Tax Cut for Rich Equals Entire Social Security Shortfall Over Next 75 Years
Contrary to what the deficit hawks tell you, Social Security is not in trouble, and it does not contribute significantly to the deficit.
There are several simple ways the small Social Security shortfall over the next 75 years could be remedied. One would be to let the tax cut for the rich expire. The savings from the cancellation of that tax cut would about equal the Social Security shortfall over the next 75 years.
The cap on Social Security contributions could be lifted.
Here are some facts from ourfiscalsecurity.org:
Social Security is currently in surplus and will take in more than it pays out until at least 2037, more than a quarter century from now.
Raising the employer and employee payroll tax rates by just 1.1 percent each would erase the entire 75-year projected shortfall.
Inequality leads to the projected Social Security shortfall: as income growth has become concentrated at the top, more income has fallen above the payroll cap of $106,800. Congress could close the entire 75 year projected funding gap by raising or eliminating the cap on taxable payroll income.
Not just an I.O.U.: Income to the Social Security trust funds must be invested in guaranteed Treasury securities, which can be redeemed at any time at face value, giving the trust funds the same flexibility as cash.
Social Security can never add to the yearly deficit; by law it cannot draw a single dollar from general revenues, even if payroll taxes fall short of scheduled benefits.
Not just for the Elderly: Social Security also protects you if you become disabled—a 20 year-old worker has a 30% chance of dying or becoming disabled before they reach retirement age.
Social Security provides more benefits to children than any other program (more than TANF or SSI programs).
It’s clear that the deficit hawks promote the myth that Social Security is in trouble in order to justify an assault on the program, including the scheme to privatize it. That massive pool of money is very enticing to the financial class (the same folks who brought us the Great Recession). The attack is also part of the general effort by conservatives to roll back all elements of the New Deal.
Kevin Drum, writing recently in Mother Jones, published a CBO graph that clearly shows that the primary out-of-control factor affecting our fiscal condition is health care. Take a look:
Discretionary spending (the light blue bottom chunk) isn’t a long-term deficit problem. It takes up about 10% of GDP forever. What’s more, pretending that it can be capped is just game playing: anything one Congress can do, another can undo. So if you want to recommend a few discretionary cuts, that’s fine. Beyond that, though, the discretionary budget should be left to Congress since it can be cut or expanded easily via the ordinary political process. That’s why it’s called “discretionary.”
Social Security (the dark blue middle chunk) isn’t a long-term deficit problem. It goes up very slightly between now and 2030 and then flattens out forever. If Republicans were willing to get serious and knock off their puerile anti-tax jihad, it could be fixed easily with a combination of tiny tax increases and tiny benefit cuts phased in over 20 years that the public would barely notice. It deserves about a week of deliberation.
Medicare, and healthcare in general, is a huge problem. It is, in fact, our only real long-term spending problem.