Social Security Reform

After I blew out the transmission in my first car (a Ford, imagine that) my father asked if it was doing anything funny before the final death throw. I told him yes, but that I just didn’t have the money to fix it and would rather suffer the drivetrain oddities than shell out cash from my anemic McPaychecks. He told me something that I’ve followed to this day: fixing problems early is hella cheaper than waiting until the entire system collapses.

Accordingly, I applaud Bush for pushing Social Security reform. Though the devils are in the details and I might not agree with him that the system is heading for guaranteed solvency in coming decades, I do believe the margins of error are too tight for comfort. I applaud him for having the political courage to reach out, touch that political third rail, and look at a problem before it blows up in our collective faces, potentially costing our generation the social safety net we are expecting.

Democrats should take a skeptical stance right now, in contrast to unflinching opposition. This is an assured method to be left out of the negotiation process. I earnestly want to believe Bush when he said he was open to any suggestion that allows for some sort of private account, does not raise payroll taxes, and is not a temporary solution. These are terms that Democrats should agree to on an ad hoc basis for the sake of coming to an acceptable compromise with a hesitant Republican majority.

Much the same as with Bush’s original tax cut proposal, his numbers are elephantine (and economically disastrous) on purpose – starting on higher ground to wage battle so that the inches ceded leave him with a result closer to his original goals. Allowing the Social Security to have its income slashed by 65% (4% of income, which will come out of the 6.2% payroll rate) would bankrupt the system as we know it. Though guaranteeing funding, albeit smaller than current payouts, for current freshman, it would nonetheless axe benefits for the non-traditional students. Already well into their careers, they have subsequently not had time to significantly pay into these accounts before costs exceed revenues in 2012 because of the accounts.

Bush purportedly has not ruled out raising the ceiling on taxable income. Currently, Social Security dishes out benefits proportional to what workers put in while they worked. In a bit of regressive-tax logic, only the first $90,000 of income is taxable – maxing out at $5580 a year. In raw numbers, that means that most liberal arts UNF graduates will be taxed 6.2% on all income, while an MBA peer making $900,000 yearly is only paying a tenth your tax rate at .62%.

Depending on Republican momentum on this issue, it is likely Democrats will have to make a “deal with the devil” to ensure the survival of America’s largest entitlement program’s. If allowing for small private accounts is necessary to eliminate the taxable income bar and make other steps necessary to ensure the programs solvency, , then that's a deal that should be made.