What
We
Should Do
About
Social Security
The Social Security system is quite sound, and with
only minor modifications, it should stay that way. We don’t have to institute
privatization, raise the retirement age, cut benefits, reformulate the cost-of-living
index, or increase the payroll tax on workers to "save" Social Security.
One modest and relatively painless change to Social Security would wipe
out a big chunk of the shortfall that some are projecting: Eliminate the payroll-tax
earning cap. Currently, the Social Security payroll tax is not paid on wages in excess of
$68,400. Since the ranks of the very rich have been growing, this has resulted in
something of a drain on Social Security. In the early 1980s, 90 percent of all wages fell
under the threshold. Now it’s 87 percent, and it’s expected to drop to 85
percent. Why not make it 100 percent?
Says economist Dean Baker: "If you eliminate the cap altogether, it
would wipe out about three-quarters of the projected Social Security shortfall. The amount
that will be paid out in Social Security benefits won’t be that much more than
before, because it’s a progressive pay-out structure. Someone who earned a million or
two in their lifetime might only get an annual Social Security payment of $50,000,
say."
Another proposal the Labor Party has suggested: raise the payroll tax on
employers — but not workers. Workers have seen a net drain on their incomes for the
past couple of decades, and this would be one way to begin to tip the balance in the other
direction.
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