Re: On Government Trust Funds

On Wed, 31 Aug 2005 07:57:30 -0700, "The Trucker" <mikcob@xxxxxxxxxxx>
wrote:

>"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
>news:fqu8h196v2namgi46obiuk85d67s8sfclt@xxxxxxxxxx
>> On Mon, 29 Aug 2005 20:00:46 -0700, "The Trucker" wrote:
>>
>>>"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote:
>>
>>>> I proposed two things: (1) Get rid of the dedicated tax system which
>>>> implies "trust funds" which are that in name only, and (2) eliminate
>>>> the payroll tax altogether. The loss of revenues would be made up by
>>>> a fractional increase in the income tax rates across the board.
>>>>
>>>> Government trust funds are not what most of the public thinks them to
>>>> be, namely a "lock box" where their retirement contributions are
>>>> stored for their later benefit. They serve no real purpose, and have
>>>> only managed to confuse the public as well as the politicians in
>>>> Washington. How many people really understand the difference between
>>>> the official debt and the publicly held debt?
>>>>
>>>> The payroll tax is highly regressive because it takes a larger
>>>> fraction of the workers' income than it does of those in the high
>>>> income bracket. By eliminating the payroll tax and redistributing the
>>>> tax load as I proposed, we get rid of this regressive feature which
>>>> hurts aggregate demand and is a drag on the economy.
>>>>
>>>> SS is in reality a social safety net, and not a retirement savings
>>>> program. Few, if any, could live on SS benefits alone. The
>>>> government has implied as much by setting up many personal retirement
>>>> programs since SS was instigated, e.g. various IRAs, and 401Ks.
>>>>
>>>> The claim that political support for SS would evaporate is phony in my
>>>> opinion. It implies that the average worker would vote against
>>>> receiving some modest government-paid benefits at retirement age.
>>>
>>>Political support for the SS system would evaporate if
>>>the Repugnicans did the change because they would make
>>>dead certain that this would be the case. But if the system
>>>is left EXACTLY as it is in that people receive benefits
>>>based on wages earned during thier active anf contributiing
>>>years then it is certainly NOT your typical "welfare"
>>>program. Just do it EXACTLY as it is done now on the
>>>payout side and simply eliminate the actual payroll
>>>withholding. Account it all just as it is now.
>>
>> That would be a definite improvement over the dedicated tax system.
>> However if Social Security were treated as a social safety net, as its
>> name implies, rather than a retirement savings program, there would be
>> no issue of public support. There is no serious political opposition
>> to the government spending billions out of the general fund to provide
>> for disaster relief, which is a form of social welfare.
>>
>> The SS benefits should be means tested with the basic objective of
>> relieving pain and suffering for US citizens with disabilities or with
>> inadequate retirement income. For more than a generation now, the
>> government has had special programs such IRAs and 401Ks aimed at
>> retirement savings. That has changed the role of SS from what may
>> have been advertised at inception.
>
>The tracking of wage lends a certain legitimacy to the idea that
>the recipients of SS HAVE actually contributed to the economy
>and the society during their able years. That is what keeps the
>program from being successfully attacked by the rightards. If
>the program is based solely on need then the rightards will have
>a field day demonizing it. It is not necessary that the benefits
>exactly match the contributions on an individual basis, but the
>basic principle of the benefits being a percentage of what you
>earned while working AND THEN being adjusted to need is
>very good and very defensible. The minimum alternative tax
>thing does much to take back the SS benefits paid to very
>wealthy people (or it DID prior to the last 5 years of
>reward the rich Repugnican tax cuts). So all that is really
>necessary is to eliminate the FICA tax and adjust income
>tax across the board to provide the funds. (there are better
>ways to tax than with income tax but that is a different
>matter).

What you are describing is basically a negative income tax, but
payable only on retirement. The less an individual pays in total
income tax during his working years, the more he receives as a "tax
refund" in retirement. That's reasonable, but I doubt such a plan
would stand up to the political pressures opposing it.

However if we treat SS as a Social Safety program based on need rather
than as an income supplement in retirement, it has much the same
character as other relief programs. It would also probably be less
costly than the current program. I think the average citizen is
compassionate enough to willingly see a portion of the total tax
revenues be spent to help those in real financial need. We already do
in disaster relief.
.

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