Sunday, August 08, 2010

Michael Does The Math

OK, I admit that I have a bias when it comes to essays written by Michael Hiltzig, a business columnist for the Los Angeles Times. As far as I'm concerned, he's always right on the money. He's one of those columnists like Paul Krugman of the New York Times who does his homework and puts out the information accurately. Both men must drive the oligarchs, our owners, batshit-foaming-at-the mouth crazy because if people start paying attention to what Hiltzig and Krugman have to say the gig is up for the super-rich.

Mr. Hiltzig's latest column is yet another example of why I hold him in such high esteem. He has actually taken the time to read the annual report on Social Security, done the math, and has come up conclusions which match reality rather than the wishful thinking of the powerful.

The annual report of the Social Security Trustees is the sort of rich compendium of facts and analysis that has something for everybody, like the Bible.

In recent years, during which conservatives have intensified their efforts to destroy one of the few U.S. government programs that actually works as intended, the report's publication has become an occasion for hand-wringing and crocodile tears over the (supposedly) parlous state of the system's finances.

This year's report, which came out Thursday, is no exception. Within minutes of its release, some analysts were claiming that it projected a "shortfall" for Social Security this year of $41 billion. ...

The old age and disability trust funds, which hold the system's surplus, grew in 2009 by $122 billion, to $2.5 trillion. The program paid out $675 billion to 53 million beneficiaries — men, women and children — with administrative costs of 0.9% of expenditures. For all you privatization advocates out there, you'd be lucky to find a retirement and insurance plan of this complexity with an administrative fee less than five or 10 times that ratio.

This year and next, the program's costs will exceed its take from the payroll tax and income tax on benefits. That's an artifact of the recession, and it's expected to reverse from 2012 through 2014. The difference is covered by the program's other income source — interest on the Treasury bonds in the Social Security trust fund.

And therein lies the basis for the pseudo-angst of the rich and powerful. That interest payment mechanism just might mean that we're going to have to revisit the taxation scheme, something that chills the souls of the oligarchs (assuming they have any). What is so remarkable about the column, however, is that Mr. Hiltzig lays out in elegant yet understandable prose how that works:

The truth is that there are two separate tax programs at work here — the payroll tax and the income tax — and they affect Americans in different ways. The first pays for Social Security and the second for the rest of the federal budget.

Most Americans pay more payroll tax than income tax. Not until you pull in $200,000 or more, which puts you among roughly the top 5% of income-earners, are you likely to pay more in income tax than payroll tax. One reason is that the income taxed for Social Security is capped — this year, at $106,800. (My payroll and income tax figures come from the Brookings Institution, and the income distribution statistics come from the U.S. Census Bureau.)

Since 1983, the money from all payroll taxpayers has been building up the Social Security surplus, swelling the trust fund. What's happened to the money? It's been borrowed by the federal government and spent on federal programs — housing, stimulus, war and a big income tax cut for the richest Americans, enacted under President George W. Bush in 2001.

In other words, money from the taxpayers at the lower end of the income scale has been spent to help out those at the higher end. That transfer — that loan, to characterize it accurately — is represented by the Treasury bonds held by the trust fund.
[Emphasis added]

In other words, the rich have been borrowing from the less rich and suddenly their debt is going to have to be paid, probably by raising their taxes back to where they were eight years ago, if not to where they ought to be. Is it any wonder that the private-jet-owning class is beginning to squeal?

The fact of the matter is that even with the shortfall of the next two years, the Social Security Trust Fund is not in any immediate danger, no matter what such oligarchs as Pete Peterson and some of the members of the Catfood Commission have been saying. The Trust Fund is solvent and will continue to be able to pay out benefits for the next several decades.

If we want to extend the viability of the Trust Fund, we needn't rush into reducing benefits or extending the retirement age. What we ought to do is raise or remove the ceiling on payroll taxes being paid into Social Security and Medicare, something Mr. Hiltzig thinks is a better approach. In the mean time we ought to cut off all the crap being trickled down on those of us who actually work for a living and pay into the fund. We need to call bullshit every time someone calls Social Security or Medicare an "entitlement". Neither are: they are both insurance policies that we've paid premiums on, some of us for over 45 years. And we also need to point out that neither, not Social Security nor Medicare, contribute to the national debt.

In short, if the new trustees report gets examined wisely and responsibly, it should put an end to all the current talk about raising the retirement age or cutting benefits. Social Security doesn't contribute a dime to the federal deficit, and in these days of market stagnation and cutbacks in pensions, it has never been more important to millions of Americans. The Pete Petersons of the world should find themselves a different target.

Preach it, Brother!

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Blogger montag said...

I agree that the column is great. I was saddened by the comments to it. It appears that there are a lot of people willing to gnaw off their foot before it gets caught in a trap.

8:52 PM  
Blogger One Woman, Ink. said...

I would like to thank "Crooks and Liars" for the link to this blog. Diane offers a compact, but easily understood, synopsis of what I sarcastically call the "Game of Life." [Cliché intended.] As everyone with under $100K income, or who is dependent on Social Security for disability benefits or retirement income knows, we are just easy marks in the game—we are not really playing it.

People like me are fully disabled since 2002, but unable to get in the game; I do not receive Social Security Disability because of a little "quirk" in the system. We know what it is like to sit in the bleachers while the top-five-percenters run the play. People like me are women who busted their asses working 16-hour days, seven days a week for over 39 years, with only three actual vacations, and never took a dime or a handout from anyone.

However hard the oligarchs push for expansion of their form of government, it is incumbent upon the rest of us to remain critical of their crusade, and stand in resolute opposition to their constant manipulation. For that to work, we must each take some time to gain a better understanding of what’s actually taking place around us, and to what efforts are being employed against us. Progressive blogs are a great method for discovering the truth.

This particular blog entry has really provided me with a printable explanation of who American oligarchy is attempting to take away something we in the working class worked so damn hard to achieve. Print this entry and make copies for anyone who argues with you about the “entitlement” you so earnestly rely on. Thanks!

11:05 AM  
Anonymous hawkny said...

America's Social Security System is the greatest social insurance program ever devised by mankind. It has been emulated around the globe in the industrialized world. Instead of curtailing Social Security benefits the U. S. government should expand them to provide greater protection to the American people in times of medical, social and income need. There is nothing to the notion that the Social Security trusts are or ever need be insolvent. Anyone or any body that indicates otherwise is either ignorant of the facts or a liar harboring devious motives and anti-populous goals. These agents of greed or instruments of fear and distrust should be ignored and/or chastized for what they are and who the represent.

4:26 PM  

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