[Peace-discuss] Katie Couric's Hit Job on Social Security

[David Johnson]

<http://www.counterpunch.org/2015/08/17/katie-courics-hit-job-on-social-secu
rity/> Katie Couric's Hit Job on Social Security



 
<http://www.counterpunch.org/2015/08/17/katie-courics-hit-job-on-social-secu
rity/>
http://www.counterpunch.org/2015/08/17/katie-courics-hit-job-on-social-secur
ity/

by  <http://www.counterpunch.org/author/dave-lindorff/> Dave Lindorff 

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Katie Couric, a veteran TV journalist and currently global anchor for Yahoo
News,  just trashed Social Security  in a
<https://www.yahoo.com/katiecouric/now-i-get-it-social-security-aug-14-marks
-the-126672817613.html> hit piece misleadingly called "Explaining Social
Security" that  purported to be explaining the system's financial "crisis."
Far from explaining the system, she trundled out tired falsehoods and scare
tactics long used by the system's enemies - notably the Republican Party and
including many Democrats in the pocket of Wall Street. (Significantly, the
online video was sponsored by a Merrill Lynch/Bank of America, hardly a fan
of Social Security.)
First, Couric's long list of whoppers:
She claims the system works like a bank, collecting workers' Social Security
payroll taxes, and stashing them under a government mattress, and then
paying out the money as retirement checks when they take their retirement.
This is simply not true and was never meant to be true. What actually
happens, and happened from the beginning of the program in1936, is that the
payroll taxes collected from current workers and their employers go to pay
for the benefits of current retirees.
Couric makes it appear that greedy baby boomers are going to be sucking
money out of the pockets of younger active workers to fund their retirements
as though this were something new and unseemly, when in fact, retirees since
1936 have been getting their benefits paid by younger people actively in the
workforce. That is the actual way the system was designed to work, not, as
she suggests, as a enforced retirement savings program.
Then she highlights what she wrongly claims is the problem: that the system
has gone out of whack because of the unanticipated burden of some 74 million
baby boomers now beginning to retire and collect Social Security benefits,
and a relatively diminished number of current workers who have to pay for
those benefits.
Couric warns ominously that the $2.8 trillion in the Social Security Trust
Fund is being diminished to cover the annual shortfall in current payroll
tax collections, and says this fund is going to eventually run out. Then she
says that the program's future is "well.not secure."
This is about as disingenuous or ignorant as a journalist can be. Social
Security is completely secure - unless crooked politicians kill it. Sure the
trust fund would "run out" in about 2033 if nothing was changed by Congress
between now and then But Couric conveniently fails to mention that even
then, taxes from current workers would be sufficient to cover 77% of the
retiring boomer benefits due indefinitely until the percentage of elderly
begins to decline. And remember, by 2033 the youngest baby boomer would be
69, so the wave of retirees would actually already be shrinking in relation
to the active workforce, meaning the alleged "crisis" would already be
resolving itself.
Couric, like political critics of the program who have been seeking its
demise ever since its creation as a signature New Deal program, offers only
a hatchet in listing various "cures" for the problem: cutting Social
Security Benefits, further raising the retirement age, instituting a "means
test" for benefits), raising the payroll tax, or turning the program over to
Wall Street, which she, rather incredibly, suggests "knows better than the
government when it comes to making a return on your investments" (right!) .
She completely ignores any of the much more progressive solutions to the
pending shortfall in current employee payroll taxes such as, for example,
simply lifting the cap on income subject to the Social Security payroll tax
- a cap which is currently set at a relatively modest $118,500.
In other words, this year only the first $118,500 of a person's earnings is
subject to the payroll tax, which is paid at a rate of 6.2% each for both
employers and employees.  A person who earns $200,000 or $1 million, still
only pays the tax on that first $118,500. The rest of her or his income is
tax free as far as the payroll tax goes. As
<http://www.pbs.org/newshour/making-sense/what-impact-would-eliminating/>
PBS reported in a 2012 program featuring economist Paul Solomon, eliminate
that cap and subject all income to the combined 12.4% FICA payroll tax, and
Social Security would be able to pay all benefits in full for the next 75
years - well beyond the death of the last baby boomer.
But that's not all. There are other reforms that could be made that would
not just fix the system's temporary shortfall in income, but that would
allow it to pay much higher and more realistic retirement benefits (badly
needed because greedy employers have been eliminating the defined benefit
pensions that used to be the norm for most workers, and even cutting back on
their contributions to 401(k) retirement savings plans, leaving Social
Security as the only retirement funding for most Americans). One such reform
would be to start applying the payroll tax to capital gains - the favored
income source of the wealthy. Capital gains are currently exempt from Social
Security taxation entirely. According to the IRS, wealthy investors earned
nearly half a trillion dollars in capital gains in 2012 (the wealthiest 1%
of Americans - those who earned more than $250,000 a year, received 87% of
that money). Not only is their so-called "unearned income" taxed at a lower
rate than regular income already, but not a penny of Social Security tax is
collected on it. It should be, and there is a precedent too: in 2012,
Congress added a 3.8% tax surcharge to the then 20% income tax on capital
gains, to help fund the Medicare program. They should do the same thing to
help fund improved Social Security benefits, that alone would add. If the
wealthy had to pay the Social Security payroll tax on their capital gains,
it would provide an extra $1000 per year to every baby boomer retiree at the
absolute height of the baby boom retirement.
The wealthy could also be required to pay a full income tax rate appropriate
to their tax bracket on the full amount of Social Security benefits they
receive in retirement, instead of only being taxed on 85% of those benefits
- the current maximum for all beneficiaries.
Another idea not mentioned by Couric to further support future Social
Security benefits, and even raise them, is one long used by many European
countries for their much sounder and more generous retirement systems: make
employers pay a higher payroll tax rate than employess. There is no magic
reason why this tax should be split 50/50 as Social Security always has
been. Why not 25/75, with employers paying three-quarters of the tax? Doing
that, the system could lower taxes on employees, say to 4%, and raise them
on employers, say to 12%. That would bring in huge new revenue that would
allow the system to start paying a decent retirement benefit instead of just
enough to keep the poor off of heating grates in the winter. (Mainstream
economists always argue that all the tax, including the employer payments,
actually come out of the workers' salaries, but this is debatable to say the
least. Most people negotiating for a job look at what their take-home pay is
going to be, and look elsewhere if that amount is not enough to pay their
bills, so the real economics of it is that the employer payroll tax will
come of the employer's bottom line, not the worker's, just like health
benefits do, or the cost of raw materials.)
Perhaps the biggest "failing" of Couric's so-called "explanation" of the
Social Security "crisis," was her failure to note that the reason for the
Trust Fund balance of $2.8 trillion is that back in 1983, President Ronald
Reagan and the Democratic Congress agreed to a reform to slowly push back
the retirement age, from a then 65 to 66 and later 67, and to raise the
payroll tax from a then 10.16% to the current 12.4%. They put the money into
a trust fund precisely in order to pre-fund the baby boomers in retirement,
and that pre-funded reserve was supposed to decline back to zero as that
post-war wave of population passed through retirement. (So much for the
libel from people like NJ Gov. Chris Christie or Social Security arch-enemy
Peter Peterson that Baby Boomers are trying to get a free ride on their
kids' incomes!) That it appears to be not quite sufficient to do the job
isn't a problem with the Social Security system - it's a result of two
things: improved medical care that has extended US citizens' lifespans by an
unanticipated amount (a good thing), and several unusually powerful economic
downturns - most notably the Wall Street-caused Fiscal Crisis and subsequent
Great Recession, which greatly reduced incomes (and thus payroll taxes) as
well as the numbers of people with full-time, well-paying jobs.
One last problem with Couric's hit job on Social Security posing as a
neutral "explanation" of Social Security's alleged "crisis," is her ignoring
of the most obscene problem: Congress' continued refusal to address the
issue. The reality is that every year Congress and the President fail to
address the 2033 run-down of Trust Fund revenues means that any future fix
will have to be more dramatic. Ten years ago, it wouldn't have been
necessary to lift the payroll tax on all income to eliminate the problem. It
could have been accomplished by taxing just the the first several hundred
thousand dollars of income, or with a surcharge on income of over $1
million. Now it has to be on all income, for example. Or the shortfall in
revenues for boomer retirement could have been fixed by a small 1% increase
in the payroll tax - an amount most people wouldn't have even noticed in
their paychecks.
That refusal to act on the part of Congress is the result of deliberate
stonewalling by ideological opponents of Social Security and members of
Congress in the pocket of Wall Street and the US Chamber of Commerce -
people and corporate interests who are hoping to kill off the system before
Americans wake up and demand a real fix.
And there is the real story. Maybe it's true, as Couric claims, that only
20% of currently working Americans believe that Social Security will be able
to pay them the benefits they have earned when it's their turn to retire.
But they are thinking that way for two reasons: one is people in the media
like Couric, who are spreading lies and scare stories about the system, and
the other is that Congress is deliberately trying to kill Social Security on
behalf of the Wall Street financiers and all of corporate America which, in
the first case, want to be able to get access to all that money so they can
charge fees to invest it, and in the second, want to stop having to pay
their share of the payroll tax. Their attitude: To hell with old people and
the disabled!
What Wall Street and corporate America really fear is that as baby boomers
start to become the majority of retirees, and as their children begin to
enter middle age in large numbers, there will be the largest senior lobby in
history, and we in that voting cohort will be able, politically, to demand
that Social Security be better funded and more generous in supporting
America's retired and disabled. (And don't forget, we'll also have the
support of our kids, who in reality want their elders to have decent
retirement funding, if only so they won't have to support them on their
own!)
That too is a reality that Couric completely ignores.

Dave Lindorff is a founding member of  <http://www.thiscantbehappening.net/>
ThisCantBeHappening!, an online newspaper collective, and is a contributor
to  <http://www.easycartsecure.com/CounterPunch/CounterPunch_Books.html>
Hopeless: Barack Obama and the Politics of Illusion (AK Press). 

 

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