Social Security, Day by Day

[JohnnyBz00LS]

Social Security, Day by Day

By Richard Cohen

Tuesday, May 3, 2005; Page A21

This column is about Day Two. Day One is the first day of the work year. On that day, the average American worker earns about $142.31 and, of course, has a piece of that withheld for Social Security. Since the cap on such payments is $90,000 a year and the average American earns only $37,000, he or she pays Social Security tax all year long. Now we come to Day Two. For some people, it's not like Day One at all.

A couple of those people happen to be Tom Freston and Les Moonves. They are co-presidents of Viacom, the entertainment conglomerate that owns CBS and Paramount Studios. Last year they each took home more than $50 million. Of that, about $20 million was in salary and bonuses (I'm rounding like crazy here), which means that if they get paid for 52 weeks a year and work a five-day week, they earned about $77,000 on Day One. By, say, 10:15 in the morning of Day Two, their Social Security obligation was behind them.


I give you these data so you will see what suckers we Americans are. Here is the president of the United States, a certain Mr. Bush, attempting to sell us a revision of the hallowed Social Security program -- FDR, Warm Springs and all that -- that would reduce benefits for many of us while at the same time ruling out any increase in the cap. The cap would stay where it is, about $90,000, because to raise it would mean a tax increase, and it is dogma in the Republican Party and the White House that such a thing must not be done. Instead, taxes must only be reduced, which they have been under George W. Bush. To refer back to Freston and Moonves, had they been in the money back in, say, the 1980s, their marginal tax rate -- the rate paid on anything over the first couple of hundred thousand dollars -- would have been 50 percent. (It's been as high as 94 percent.) It is now around 35 percent. Not bad. Not bad at all.

It just so happens that I think George Bush is doing something interesting with Social Security. The program does need to be fixed or recalibrated or something, and he has had the guts to take it on. Moreover, I kind of like the idea of personal investment accounts if funding them does not weaken the overall program or add to the nation's incredible debt. After all, there is something to be said for expanding the number of American worker-capitalists and having a nest egg an heir could inherit, or one that would not be eliminated by death. The idea is not all that radical, after all. It's being done in other countries -- Australia, Sweden, Chile, Britain.

Whatever the merits of personal investment accounts, they would do nothing to alter the dismal math of Social Security projections. But raising the cap would. Why $90,000? Why not $140,000? Better yet, why not raise it to $140,000 and then raise it to confiscatory levels on obscene payments such as Michael Eisner's $575.6 million back in 1998 or -- brace yourself -- the $105,000 Moonves got for using his own home in New York rather than a hotel or the $43,000 Freston got for spending time in his place in Los Angeles. (Moonves is based in L.A.; Freston is based in New York.) Somewhere, ladies and gentlemen, is a CEO who's angling to be paid for sleeping with his wife. It's just a matter of time. Get mad, people. Get mad.

But we don't. Instead, Washington can somehow discuss reducing Social Security benefits when all across America what used to be called Fat Cats are laughing up their sleeves at what they're getting away with and Bush will not even consider raising the cap. But if he did, it would by itself go a long way toward fixing the looming imbalance in the Social Security program. That's good. And so is making everyone pay his fair share, restoring the sense that the more you make, the more you owe others.

A deal can be made on Social Security. If Bush raised the cap, the Democrats could permit some sort of move toward private accounts. Both objectives make sense. What matters is not ideology or political advantage but a dependable retirement for the average American. Bush should take the first step. All it takes is making Day Two more like Day One.

 

[JohnnyBz00LS]

more: Time to Leave the Table

Time to Leave the Table

By E. J. Dionne Jr.

Tuesday, May 3, 2005; Page A21

There is a name for those who continue to sit at a gambling table even after they learn that the game is fixed. They are called fools.

Now that President Bush has proposed Social Security benefit cuts through "progressive indexing," his critics are said to have an obligation to negotiate in good faith to achieve a solution. There are just two problems with that sentence: The words "good faith" and "solution."


Bush's "plan" is still not a plan, just a few ideas. If the president is serious, let him first persuade members of his own party to agree to a detailed proposal so everyone knows what the trade-offs are. If what he has in mind is a good idea, Republicans will be eager to sign on. And if Bush can't get Republicans to go along, might that say something about the merits of his suggestions?

Opponents of Bush's cut-and-privatize project -- they include not only Democrats but also skeptical Republicans -- do have a responsibility. Their task is to subject half-baked concepts to the criticism they deserve and insist that they be fully baked before serious discussions can begin. Social Security, the most successful government program in our history, should not be overturned lightly.

That the president is fixing the Social Security reform game should be obvious. The most basic corruption of the process is the way the Republican congressional leadership has transformed the bargaining that once took place between the House and the Senate.

In the old days, when each house produced different versions of the same bill, a "conference" committee typically including members of both parties from both houses would thrash out the details and reach a compromise. Now the Republicans will concede whatever is necessary to get a bill out of the Senate, even as the lockstep-Republican House produces a right-wing version of the same proposal. In conferences, Republicans routinely freeze out all but the most pliable Democrats. The supposed "compromise" that emerges is not a compromise at all. Democrats who go along become enablers of a game being played with a stacked deck.

The game is also fixed because the president has narrowed the range of Social Security options to protect his most questionable policy choices.

Some press reports have suggested that Bush's willingness to cut Social Security benefits for the wealthy turned him into some latter-day Karl Marx, or at least Ted Kennedy.

This is nonsense.

Bush has refused to put his own tax cuts on the table as part of a Social Security fix. Repealing Bush's tax cuts for those earning more than $350,000 a year could cover all or most of the 75-year Social Security shortfall. Keeping part of the estate tax in place could cover a quarter to half of the shortfall. Some of the hole could be filled in by a modest surtax on dividends or capital gains.

But Bush is resolute about protecting the interests of the truly rich by making sure that any taxes on wealth are ruled out of the game from the beginning. The Social Security cuts he is proposing for the wealthy are a pittance compared with the benefits they get from his tax cuts. The president is keeping his eye on what really matters to him.

The real costs of progressive indexing as currently conceived would be paid by middle-income earners -- those with incomes in the range of $35,000 to $60,000 a year.

Eventually, such earners would face benefit cuts of 20 to 30 percent from what they are promised under the current program. And it gets worse: Rising Medicare premiums are eating up an increasing share of middle-class Social Security checks. Even without the cuts, Social Security payments will, over time, barely cover an individual's Medicare costs.

Last, there are the trillions of dollars that Bush would have us borrow to cover the transition to the private accounts he wants to set up. It's far from clear that cutting future Social Security benefits for younger members of the middle class and saddling them with mounds of new indebtedness would make either them or the country better off. Anyone who is truly conservative might have a question or two about whether this "solution" is worse than the problem it is purportedly addressing.

Walking away from a rigged game is hard for some people, especially when those running it and the respected opinion-makers who support them insist that this time the game will truly be on the level. But, especially when the danger involves gambling away the future of Social Security, the truly responsible thing is to leave the table.

 

[barry2952]

Very interesting articles. I think that they took the extreme view that all wealthy people make 5 million dollar bonuses.

Before the economy soured (every economist except Bryan agrees) I was in that $300,000 income range. I have investments in apartment complexes and commercial properties that have dried up. My business income is now below $100,000.

You are suggesting that I can cure the financial worries of those that failed to save or invest so that they didn't have to subside on Social Security. It was only supposed to be Supplimental Income! Why is that my problem?

I have paid in over $200,000 for which I am now told that I will recieve reduced benefits. People that have paid very little into the system will easily collect my $200,000 in benefits in less than 10 years. Is that really fair?

I've looked at this subject carefully and I fall in the middle. I don't want people to have to live in poverty by why should I continue to pay into a system that will cut me out of it?

My solution is simple. Stop making payments to those people making over $200,000 a year in retirement. I dont think that will lower their standard of living while it will give quite a shot in the arm to the fund.

 

[JohnnyBz00LS]

I hear you, there is no easy solution here. It's especially tough on independant business owners who's contributions to their employees SS payments cut into their profits, I think you should at least get some credit on your own personal SS payments. However as you move up the pay scale, those making 7 digit salaries are NOT carrying their own weight. There is alot to be said in that statement that "restoring the sense that the more you make, the more you owe others". The guys in the upper eschelon of the corporate ladders only got there on the backs of those laborers at the bottom. And when bonus time rolls around, nothing ever trickles down to the guys at the bottom even though they usually deserve the most credit for those bonuses. I don't think personal savings accounts is a bad idea in of itself, but we cannot allow it to cut into the revenue that feeds this system. SS is supposed to be a "safety net", those who NEED it GET it, those who don't need it shouldn't get it. But we must all contribute to it fairly because the future is always uncertain, you'll never know when YOU might need it.

 

[barry2952]

And when bonus time rolls around, nothing ever trickles down to the guys at the bottom even though they usually deserve the most credit for those bonuses.

That, my friend, is the worst type of generalization. In fact, many small businessmen like myself go into debt to fund bonuses and retirement plan contributions. Please stop making it seem like we're all bad guys. You wage earners would be :q:q:q:qed without jobs provided by small business. I don't see any of you bellying up to the bar when times get tough. Haven't you heard of risk/reward. What risk do you take as an employee?

If you want high rewards, start you own business. Until then, quit bitching.

 

[JohnnyBz00LS]

That, my friend, is the worst type of generalization. In fact, many small businessmen like myself go into debt to fund bonuses and retirement plan contributions. Please stop making it seem like we're all bad guys. You wage earners would be :q:q:q:qed without jobs provided by small business. I don't see any of you bellying up to the bar when times get tough. Haven't you heard of risk/reward. What risk do you take as an employee?

If you want high rewards, start you own business. Until then, quit bitching.

I didn't mean to be so general as to include small buisnesses, I was referring mostly to the large conglomerate corporations that employ the majority of "us wage earners" in the US. We take plenty of risks as employees of these monsters, we risk getting our asses reamed when some CEO blows our pensions (Enron, United, to just scratch the surface here), we risk getting forced to relocate to places w/ a 400% increase in the cost of living w/ only a 30% boost in salary just so the shareholders can achieve profits from "consolidation", "outsourcing" and "downsizing". Yeah, we might have cushy jobs w/ great bennies when times are good, but when they aren't, there is NO loyalty from above for working 60 hour weeks.

 

[MonsterMark]

Yep. Bush is the Man!
http://apnews.myway.com/article/20050519/D8A6D71G1.html
Too bad they didn't quote me in the article. Would have made NY Times front page!


MILWAUKEE (AP) - President Bush marshaled a group of supportive young adults on Thursday to help him sell lawmakers on action he says would save Social Security for future generations.

Bush wants Congress to let younger retirees begin to divert some of their payroll taxes into private investment accounts, but public opinion polls show little support for the idea. The president's also touting his approach to address the future solvency of the government retirement program.

Bobby Kraft, 27, who is president of a local printing and mailing company, told Bush he urges his employees to take advantage of their 401(k) plans because "the way the Social Security system is set up, we cannot count on that to be there."

"A lot of people feeling that way here in America," interjected Bush, sitting next to Kraft on a stage in the soaring Milwaukee Art Museum atrium, Lake Michigan visible through the windows behind him.

[font=Verdana,Sans-serif](AP) President Bush gestures as he sits down to talk to young workers in favor his Social Security...
Full Image[/font]"What I'm telling you is, if we get the United States Congress to listen to you, we can put a plan in place to make sure Social Security IS there," Bush said.

Before his remarks, Bush sat down across town with Kraft and other 20-somethings arrayed on a leather couch and a couple of easy chairs in the on Milwaukee.com headquarters, in a room that looked like the set for a reality show about recent college grads. The young people all support Bush's Social Security plans and joined him on stage later at the art museum.

"This issue is particularly relevant to people who are young," Bush said in thanks. "Because you are paying payroll taxes into a system that's going bankrupt."

But a group of young people outside offered a counterpoint to the harmony inside. A couple dozen people flashed obscene gestures at Bush's motorcade as it passed, some with both hands. They held no signs that explained their displeasure.

Bush wants a new method for calculating the growth of future benefits - a system that would give all but the poorest retirees smaller checks than the current system promises to pay.

Public opinion polls show little enthusiasm for the personal retirement accounts. Nearly all congressional Democrats oppose them as a cut in benefits for millions of retirees and as part of a larger agenda to privatize the program.

Though his initial sales pitch for his Social Security proposals has ended, Bush has continued to travel the nation, focusing more on ways to address the program's long-term fiscal picture. He touted the "progressive-indexing" idea as a way to solve the vast majority of the program's projected future shortfall. "It sounds simple, but it basically means that poor people won't have to retire into poverty and the wealthier people in America will get benefits that increase with the rate of inflation," he said. "There's a reasonable approach that I'm confident, if Congress takes a look at, will see it is reasonable."

 

[Joeychgo]

Bryan - Your just a little too much of a GW fan - its like the man can do no wrong in your eyes.

 

[barry2952]

I've said that many times about Bryan and his Bush goggles. He's being proven consistantly wrong about GWB yet he tries to sway his arguement by diversion. Once he actually opens his eyes and sees what an idiot GWB is he'll be eating lots of crow.

I love the smell of impeachment in the air.

 

[MonsterMark]

Bryan - Your just a little too much of a GW fan - its like the man can do no wrong in your eyes.

Too bad. I just typed up a whole analysis of the Social Security system and the VB software gave me back a "message too short" notice. You must have the 'makes-too-much-sense filter installed. Not rewriting it.

Bush will make sure my kids get something for their 12.8% of $90,000 that they will kick in over the next 40 years of their lives. The numbers with compunded interest at 6.5% even are huge.

SS is the biggest rob the rich to pay the poor program ever put together by the government. The Poor and the Middle Class should be pissed off because they are the ones that are really getting hosed. Crap returns for their money. The government continues to steal from us daily.