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Pastimes : It's the Economy- Stupid -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (39)	6/28/2000 5:18:00 AM
From: ztect	Read Replies (1) \| Respond to of 65

Some Thoughts on Social Security..... Privatization, in theory, will supposedly increase the rates of return making the social security system more solvent. The two basic ways in which privatization is proposed are 1). Let big brother do it for you. 2). Do it for yourself w. a percent of your contributions. #1 is the Clinton/Gore approach #2 is the Bush proposal Both have problems, and don't deal with the real issues of maintaining Social Security with an increasingly graying population. Many of these problems are noted in Nader's article like increasing fraud, and greater speculation. Both IMO are ways in which to jump and skip over that proverbial third rail in politics. When Social Security was formulated in the 30's under FDR, it was intended to provide a safety net for the elderly and those most susceptible. Life expectancy was also significantly shorter. During LBJ's administration the fire wall betw. revenues generated via Social Security taxes and revenues generated via Income taxes was torn down. Social Security revenues could and were subsequently used to fund items in the general budget. During the Reagan administration while marginal rates for income taxes were significantly reduced especially for those with higher incomes and cap. gains rates were also cut (benefiting those w. the capital i.e. those were more disposable income), the social security tax rate was raised seven times. Consequently due to the fire wall being removed during LBJ's administration, and the deficit spending of the Reagan administration, the money being generated by social security was being replced by IOU's or T-bills. Support of government spending thus partly shifted from income taxes and corporate taxes (which were also cut) to a flat social security tax of approx. 6 to 7 % . Income taxes were and are staggered, ie. the more you make the higher bracket you're in (theoretically). The Reagan administration flattened these gradations w/o significantly reducing tax deductions. The 1986 tax reform bill attempted to change tax code and reduce loop holes, but in many ways, this Act only created different ways to shelter income. So the theory of gradation has been undermined by what are the actual real percentages after deductions paid on gross receipts. Any true "flattening" or flat tax has to eliminated nearly all deductions, and this didn't occur. Politicians as diverse as Jerry Brown and Steve Forbes agree with this premise. Now social security again is a flat rate and only applicable to the first $65 thous of income made. Thus if you make up to $65 thous. you pay the full 7% or so your income in taxes. However if you make $1 mill in income, you don't pay SS tax on $935,000 of that income or, in other words, the amount of your income on which you pay social security tax is less than 1% of real income. So what does all this mean to "real" social security reform? 1). The Social Security Fund should again be separate from general funds. No borrowing from SS to cook the books or pay for other government programs. 2). Either make a greater portion of income taxable to the SS tax or means test. The program was intended for those that are in the greatest need, not for people who'd like more disposable income. 3). Raise the retirement age incrementally to 70, with extraordinary relief ie. disability offered to those at a younger age who truly need to retire and need the SS benefit. Again when SS was conceived life expectancy was much much lower. With these steps, any "schemes" of privatization wouldn't be necessary, since higher rates of return wouldn't be gambled upon to generate the foreseen short falls with the current tax rate, government and age structures. But then again, such changes would infuriate the AARP and be manipulated to generate fear and angst especially by Gore, thus rather than real discussions on how to protect the most in need, no real change will be proposed out of fear of losing the support and votes of a well organized constituency. Social Security IMO like other well intended programs was conceived during a specific context- the depression- to meet specific needs of the most susceptible. Unfortunately, the program as structured became a sacred cow or entitlement to which everyone feels entitled. SS needs to be re-examined and modified as the context has changed and, thus be modified accordingly irrespective of the politcal consequence. Privatization schemes just demonstrate to me that neither Bush nor Gore have the steel balls or real leadership skills to effect meaningful change or reform. Anyway, time to get off of my soap box. Any thoughts or reactions? The soap box is now clear for some one else to stand upon it. Sincerely, z (spellin' and grammar not checked)