Nov 27, 2012

Doing Away With F.I.C.A. Isn't Liberal

      Froma Harrop isn't buying Russ Douthat's argument that we should do away with the F.I.C.A. tax and means test Social Security:
Conservatives never much liked Social Security. It's a wildly popular government program that's totally solvent until 2033. It will be easily fixable and by then may not need fixing at all. Doesn't quite fit with the government-can't-do-anything-right talking point. ...
They already tried Plan A during the George W. Bush years. Recall efforts to privatize the program -- that is, let workers put their Social Security payroll tax money into private investment plans. Recall how the boosters tried to sell stocks as a no-lose investment.
The beauty of Plan A was that Wall Street would get its cut, and eventually, the federal government would no longer be obligated to cut Social Security checks. But the public was so protective of traditional Social Security that Plan A crashed even before the stock market did.
Plan B starts with means-testing. It is a clever approach because it expropriates liberal rhetoric about the rich helping the poor. Means-testing would reduce the benefits of the well-to-do while keeping (or raising) them for others. This is an excellent way to destroy the loyalty to the program among our more powerful citizens. The deal could include making permanent the Social Security payroll tax holiday scheduled to expire on Jan. 1 -- in the interests of progressive taxation, of course.
Another counter-idea: The payroll tax holiday was always a bad concept from a true liberal perspective. (President Obama backed it as a stimulus measure.) It's bad because Social Security is an earned benefit. You can't easily take away something people know they've paid for.
So here's the work-around: It makes no sense, writes conservative Ross Douthat, "to finance our retirement system with a tax that ... imposes particular burdens on small business and the working class."
How liberal sounding. How sneaky. Start paying for Social Security out of general revenues and reduce benefits for the wealthy, and what do you have? You have welfare. You know what happens to welfare. ...
By the way, we already have a system for means-testing. It's called the progressive income tax. If conservatives think rich people should pay more, they can simply let marginal tax rates (and the capital gains tax rate) rise. Complicating Social Security with more means-testing and ending the tax dedicated to keeping it afloat would kill the program -- with a smile.
On to Plan C.

13 comments:

Anonymous said...

I really like the idea of raising the FICA cap--taxing more income than currently--as a way to increase SS solvency. However, I feel doing so precludes more aggressive means testing on the back end.

Oftentimes high-income earners whine that they pay an increased share of taxes and get less benefit. They are mistaken because they often forget about the huge mortgage interest deductions they take, healthcare deductions, treatment of gains and dividends, etc. that benefit them greatly. Not to mention having a society that runs smoothly enough that they can be uber wealthy and not really have to worry about being murdered on a daily basis for their wealth.

In this case, if we raise the FICA cap and then means test more aggressively on the back end, the high-income folks will have a very legitimate gripe, and suddenly an earned "entitlement" really starts to look like welfare.

Anonymous said...

In addition to removing the FICA tax I would put forward that a quarter of coverage should be harder to attain. 1,160 per quarter in 2013 just isnt enough. I believe a quarter of coverage should equate to 3 months of SGA which is going to 1040 gross per month next year.

Anonymous said...

Sorry that should be to FICA tax cap

Anonymous said...

anon at 6:00...spot on

Just one of the many ways that SS can be incrementally improved. Not to mention that quarters of coverage can be "earned" through self-employment. This, coupled with the EIC, which also encourages falsification of self-employment records are terrible.

Anonymous said...

Why can't we address the fully capable Bartleby group that gets housing, food stamps, utility assistance, free or low cost childcare, receive assistance from community charitable programs, and systematically enroll each child on SSI for an additional $698 per month?

I understand providing healthcare to a disabled child, but shouldn't there be a better check and balance system for the parent recipients of multiple benefit programs?

Anonymous said...

anon @ 8:22

Agreed. Child SSI should be provided in the form of a debit card or vouchers that are useable only at healthcare providers.

Is this a disability program or welfare?

Anonymous said...

But remember, the last two posts are totally irrelevant to the topic. That is, whatever changes one might want to make to welfare and other assistance programs (like SSI) do nothing to address Social Security.

Anonymous said...

here's a "relevant" change that can be made to social security.

Get rid of the presumptions of disability espoused by the "GRID" rules. Why are 50 y/o's automatically "disabled" when they are limited to desk work?

Anonymous said...

here's a "relevant" change that can be made to social security.

Get rid of the presumptions of disability espoused by the "GRID" rules. Why are 50 y/o's automatically "disabled" when they are limited to desk work?
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ding, ding ding!

exactly.

The GRID rules may have served some purpose long ago, but they are embarassingly outdated and are a major cause of granting too many cases. Nearly all jobs are sedentary. To have a rule that a 50 y/o limited to sed work is disabled is ridiculous.

Anonymous said...

Anonymous 2:11 and 2:58 PM - I don't understand your comments about the grid rules.

"Why are 50 y/o's automatically "disabled" when they are limited to desk work?"

The premise of your question is wrong. A 50 year old lawyer, ALJ or secretary would not be disabled if limited to sedentary work as they could still perform their past relevant work.

From the tenor of your comment, I'm guessing you have very little experience with 50 year old construction workers, janitors, auto mechanics or motel maids who are limited to sedentary work. I can tell you from experience that they almost always have neither the education or skills to make adjustment to sedentary work.

Just curious - where are all these sedentary jobs for 50 year old janitors limited to sedentary?

While I agree we need to take a long look at Child's SSI (as discussed above), from my experience I would leave the grids alone.

Anonymous said...

"From the tenor of your comment, I'm guessing you have very little experience with 50 year old construction workers, janitors, auto mechanics or motel maids who are limited to sedentary work. I can tell you from experience that they almost always have neither the education or skills to make adjustment to sedentary work."

And yet a VE can magically go into the DOT and other resources and pull out unskilled sedentary jobs for 35-year old construction workers, janitors, and maids without the education or skills to make the adjustment to sedentary work...

Does being 50 rather than 45 really make you so much more unable to adjust to an unskilled sedentary job that you should be considered disabled automatically?

Anonymous said...

As a SSD attorney, I have always wondered about the Grids. I use them for my clients but not sure if they are right. Like you said, if a 50 year old can work a sedentary job, then why not?

I think the Grids are the few areas where the SSA takes real-world factors into account, such as mainly age discrimination. So many clients over 50, 55, 60 would simply not be hired over younger cheaper workers. And if that person had done a light job or above (such as construction), then it is pretty unfair to make them retrain for a job they could never get.

I would not be opposed to tweaking the Grids. Maybe raising it to just 55 and required to be light or above to Grid out.

An interesting dilemma.

Anonymous said...


From the tenor of your comment, I'm guessing you have very little experience with 50 year old construction workers, janitors, auto mechanics or motel maids who are limited to sedentary work. I can tell you from experience that they almost always have neither the education or skills to make adjustment to sedentary work.

Just curious - where are all these sedentary jobs for 50 year old janitors limited to sedentary?

----------------
as you well know, there are nearly 200 sedentary unskilled occupations in the DOT.

We should not be making any general assumptions based solely on age, or, as the above poster noted, we are making a value judgement on the implicit understanding that someone >50 is going to have a much harder time getting hired than someone age 35. But that should be completely irrelevant. Can you Mr. 50 y/o work? That should be the deciding factor. Not some ridiculous GRID rule.