them, but there’s no guarantee. So it’s easy to see why Huckabee’s call to keep the status quo is appealing to the blue-collar segment of the electorate. Of course, using the tax code to compel desired behaviors is yet another un-conservative idea that’s widely accepted when couched in the right terms.
Well, smarty Prawn, you might ask, what exactly is your prescription? I can’t lay out a nice three-point plan to save Social Security or provide comfort in old age to the populace. I hate to point out a problem without suggesting a solution, but this matter is way bigger than me. The key thing, in my uninformed opinion, is to start hacking away at the very root of the problem: The entire Social Security system is a lie. This is not an insurance plan where you pay your premiums and receive your reward when it’s your turn.
Social Security is a direct payment welfare program. The wages of the barista at Starbucks, struggling through on $11/hour (or $15 in Seattle), are confiscated and given immediately to her grandmother. The young are taxed to subsidize the old. This often takes from those with the greatest need and just as often gives to those with the least. If we really believe this program satisfies a collective moral obligation, then let’s treat it as such. Let’s abolish the myriad taxes and replace them with “one tax to rule them all.” Take from all without bias or favor, give to those actually in need. If we must redistribute wealth, if we must ration the redistribution, then let’s do it all above-board and honestly. If we want our elderly population to live in dignity, if we believe a redistributive welfare program accomplishes that goal, then let’s do exactly that and nothing else with the taxes we confiscate for that purpose.
Rubio’s plan is tinkering around the edges and playing with the balance sheets. But never touches the real problem, which is the lie upon which the system is built.
Published in Domestic Policy, Economics, Elections, General
It’s interesting to me the the Dems are always harping on how the Republicans want to cut tax on the rich. But what about Social Security which transfers money from the poor to the rich, and only Republicans are interested in doing anything about it.
This is just one of many examples of how Democrats are unable to think things through.
They should oppose subsidies to higher education, because they tax working class people to put middle class people through college so they don’t have to be working class.
They should oppose environmental policies that cause the price of electricity and gasoline to go up, because those price increases have an enormous effect on the lives of poor people, and the rich not so much.
They should oppose an increase in the minimum wage because it leads to very high rates of unemployment among black teenagers.
They should support stop and frisk and other policies that reduce crime because blacks are by far the likeliest victims of crime.
They should elect Republican mayors and city councils because the Democrats they do elect run their cities into the ground.
Etc.
FIFY.
Amy , what I said is that SS paid out 80 billion more than it took in. That makes up about 10% of the defect. I didn’t say that SS was ten percent of the budget. But SS should be looked at as separate from other expenses because it has its own separate revenue stream. Fix the other 90 % before complaining that baby boomers screwed everyone. SS is not wefare. I paid hundreds of thousands of $ for 38 years. In fact we supposedly built surpluses too. I will also argue that inflation cuts SS every year. As for wanting health, wait until it’s your turn to need it to tell me about death panels. Yes some people collect for a long time. My grand father collected 30 years even though he never paid a dime into it. My high class was 39 people ,11 of are dead you will be glad to know. BTW ,thanks to a baby boomer Bill Clinton , SS is taxable.
Fungibility. The federal government realistically has one bank account into which all revenue flows in and all spending flows out. It’s part of the lie (which was debunked in Helvering v Davis) that payroll taxes are earmarked for any particular spending or belong to any individual.
I don’t disagree entirely with you, just think that retirees will rise up in arms against draconian COLA adjustments downward – prior adjustments have been heavily scrutinized by this group I recall. So I would expect any tricks of this sort to be rather modest in their effects.
King, when is the last time you sent a check to pay for an aircraft carrier?But you did pay your FICA.
I just can’t follow your logic, sorry:
“The one who cannot work and has no savings..”, I’m sorry, after 45-50 yr of working, one should have savings, planned for same.
“The one who can work will make more and can probably save more, and increase his monthly payments. Also very likely he will live longer and collect more SS in the end.” – yep, if you work and earn income longer, sure enough, you have a better chance of a higher standard of living. Oh, yes, there is that small matter of having to work longer to get this better life.
Just not buying this, sorry.
PS. Isn’t disability insurance a factor here for those physically unable to work?
“King, when is the last time you sent a check to pay for an aircraft carrier?But you did pay your FICA.”
As someone who’s been hit with multi-thousand dollar tax bills for FICA when she had no income tax liability, let me note that one pays the check to the IRS, not the Social Security Trust Fund.
Here’s my gross (and I mean gross) calculation of how much it would cost to fully ‘privatize’ SS today. We first inquire how much of separate investment of money would need to put into a fund to produce the identical ~$800 billion/year in benefits. Well at ~8.5% (=1/12) return from mutual funds, you would need ~$9 trillion dollars. But it is not quite that bad, because we have an existing revenue stream out into the future from payroll taxes. Let’s assume that that stream is worth ~45% of what it takes to make SS solvent. We can then reduce that $9 trillion fund requirement down to about $5 trillion. That’s all we have to do, MwtA, just find ~5 $trillion dollars laying around.
The alternative is to implement something like an augmented Christie plan that 1) needs-tests and 2) ups RA (or cuts benefits JoJo) and 3) adjusts COLA and 4) increases payroll taxes to close gap. That’s all (unless my math is bad, of course)
Amy , for 30 years I paid FICA for up to hundred people and never missed one.The checks did not go to the IRS. Maybe you need a better attorney.
Manfred, you expressed concern for the worker with no savings in a comment above, so I don’t see how you’re “not buying” what you brought up. I was going into the implications of the concern you raised, and explaining that your solution makes one party better off and the other much worse off, though neither of them have savings. I would hope that if you are concerned about the worker who can work, you are also concerned about the worker who can’t.
We already discussed disability. My feeling is if anyone has to beg for their benefits everyone should have to beg for their benefits; i.e., means testing. Also some people can’t work because they can’t get a job.
Your system prioritizes the interests of healthy people with a good job they can do another two years at 67, over the interests of people who can’t work from 67-69. The people who can’t work have probably paid SS taxes for forty plus years too. Cutting benefits without raising the age is fairer.
Um, my self-employment taxes went to the IRS……?
So why would these folks want your system where they have their benefits cut? They might prefer to work while they still have some gas left in the tank, then retire with more money each year, as opposed to having to live off less for the rest of their lives. A lot of folks work the extra years with the intent of getting higher benefits. You disfavor that, probably because of some personal experience you have, but they could feel strongly to the contrary. You are picking and choosing who to favor here, which is your right. But, your perspective is no more compelling than these persons’ perspective to me.
Manfred, you are picking and choosing who to favor. Raising the age eliminates benefits that are not vital to the healthy and employed, but are vital to the unhealthy and unemployed. Not surprisingly that approach looks ok to the healthy and employed. Not sure why you can’t see that or why you think it’s fair since they both had to pay in over a lifetime. I do understand it is an easier political sell than benefit cuts but that does not make it right.
My perspective here is one of trying not to increase the already inherent and unavoidable unfairness of any arbitrary age. The extra two years or whatever extract very different costs from different people.
Agreed. But the people you disagree with count too.
Of course they count, and they get equal treatment if the age is kept the same. In fact they get preferred treatment in terms of having additional choices and being statistically likely to get more of a total payout. They just don’t get additional preferred treatment.
The system was set up so that some would win the payout lottery and some would lose, which is unavoidable. Raising the age creates more losers in order to minimize the required reduction in the lottery payout. The losers are not all responsible for being in that position even if you concede that the decision to eat junk food or do physical work makes you a fair target for discriminatory government policies, which I do not concede.
Of course. But I see huge numbers in their 20s and 30s and trust me they have never worked up a sweat. I love the ones who come in for an injury playing basketball or golf and are on disability for their “chronic back pain”.
This is an instance of a common problem herein nonsense particulars enjoy the camouflage of accurate generalizations. Back pains is real, but back pain *cases* still break down into meritorious and mendacious particulars.
False propositions do fit into a valid truth table — they just evaluate as false.