Thursday, March 03, 2005
The Intolerable Pain of Payback
Alan Greenspan has added his voice to the clamor about the crisis in Social Security. His statements support the claims of those who are telling us that Social Security faces a crisis in 2018 (or thereabouts). The crisis is, according to Mr. Greenspan, that by that time the present payroll tax won't be sufficient to pay all the benefits promised to retirees.
Well, DUH! We know that. We also know that the excess of the payroll tax has been invested in safe government securities for many years. The Social Security Administration has only to start cashing in those bonds to make up for the shortfall in the payroll tax. So, where's the crisis?
The real crisis is that the federal government hasn't been collecting enough money in other taxes for years. The shortfall has been made up by using the excess money from the payroll tax. You see, if you don't already, that when the Social Security Adminstration buys a government bond, the money goes into the general fund of the federal government.
The crisis and the pain is that the payroll tax excess will go away. Not only that, but the federal government will have to find some way of raising money to pay the bonds that the Social Security Administration will be cashing. That probably means, horror of horrors, a tax increase.
For years the federal government has been using the excess of the payroll tax to help fund other government operations. After 2018, the government will have to start paying back all that money. That is the crisis.
A prudent President would know that the situation simply requires an adjustment in certain other tax rates. Perhaps persons with large incomes would have to pay at a slightly higher rate. Our present President doesn't see things that way. He is a tax cutter, not a tax increaser. Rather than raise some other tax to begin paying back the Social Security Trust Fund bonds, he proposes to abolish Social Security altogether. He wants this change in Social Security to be his legacy. I suggest that, if he succeeds, future historians may call him the Great Welcher.
Well, DUH! We know that. We also know that the excess of the payroll tax has been invested in safe government securities for many years. The Social Security Administration has only to start cashing in those bonds to make up for the shortfall in the payroll tax. So, where's the crisis?
The real crisis is that the federal government hasn't been collecting enough money in other taxes for years. The shortfall has been made up by using the excess money from the payroll tax. You see, if you don't already, that when the Social Security Adminstration buys a government bond, the money goes into the general fund of the federal government.
The crisis and the pain is that the payroll tax excess will go away. Not only that, but the federal government will have to find some way of raising money to pay the bonds that the Social Security Administration will be cashing. That probably means, horror of horrors, a tax increase.
For years the federal government has been using the excess of the payroll tax to help fund other government operations. After 2018, the government will have to start paying back all that money. That is the crisis.
A prudent President would know that the situation simply requires an adjustment in certain other tax rates. Perhaps persons with large incomes would have to pay at a slightly higher rate. Our present President doesn't see things that way. He is a tax cutter, not a tax increaser. Rather than raise some other tax to begin paying back the Social Security Trust Fund bonds, he proposes to abolish Social Security altogether. He wants this change in Social Security to be his legacy. I suggest that, if he succeeds, future historians may call him the Great Welcher.
