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Obama to Raise Social Security Taxes On Earnings Over $250k

By Jeralyn, Section Elections 2008
Posted on Fri Jun 13, 2008 at 01:06:10 PM EST
Tags: social security (all tags)
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Sen. Barack Obama says if elected, he will require people who make over $250k a year to pay FICA (social security) taxes on the amount in excess of $250k. (I think he means he will ask Congress to pass such a law.)

Under Obama's plan, like now, you would pay taxes on amounts up to the cap of $102k. Under his plan, you wouldn't pay taxes on amounts between $102k and $250k. But over $250k, and you pay.

The 6.2 percent payroll tax is now applied to all income up to $102,000 a year, which covers the entire amount for most Americans. Under Obama's plan, the tax would not apply to incomes between that amount and $250,000. But all annual income above the quarter-million-dollar amount would be taxed under his plan.

Obama has talked before of establishing such a "doughnut hole" in the amount of income subject to the Social Security tax. Friday marked the first time he named a restart level: $250,000 and above.

Here's an ambiguity, at least in the news article. Compare [More...]:

Obama said his plan "allows us to extend the life of Social Security" without raising the retirement age or cutting benefits

with

Obama said he would "limit circumstances when retirement benefits can be cut..."

So he says both benefits won't be cut and they can be cut on a limited basis. Does he mean he won't add additional circumstances under which benefits can be cut? Which is it?

Is Obama's plan going to sell? Is it a good idea? I remember Hillary wouldn't commit to this, saying she preferred long-term solutions to a social security fix.

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    Obama to Raise Social Security Taxes On Earnings Over $250k | 205 comments (205 topical)
    Uncapping is probably (5.00 / 1) (#1)
    by andgarden on Fri Jun 13, 2008 at 01:09:17 PM EST
    one of the least bad solutions. Social Security is not "in crisis" of course, and benefits will be paid out of the general fund if they need to be. The U.S. government will not back out of its obligations.

    The general fund is going to be in crisis (5.00 / 1) (#3)
    by dianem on Fri Jun 13, 2008 at 01:13:01 PM EST
    Once the social security system becomes a debtor instead of a creditor, the general fund is going to have major problems. I agree that social security itself is solid, but it has made a lot of loans to an outfit that has a shaky fiscal future.

    [ Parent ]
    We'll do what we need to to keep paying (5.00 / 1) (#6)
    by andgarden on Fri Jun 13, 2008 at 01:14:53 PM EST
    Americans like their benefits.

    [ Parent ]
    The closer you get which is >45 (none / 0) (#38)
    by BarnBabe on Fri Jun 13, 2008 at 01:30:30 PM EST
    the more you really like those benefits. At your age, early 20's, you need to just be thinking IRA Roth or 401k and if wise, SS will just be gravy. Even if you put 1 or 2% of income right now, it will snowball even if it has its ups and downs like right now. For others, it might be the only income they will have and believe me, I feel so badly for the seniors dealing with the cost of heating oil right now. Like half their SS checks.  

    [ Parent ]
    No question (5.00 / 2) (#43)
    by andgarden on Fri Jun 13, 2008 at 01:33:22 PM EST
    Compound interest is my friend.

    [ Parent ]
    forget IRAs and 401ks (5.00 / 2) (#64)
    by p lukasiak on Fri Jun 13, 2008 at 01:41:39 PM EST
    if the money goes into the stock market.

    You know why people keep promoting the myth that SS is in trouble in 2013 -- the year that benefits paid exceed payroll revenue?  Because they NEED to create a sense of crisin that will allow privatization of SS assets before that time.

    See, the value of the stock market for the last couple of decades has been inflated by the existence of automatic payroll deductions that go directly into stock purchase plans -- especially 401ks.  Its a constrant stream of new cash going into the markets.

    But, at around the same time that SS benefits paid exceed payroll taxes collected, the net 401K cash flow will begin to reverse -- just as there are too few workers to pay for all social security benefits, so too will there be too few contributors to 401ks to make up for the money being pulled out of those funds by retirees (and their heirs).

    We've got a nice little pyramid scheme in the stock market -- and its about to collapse once the "retirement fund" cash flow reverses itself.

    [ Parent ]

    Today, there is no crisis. (5.00 / 1) (#84)
    by BarnBabe on Fri Jun 13, 2008 at 01:50:56 PM EST
    And I do not believe that privatizing Social Security is a good plan at all referencing your ups and downs of the stock market which can collapse at any moment. But if you are in a 401k and the company is matching 2% and some go a lot higher, then you are already doubling your investment. You can put it in bonds or if young, go for the growth, and yes, it will go up and down but time is on your side. With what they are paying in the banks right now, you might as well put it under your mattress. With growth, it takes off on a wild spree and then goes back but there is usually a ching ching along the way. So I still encourage some type of savings in a investment account. Pyramid or not, maybe it is the driving force in the stock market. I always thought so. I worry more about the oil trading which should come to an end hopefully sooner than later.

    [ Parent ]
    Not quite right (none / 0) (#125)
    by dianem on Fri Jun 13, 2008 at 02:24:41 PM EST
    The stock markets aren't going to collapse when people start pulling money out as they hit 65. First off, it's not like they all will retire at once, or pull out all of their money at once. It will happen over decades. Second, 401k dollard aren't the entire stock market investment - there are also foreign investments, corporate investments, and private non-retirement investments, among others. Third, The money won't simply disappear into the ether. Retiree's will spend it, circulating the money so that other people can earn it and invest it in their retirement accounts. Finally, as population increases, there are more people investing, which means that the relative value of the senior's holding's goes down every year.

    There will always be fluctuations in the stock market, but it isn't going to suddenly go down because they start pulling money out. I used to think it would, by the way, until I really started thinking about it.

    [ Parent ]

    I also think that young people who (none / 0) (#197)
    by hairspray on Fri Jun 13, 2008 at 07:30:59 PM EST
    make a COMBINED income of less than 35-40k may pay little in fedral and state taxes, but pay a lot of FICA and it is killing them.  It is awful if they have some kids because they are not deductible under FICA as with the other taxes. Also people who are self employed in small operations (like home remodeling, etc) are really hurt.  I wish we had a more comprehnesive solution to this issue than what Obama is proposing, although it is better than nothing.

    [ Parent ]
    which is why this (none / 0) (#8)
    by Capt Howdy on Fri Jun 13, 2008 at 01:16:01 PM EST
    or some form of it is a good idea.

    [ Parent ]
    This is the funding issue (none / 0) (#9)
    by Dalton Hoffine on Fri Jun 13, 2008 at 01:17:08 PM EST
    With SS, IMO. I agree with you on the sketchy loan practices it's gotten into. The problem with SS as I see it is that it's dependant on so much of the rest of the economy right now. When the economy dips, funding starts getting in trouble. When the economy rises, SS has been known to operate in surplus. That's why I like this doughnut cap idea--I think it would stabilize the funding a bit from the shaky market economy.

    [ Parent ]
    SS is not into sketchy loan practices... (5.00 / 3) (#20)
    by p lukasiak on Fri Jun 13, 2008 at 01:23:06 PM EST
    every penny in the ss trust is backed with the full faith and credit of the USA -- the same thing that lets you sleep at night and not worry if your bank is going under, because your deposits in that bank are insured by the FDIC, which is backed by the "full faith and credit" of the USA>

    [ Parent ]
    Correct (5.00 / 3) (#24)
    by andgarden on Fri Jun 13, 2008 at 01:25:30 PM EST
    And that's why there is no crisis.

    [ Parent ]
    Problem is (none / 0) (#46)
    by Dalton Hoffine on Fri Jun 13, 2008 at 01:34:16 PM EST
    Sometimes that "full faith and credit" is given to people who you can't say the same about. There are quite often, most of the time on the small scale, Social Security schemes and frauds that can shift the pool into not having enough money during a bad time in the economy. The good times in the economy often make up for it (as they do now), but it is more fluidic.

    This doughnut hole would stabilize the funding pool long-term, because it takes away a little of that surplus during the good times--keeping it in the pockets of citizens within the hole--and during the bad times (when the rich get richer), the upper class makes up for what is needed.

    [ Parent ]

    nonsense... (none / 0) (#75)
    by p lukasiak on Fri Jun 13, 2008 at 01:47:17 PM EST
    increasing social security revenues by raising taxes simply delays the point at which we are forced to confront the fiscal insanity of George W Bush (and Barack Obama's $1000 middle class tax cuts, and McCain's 'keep all the bush tax cuts' policies).

    [ Parent ]
    Future and Past (none / 0) (#194)
    by CoralGables on Fri Jun 13, 2008 at 06:31:16 PM EST
    It also has made a lot off loans to an outfit with a shaky fiscal past..lol

    [ Parent ]
    this looks to me to be a stalking horse... (5.00 / 4) (#14)
    by p lukasiak on Fri Jun 13, 2008 at 01:19:35 PM EST
    for privatization.

    1. make people pay SS taxes on income over $250K -- and these people get more benefits as well

    2. allow people subject to that tax to use 'private accounts' -- but they lose their extra benefits

    3. allow everyone to use 'private accounts' in exchange for benefit cuts

    The fact is that social security isn't in crisis.  Because the trust fund's assets earn interest, the trust runs a surplus until 2029 -- and long term predictions are notoriously unreliable.   (and lets not forget than any increase in the minimum wage increases revenue to Social Securty while doing almost NOTHING to benefit levels, because benefit levels are based on the last 30 years of income, and most minimum wage jobs are 'entry level' types that people get at the beginning of their careers).

    This is an Austen Goolsbee special, IMHO....

    [ Parent ]

    Let's make a bet (5.00 / 3) (#19)
    by andgarden on Fri Jun 13, 2008 at 01:21:47 PM EST
    I think that at some point pretty soon, Obama is going to have to go after McCain on privatization. Why? Because he needs to win Pennsylvania and Ohio, and Democrats ALWAYS attack privatization in PA and OH.

    It would be suicide for Obama to do anything else.q

    [ Parent ]

    Privatization is slippery. Remember that (5.00 / 1) (#29)
    by MarkL on Fri Jun 13, 2008 at 01:27:40 PM EST
    Bush was against "privatization" eventually, and even against "private accounts"---but he was all for "personal retirement accounts". That's Liebman's  preferred phrasing, btw.

    [ Parent ]
    Well, perhaps (none / 0) (#37)
    by andgarden on Fri Jun 13, 2008 at 01:30:28 PM EST
    but I think Obama isn't going to cross Nancy Pelosi on this. BTW, as long as she's Speaker, there will be no privatization of any kind.

    [ Parent ]
    and you trust Nancy Pelosi because... (none / 0) (#48)
    by p lukasiak on Fri Jun 13, 2008 at 01:34:52 PM EST
    ???

    [ Parent ]
    She actually did stand up to GWB (none / 0) (#52)
    by andgarden on Fri Jun 13, 2008 at 01:36:39 PM EST
    on Social Security.

    [ Parent ]
    and you think she'd stand up... (none / 0) (#68)
    by p lukasiak on Fri Jun 13, 2008 at 01:43:37 PM EST
    to the magical unity pony?

    [ Parent ]
    On this, yes. (none / 0) (#71)
    by andgarden on Fri Jun 13, 2008 at 01:45:50 PM EST


    [ Parent ]
    Eh (none / 0) (#47)
    by Ga6thDem on Fri Jun 13, 2008 at 01:34:45 PM EST
    Bush swore up and down he was against ss privatization in 2004 and people believed him until 2 days after the election. Anyway, unless McCain has a record of voting for ss privatization then I don't think it helps Obama much.

    [ Parent ]
    He does have a record (none / 0) (#56)
    by andgarden on Fri Jun 13, 2008 at 01:38:26 PM EST
    watch here.

    [ Parent ]
    man (5.00 / 1) (#21)
    by Capt Howdy on Fri Jun 13, 2008 at 01:23:10 PM EST
    I told you so would not even make ME feel better if this is the case.
    and I love saying I told you so.


    [ Parent ]
    Bruce Webb has been writing about this (none / 0) (#16)
    by MarkL on Fri Jun 13, 2008 at 01:20:27 PM EST
    for eons.

    [ Parent ]
    Obama the Crypto-Conservative (none / 0) (#159)
    by flyerhawk on Fri Jun 13, 2008 at 03:20:02 PM EST
    It amazes me how some of you can find an ulterior motive in EVERYTHING he does and that this motive is almost unerringly a secret Conservative plan.

    First off SSA is schedule to run at a deficit starting in 2017 not 2029.

    Secondly the rest of your comment is here is nothing but wild speculation and not consistent with Obama's past comments regarding SS.  Where does he mention extra benefits?  Where does he mention private accounts?  Don't make things up, please.

    This is a win-win for Obama.  He basically proposes something affects less than 3% of Americans and neutralizes the SS arguments from the Right.

    [ Parent ]

    neutralizes the SS arguments from the Right (none / 0) (#165)
    by mm on Fri Jun 13, 2008 at 03:48:00 PM EST
    We already had.  Now Obama wants to open up this can of worms again.  

    The problem is, once you put it back on the table, we're going to have 100 Senators and 500 Congressman all weighing in.  

    This is one of the prime reasons I can't support Obama.  

    [ Parent ]

    that is absurd (none / 0) (#166)
    by tben on Fri Jun 13, 2008 at 04:02:12 PM EST
    I dont know how many times, in how many ways Obama has to make it clear to any rational person listening, that he is totally opposed to privitzation. Why do you insist on subjecting all of us to this constant derangement stuff?

    Whats this "allow people to use private accounts" stuff? Since when is anyone NOT allowed to use a private account to save for retirement?

    There is no question about the fact that the trust fund will soon need to start cashing in its IOUs, which means we have to pay through general tax revenues into the system. And there is no question but that at some point those IOUs will be gone, and there will be an even greater need for general tax revenues in order to keep benefits at their current level.

    In either case the money has to flow, and it flows from taxpayers to SS recipients. Whether it flows through general revenues, or through increased payroll taxes, it comes from the same general place (all of us).

    The only difference with the Obama proposal is that the necessary revenue (for paying UNCUT benefits) comes exclusively from the top 3% of earners - i.e it is the MOST PROGRESSIVE proposal.

    Doing nothing about payroll taxes means that the money comes from general revenues. It doesnt mean that there arent new taxes, just that they are collected in a less progressive manner.

    [ Parent ]

    The thing about Social Security is (5.00 / 1) (#170)
    by FlaDemFem on Fri Jun 13, 2008 at 04:10:51 PM EST
    that everyone is entitled to it, but not everyone needs it. When my grandmother became eligible for SS, she tried to tell the government that she didn't need it or want it. She said keep it and give it to someone who does need it. Apparently, that would have messed up their bookkeeping or something, so she got social security payments even though she had no need for it. She used it to supplement a local college scholarship which didn't cover living expenses. She said that students can live on what Social Security pays, which would save the student having to get a job that would take time away from school work.

    If they reformed Social Security to enable people who become eligible to refuse payment, then those payments would stay in the kitty. The refusal could be renewable, say on a yearly basis, so that should someone lose their pension or savings, they could opt in on the payments. I mean, this country has more millionaires than any other, why pay them Social Security? Yes, they paid in, but given the option to opt out, don't you think most of them would?

    [ Parent ]

    This turns social security from ... (5.00 / 4) (#2)
    by dianem on Fri Jun 13, 2008 at 01:10:15 PM EST
    ...an insurance program to a tax sponsored welfare program. The whole point of the  program has always been that people pay in and people get a proportionate amount out. We've been chipping away at that, but have never actualy gone to the extent of simply acknowledging that the paygo nature of the progam was a failure and we need to tax the rich in order to fund it. I know that this will only effect a small number of taxpayers, but it undermines the whole program, imo. Surely, there are other options?

    You said it for me! (5.00 / 3) (#4)
    by MarkL on Fri Jun 13, 2008 at 01:14:12 PM EST
    By the way, raising the cap on the payroll tax  one of four steps of the Liebman et. al. privatization plan. The short term excess funds will be used to create private accounts.


    [ Parent ]
    I agree (5.00 / 4) (#54)
    by elmey on Fri Jun 13, 2008 at 01:37:36 PM EST
    This is a bad idea and undermines support for the program among people in the upper income range. Social Security does not need extra funds right now, and may never need them, depending on the country's economic growth.
    One of the things that people like Krugman warn about is that bringing in new funds this way is simply a way to cover up the deficits the general fund is running.

    [ Parent ]
    rich people have (none / 0) (#69)
    by Capt Howdy on Fri Jun 13, 2008 at 01:43:52 PM EST
    like SS or really cared about it.  as long as they get their checks.
    and I am surprised at the talk of the non-crisis.
    a crisis is coming. there is absolutley no doubt about that.
     how soon it arrives depends on many things including the state of the economy and that aint looking so good right now.


    [ Parent ]
    "a crisis is coming" is just plain false (5.00 / 2) (#77)
    by rilkefan on Fri Jun 13, 2008 at 01:47:34 PM EST
    See e.g. Krugman.  The only question is whether the govt. decides to default on its loans, and destroy the world economy in the process.

    [ Parent ]
    it is not false (1.00 / 1) (#78)
    by Capt Howdy on Fri Jun 13, 2008 at 01:49:05 PM EST


    [ Parent ]
    Read the economists - there is no SS crisis (5.00 / 2) (#102)
    by songster on Fri Jun 13, 2008 at 01:57:57 PM EST
    The coming crisis is in Medicare.  That's why there's starting to be some political support for universal health care.


    [ Parent ]
    No. But there is a U.S. Fiscal crisis (5.00 / 1) (#162)
    by dianem on Fri Jun 13, 2008 at 03:26:39 PM EST
    Social security has plenty of money, even if the U.S. has to default on the trillions worth of bonds it currently owes to the fund. Social Security will be good to go for decades. But ... the U.S. treasury has gotten used to treated SS money as a tax, and it's going to be hard to 1) start giving that money back to the people and 2) find ways of paying our debts without the SS cash flow.

    [ Parent ]
    The "in crisis" frame... (5.00 / 6) (#108)
    by kredwyn on Fri Jun 13, 2008 at 02:00:24 PM EST
    is one of the things that got Obama in trouble with a whole bunch of people early on.

    We'd just fought a battle against the GOP's efforts to privatize Social Security by claiming that there was a great crisis looming.

    IIRC there are quite a few economists who argue that the "crisis" is a made up one...and unfortunately, one that Obama bought into.

    [ Parent ]

    Obama advisers advocate SS privatization (5.00 / 2) (#114)
    by Josey on Fri Jun 13, 2008 at 02:08:59 PM EST
    don't they?

    [ Parent ]
    One of them does.. (none / 0) (#190)
    by rjarnold on Fri Jun 13, 2008 at 05:59:49 PM EST
    I think his name is Jeff Liebman. The rest of them haven't said much about it.

    [ Parent ]
    Refute Krugman or you're chattering n/t (none / 0) (#99)
    by rilkefan on Fri Jun 13, 2008 at 01:57:14 PM EST


    [ Parent ]
    not with you (5.00 / 1) (#101)
    by Capt Howdy on Fri Jun 13, 2008 at 01:57:47 PM EST


    [ Parent ]
    FWIW, (5.00 / 3) (#62)
    by seeker on Fri Jun 13, 2008 at 01:41:10 PM EST
    that was precisely why the the SS tax was initially capped.  FDR did not want there to be any possibility of the benefits being considered "welfare".  He believed they would be so considered if there was substantial inequity in contributions.

    OTOH, circumstances have changed greatly.  Then, the income tax was low; now it is substantial.  The question that occurs to me is whether or not people might accept the higher FICA rate now that direct income taxation is more acceptable (by many, but not all).  

    My guess is that this increase would cause notions that SS was becoming "welfare," especially after the nearly 40 years of anti-taxation rhetoric to which we have been subjected.  (Believe it or not, some of us remember a time when paying taxes was considered an unpleasant duty, but largely accepted as necessary.)

    [ Parent ]

    We need to reframe paying taxes (5.00 / 3) (#81)
    by madamab on Fri Jun 13, 2008 at 01:49:54 PM EST
    as patriotic; the dues we pay for a functioning society. We also need to emphasize that if we pay more taxes, we will get more benefits.

    I'd be happy to pay $5 for a gallon of gas if we had national universal health care, 5 weeks guaranteed vacation, a true living minimum wage, a great public transportation system, etc. etc. etc. the way they do in Europe.

    [ Parent ]

    To a large extent, (5.00 / 1) (#143)
    by seeker on Fri Jun 13, 2008 at 02:47:05 PM EST
    that is the basic attitude I remember prior to the 1970s, and especially before Reagan.

    [ Parent ]
    Yup. (none / 0) (#146)
    by madamab on Fri Jun 13, 2008 at 02:52:44 PM EST
    That's how I remember it too.

    Raygun basically said that society can work with massive deficits, tax cuts on the wealthy, no social safety net and an "every man for himself" attitude.

    Even Reagan was forced to raise taxes several times, however; although you won't hear those Cato Institute types highlighting that failure of Reaganomics.

    [ Parent ]

    What we know (none / 0) (#201)
    by denise on Fri Jun 13, 2008 at 09:36:27 PM EST
    is that Roosevelt was right about Social Security. It's had broad support through good times & bad because it's not perceived to be an income transfer scheme.

    We shouldn't risk messing this up. The boomers have already paid in extra for our retirements. Social Security shouldn't take in more than is needed to pay the benefits. If taxes need to be raised to pay the borrowed money back into the system, they should be general taxes, not SS taxes.

    [ Parent ]

    I dont agree (4.50 / 2) (#7)
    by Capt Howdy on Fri Jun 13, 2008 at 01:14:54 PM EST
    it is still social security tax.  it still works the same way only now more justly so.
    its crazy that rich people dont pay over the cap and then can draw out what they dont really even need.
    I would also be for means testing.
    and I think the gap between 102 and 250 is a little odd.
    I suspect he thinks he has a lot of voters in that bracket.


    [ Parent ]
    Here's the problem (5.00 / 3) (#63)
    by frankly0 on Fri Jun 13, 2008 at 01:41:37 PM EST
    with what you say:

    its crazy that rich people dont pay over the cap and then can draw out what they dont really even need.

    Insofar as SS is conceived of as something given to people based on their need, as opposed to what they put in, the delicate political balance behind SS -- put in place explicitly even back to its inception under FDR -- is disrupted.

    Why would a politician who wants an invaluable progressive program to flourish, choose instead to monkey with some of its basic political dynamics without any real provocation?

    I think because he doesn't really give a large fig about that program. He cares to be thought of as a savior of something that needs no saving, even if it puts at risk the very thing his actions are purporting to rescue.

    [ Parent ]

    look (none / 0) (#72)
    by Capt Howdy on Fri Jun 13, 2008 at 01:45:55 PM EST
    I am certainly not here to defend Obama or his motives.
    but like I said before it is either monkey with the cap or go to means testing.  which do you think they would like least.
    I think they would freak at means testing for exactly the reasons you mention.


    [ Parent ]
    No, it isn't. (5.00 / 3) (#79)
    by masslib on Fri Jun 13, 2008 at 01:49:24 PM EST
    SS has a surplus today.  In 40 years, it will still have 70% funding, then a huge surge in funding as the boomers die out.  There is no crisis.  I actually oppose tinkering at all, and certainly, I oppose means testing, both of which weaken the political concensus on social security.  Our crisis in the deficit not social security.

    [ Parent ]
    I see a lot of (none / 0) (#87)
    by Capt Howdy on Fri Jun 13, 2008 at 01:53:11 PM EST
    assertions and opinions masquerading as fact here.
    I have seen very different figures.


    [ Parent ]
    I suggest you look (5.00 / 2) (#103)
    by frankly0 on Fri Jun 13, 2008 at 01:58:04 PM EST
    at what Krugman has written about SS in the past.

    I think he understands the issues pretty well, and can give a sufficiently balanced account.

    [ Parent ]

    He cares about (none / 0) (#202)
    by denise on Fri Jun 13, 2008 at 09:51:15 PM EST
    pandering to the young. In order to undermine public support for Social Security, the privatizers convinced them that it won't be there for them anyway. Obama's young followers are always expressing resentment about Social Security and threatening to pull the plug on it. A lot of his campaign strategy was based on stirring up generational division.

    If we tamper with the basic funding structure for Social Security, we may put the whole program at political risk.

    I wish I could get these kids to see how much they're going to need it. They need to know that rather than buying into the idea that it won't be there, they have to fight to make sure it is. And think long & hard about the unforeseen consequences of fixing something that isn't broken.

    [ Parent ]

    Rich people don't earn over the cap (5.00 / 2) (#80)
    by dianem on Fri Jun 13, 2008 at 01:49:26 PM EST
    Unless they plan on paying rich people a LOT more money in benefits, they will not draw even remotely what they are paying in. Even now, there is a form of means testing, since social security amounts are not taxed unless you have other income. You don't means test for insurance programs - and I don't know what program you are promoting, but the one I'm talking aobut is "SSI". Social Security Insurance.

    This will also undermine the arguments for single payer national health insurance. Right now, SSI is a great example of a national plan that everybody pays into and that pays out benefits fairly. If we convert SS into a welfare program funded by rich people, then the argument will be that any national health plan is destined to become just such a plan, as opposed to an insurance plan with low overhead.

    [ Parent ]

    Social Security IS a welfare program (none / 0) (#160)
    by Newt on Fri Jun 13, 2008 at 03:25:16 PM EST
    not just a retirement program, and as such should be more progressively taxing wealthier Americans.  I'm OK with the donut hole, given the distribution of wealth in our country.  

    [ Parent ]
    NO, it is NOT a welfare program (none / 0) (#203)
    by denise on Fri Jun 13, 2008 at 09:52:29 PM EST
    and if you turn it into one, you can kiss it goodbye.

    [ Parent ]
    other options? (none / 0) (#169)
    by tben on Fri Jun 13, 2008 at 04:09:03 PM EST
    sure. Raise the retirement age.

    When first instituted, the average life expectancy was barely over 65 - thus only those who lived longer than average ever recieved any benefits. Now average LE is well into the seventies - thats the main reason that the system doesnt work as designed.

    other options?
    Cut benefits.

    Thats all I can think of. Raise the age, cut the benefits, raise taxes under the existing cap, or raise the cap.

    I like Obama's approach the best, but I am open to other possiblities if you can think of them.

    [ Parent ]

    It DOES work as designed (none / 0) (#205)
    by denise on Fri Jun 13, 2008 at 10:05:13 PM EST
    Life expectancy at age 65 hasn't increased all that much, and the Social Security tax has been greatly increased over the years.

    Lots of people are still in good health at 67, but lots aren't. People who have done physically taxing jobs have wrecked bodies by then. And finding a job at that age is not easy - especially if you have health problems.

    Reducing benefits? The benefits are quite low already. I think the average person gets about $1000 /month. People don't have pensions any more, and lots of them haven't saved very much. Do you want to walk out your front door and have to step over old people living on your sidewalk?


    [ Parent ]

    Ooooh... (5.00 / 1) (#5)
    by Dalton Hoffine on Fri Jun 13, 2008 at 01:14:29 PM EST
    I don't like the current pay-as-you-go type system, and while I don't think SS is in a crisis, I do think there are problems with funding to it that could be fixed by this doughnut hole solution to the problem. I would like to see that cap raised to perhaps $350,000, as $250,000 in NYC and SF is different from $250,000 in Kansas, but I think the idea is a good one. It's certainly better than privatization.

    The doughnut (5.00 / 2) (#13)
    by Ga6thDem on Fri Jun 13, 2008 at 01:19:16 PM EST
    hole is dumb. It's the same thing that W. used for medicare prescription drugs. The doughnut hole usually fails.

    [ Parent ]
    Homer: mmm donuts n/t (none / 0) (#85)
    by DandyTIger on Fri Jun 13, 2008 at 01:52:22 PM EST


    [ Parent ]
    huh (none / 0) (#171)
    by tben on Fri Jun 13, 2008 at 04:11:00 PM EST
    first off, Bush's donut hole was for benefits, not taxes.
    And what do you mean "usually fails". The Medicare example would be one example if it were comparable. Are there any others you are think of when you say "usually"?

    [ Parent ]
    Another Question (5.00 / 7) (#17)
    by The Maven on Fri Jun 13, 2008 at 01:20:47 PM EST
    Without having examined any specific proposal here, perhaps it's already addressed, but I would also wonder what this might do to any payout schedules from Social Security.  My understanding is that the maximum amount an individual is supposed to be eligible to receive is largely a factor of the totals that said person had paid into the system over the course of their working lifetime.

    A strong argument in favor of capped benefits has always been that since there was a maximum amount that could be paid in, it was entirely logical that there ought to be a maximum amount being paid out as well.  Under this new proposal, however, high-income individuals will be paying significantly larger sums into the Social Security Trust Fund, thus disrupting the equipoise of the current system.

    Conceptually, I'm certainly not averse to this general idea, but as is usually the case, the devil is in the details, and until that all becomes clear, I'm not sure whether is will actually be a good idea that might have a decent shot at legislative passage.

    You are getting uprated (5.00 / 2) (#26)
    by madamab on Fri Jun 13, 2008 at 01:26:39 PM EST
    just because you used the word "equipoise."

    :-)

    [ Parent ]

    LOL (none / 0) (#28)
    by Dalton Hoffine on Fri Jun 13, 2008 at 01:27:28 PM EST
    I had to look it up. Nice word.

    [ Parent ]
    The whole comment (none / 0) (#33)
    by madamab on Fri Jun 13, 2008 at 01:29:40 PM EST
    was great, but I wish I could have given it an extra 5 for the vocabulary alone. :-)

    [ Parent ]
    those of us (5.00 / 3) (#22)
    by Jlvngstn on Fri Jun 13, 2008 at 01:23:16 PM EST
    in the upper bracket and including those in the hole of the donut should be paying more to help prevent a crisis down the road.  We complain but we can adjust.  I get taxed out the yinyang and despite my hatred that the money is going to the war in iraq, i still get to go to public libraries, have great roads, have great public transportation etc.  Remove the donut hole, it is much easier to teach us to adjust than it will be to figure out the shortage later....

    I can not believe this is what (5.00 / 4) (#31)
    by masslib on Fri Jun 13, 2008 at 01:29:12 PM EST
    the Democratic nominee is running on.  What a waste of political capital.  I do find it humourus that this is the only option Hillary said was possible vis-a-vis the cap and she was raked over the coals for it.  It's a waste of an opportunity at a time when the Dems should be running on universal health care not the social security non-crisis.  Hillary was right.  You need to go with the Reagan-O'Neil approach.

    I believe Obama equivocated (5.00 / 1) (#40)
    by madamab on Fri Jun 13, 2008 at 01:32:33 PM EST
    on this response during the Philly debate too. Wasn't his cap originally $200,000 but HRC said no, it has to be $250,000 if you are going for that option? I honestly can't remember.

    [ Parent ]
    No, he wanted to lift the cap (5.00 / 2) (#51)
    by masslib on Fri Jun 13, 2008 at 01:36:06 PM EST
    from 102k.  

    [ Parent ]
    Thanks - what I couldn't remember (none / 0) (#90)
    by madamab on Fri Jun 13, 2008 at 01:54:48 PM EST
    was at what point the taxes would resume; either $200,000 or $250,000.

    [ Parent ]
    well (none / 0) (#42)
    by Capt Howdy on Fri Jun 13, 2008 at 01:33:13 PM EST
    we all know I am no Obama fan but I give him credit for talking about this.  the president needs to lead on this and I think the criticism of "forming a comission" was valid.
    a leader needs to lead.  and THEN maybe from a comission.

    [ Parent ]
    I totally disagree. Social security (5.00 / 3) (#49)
    by masslib on Fri Jun 13, 2008 at 01:35:17 PM EST
    is not even in the top ten of serious funding issues.  And, no. a President shouldn't lead on this.  Congress should.  But, no matter, it's a total waste of political capital.  There is no crisis.

    [ Parent ]
    Medicare (5.00 / 1) (#60)
    by madamab on Fri Jun 13, 2008 at 01:39:41 PM EST
    is in bad shape right now, for example.

    [ Parent ]
    Correct. (5.00 / 1) (#66)
    by masslib on Fri Jun 13, 2008 at 01:42:37 PM EST


    [ Parent ]
    Agreed (5.00 / 1) (#113)
    by santarita on Fri Jun 13, 2008 at 02:08:41 PM EST
    I'm much more concerned about medicare than social security.  And as a sometimes reader of Krugman, that's where he thinks the crisis is as well.

    I see this plan as a way of taxing the wealthier individuals.  The reason for the donut hole is just to appeal to a certain demographic - the middle middle class.  

    A truly progressive idea would be to make sure that SS funds are not included in the general budget so that politicians don't get the idea that they can use those funds for anything other than social security.

    [ Parent ]

    Medicare Is Funded Through FICA (none / 0) (#139)
    by daring grace on Fri Jun 13, 2008 at 02:36:33 PM EST
    contributions.

    So I assume if a plan increased "FICA" it means more money to medicare as well, although the percentage of FICA that goes to medicare is less than that to social security.

    [ Parent ]

    you can argue (none / 0) (#53)
    by Capt Howdy on Fri Jun 13, 2008 at 01:37:12 PM EST
    if its a good idea to try to deal with the "crisis" before it actually happens (it certainly is coming) but the truth is we have been bashing politicians for years for not taking this issue on.  
    credit where it is due.


    [ Parent ]
    LOL. I have never bashed (5.00 / 1) (#55)
    by masslib on Fri Jun 13, 2008 at 01:38:25 PM EST
    politicians for not taking on the social security non-crisis.  

    [ Parent ]
    question if you dont mind (none / 0) (#61)
    by Capt Howdy on Fri Jun 13, 2008 at 01:40:06 PM EST
    how old are you?

    [ Parent ]
    Don't know about masslib (5.00 / 1) (#105)
    by RalphB on Fri Jun 13, 2008 at 01:59:14 PM EST
    but I'm 61 and there is no oncoming crisis with social security that getting the current deficit under control won't fix.

    If you did want to expand the financing of SS, why not move it from a payroll only tax to one which also encompasses investment income?  That would be unpopular because income couldn't be shifted from salary to dividends or stock to shield it.


    [ Parent ]

    you got a couple a year on me (none / 0) (#119)
    by Capt Howdy on Fri Jun 13, 2008 at 02:16:49 PM EST
    just to be clear, I am not saying THIS IS WHAT WE SHOULD DO.
    I am not saying that.  ALL I am saying is that I believe he deserves credit for talking about such an explosive subject.
    and I have always thought the cap should be raised.
    those who say it is a republican plot for privatization could be right.  I dont trust Obama out of my sight.  but at least he is talking in public about a subject politicians have feared to tread on for as long as I can remember.  I like that.
    (I know I said I was done but let that be a lesson, never believe anything I say)

    [ Parent ]
    Feared to tread? (5.00 / 1) (#124)
    by masslib on Fri Jun 13, 2008 at 02:22:45 PM EST
    Did you miss both the 2000 and 2004 elections?

    [ Parent ]
    you mean (none / 0) (#134)
    by Capt Howdy on Fri Jun 13, 2008 at 02:32:51 PM EST
    the loooooccck boooooox?
    that didnt go so well did it.  also "talking about it" and actually proposing something is quite different.


    [ Parent ]
    Ding! Ding! Ding! (none / 0) (#136)
    by Grace on Fri Jun 13, 2008 at 02:34:02 PM EST
    I think we have a winner!  

    What's goofy about this scheme to tax the wealthy is that most wealthy people aren't wealthy due to "payroll wages."  The income comes in from investments.  

    When John Kerry's wife revealed her taxes, I think she was earning something like $12K or $24K in payroll income...  So this is how the wealthy get around paying those SS & Medicare payroll taxes.  

    This "donut" is just large enough to encompass, oh, a Congressman or Senator's salary.  I can't think of too many people who earn over $250K in salary.  I'd be willing to bet even Warren Buffett makes less than $250K.  

    [ Parent ]

    Sometimes the obvious is the answer :-) (none / 0) (#154)
    by RalphB on Fri Jun 13, 2008 at 03:09:54 PM EST
    Thus the need for a "commission".  The only way a change to include investment income in the mix would ever fly is for everyone to hold hands and jump off the cliff together.  I doubt even a "commission" would ever propose that for a "solution".


    [ Parent ]
    Yep! Warren Buffett made $100K (none / 0) (#164)
    by Grace on Fri Jun 13, 2008 at 03:46:29 PM EST
    in salary in 2006:

    wikipedia Warren Buffett

    His 2006 annual salary was about $100,000, which is small compared to senior executive remuneration in other comparable companies

    If the top five wealthiest people in this country aren't affected by this change, who is?  

    [ Parent ]

    hello... (none / 0) (#179)
    by tben on Fri Jun 13, 2008 at 04:36:25 PM EST
    the quote you supply gives you the answer.

    Salaries in that range are common for senior executives in many many companies, as well as many doctors, lawyers and other professionals.

    Buffet is an exception in that he makes so much from his investments he doesnt bother taking much of a salary.

    [ Parent ]

    Retiree will not appreciate (none / 0) (#182)
    by Molly Pitcher on Fri Jun 13, 2008 at 04:43:07 PM EST
    investment income having still another tax.  Funds, stocks, and bonds are where their 'other' retirement income is being stashed.  Isn't that what everyone is told to do, invest any extra?  And I know that none of mine is in 'tax-advantaged' vehicles because I didn't get anything to invest till I inherited some--so no IRA's and 401K's.  I just pay my taxes and am grateful I have enough left.

    [ Parent ]
    Gee do ya think? (none / 0) (#187)
    by RalphB on Fri Jun 13, 2008 at 05:18:55 PM EST
    Of course they wouldn't and I don't want my taxes going up either to fix a crisis which doesn't exist.  Talk about fixing Medicare and then we'll talk.


    [ Parent ]
    35. (none / 0) (#65)
    by masslib on Fri Jun 13, 2008 at 01:42:14 PM EST


    [ Parent ]
    about what I thought (none / 0) (#74)
    by Capt Howdy on Fri Jun 13, 2008 at 01:47:13 PM EST
    I never worried much about the SS crisis when I was 35 either.
    it is VERY important to me now and I want something done to keep it solvent.


    [ Parent ]
    To keep it solvent (5.00 / 1) (#82)
    by rilkefan on Fri Jun 13, 2008 at 01:50:09 PM EST
    don't touch it.  It's fine for many decades to come at worst.  This is a Republican-propaganda distraction from important stuff.

    [ Parent ]
    if you dont touch it (none / 0) (#183)
    by tben on Fri Jun 13, 2008 at 04:47:19 PM EST
    then starting in 10 years or so, you will need to raise more money through general revenues to pay off the IOUs, because SS will have to start cashing them in to pay benefits.

    So the question becomes very simple. Which is preferable - raising money through general revenues and then passing it on to SS? OR raising money through payroll tax increases, or cap lifting?

    Whether you "touch it" or not, more money is going to have to move from taxpayer to SS recipient. The only question is whether you raise that money in the most progressive manner (Obama's plan), or under the existing general tax structure.

    [ Parent ]

    The only question (none / 0) (#185)
    by rilkefan on Fri Jun 13, 2008 at 04:57:48 PM EST
    is whether tbills are worthless.  If you like a world where they are, then fine - otherwise it's a problem for the general fund, not for SS.  Obama's plan will bring in a pittance while opening the door for noxious tampering while weakening the strong rhetorical advantage we hold.  Well, a pittance and   some all-important post-partisan and bandaid-applying cred with the pundit class.

    [ Parent ]
    huh? (none / 0) (#186)
    by tben on Fri Jun 13, 2008 at 05:11:44 PM EST
    I dont understand what you are trying to say.

    Tbills are not worthless. As I explained in my comment, the problem IS one for the general fund. But the money is coming out of your and my pockets no matter what. Do you want everyone to pay higher income tax, or do you want the highincome earners to pony up more to SS?

    I dont know what you imagine the "strong rhetorical advantage" is that we hold. All it will get you is higher taxes for everyone instead of higher taxes on those most able to afford it.

    [ Parent ]

    I don't want SS to bear the burden (none / 0) (#191)
    by rilkefan on Fri Jun 13, 2008 at 06:09:25 PM EST
    of taxes that are due to the raiding of the general fund.  Your way of arguing gets SS destroyed.

    SS is popular and trusted.  If the voters get misled into believing it's in crisis, or if the rich (aka the influential) are given reason to dislike it, or if the general Republican rhetoric is adopted, the Dems might lose the battle over one of their signature accomplishments.  We need to argue the true point that the problem is a) the debt, which is largely a Republican legacy and b) health care.  SS is very likely to take care of itself this century, and will continue to serve as a prime example of why the Dems are better than the other guys.

    [ Parent ]

    once again (none / 0) (#196)
    by tben on Fri Jun 13, 2008 at 07:09:02 PM EST
    sorry, maybe I am a bit slow here, but I really dont understand your logic.

    Yes, SS is popular and trusted. Yes it is one of the best things government has ever done. Yes, I will join you (I imagine) and all other progressives in fighting to the death any attempt to privatize or do away with it.

    Its financial setup IS in trouble. Call it a crisis, or resist to the death using that word - thats a silly argument to me. Lets focus on the reality. The system as currently structured will take in less than it needs to expend in a few short years. Fortunatly that was forseen 20 years ago and we have a trust fund built up that will sustain it another 25 years. But after that, it will take in only enought to pay about 70% of benefits.

    Thats reality. Call it whatever you want. IF you want SS to be there for your kids and grandkids, then it makes sense to adjust the financial model so that it is self-sustaining indefinitly.

    All this fear-mongering about privatization is truly mindless, IMHO. NO DEMOCRAT supports it. And Democrats will control Congress for the forseeable future. Obama DOES NOT SUPPORT privatization.

    Even Republicans are wary now, given that they had the perfect situation for them - a recently reelected GOP president, and GOP majorities in both houses, and even then, they couldnt pass privatization. PRIVATIZATION IS DEAD. It is not an issue. Nobody who will have any power supports it.

    Can the grownups now sit down and do what needs to be done to put the system on a permanently sound platform, please?

    [ Parent ]

    OMG, if you are over 35 (none / 0) (#83)
    by masslib on Fri Jun 13, 2008 at 01:50:32 PM EST
    it's completely solvent.  

    [ Parent ]
    I plan to live (none / 0) (#89)
    by Capt Howdy on Fri Jun 13, 2008 at 01:54:22 PM EST
    a very long time

    [ Parent ]
    Well, don't worry. Your checks will (5.00 / 2) (#94)
    by masslib on Fri Jun 13, 2008 at 01:56:09 PM EST
    keep showing up.

    [ Parent ]
    I don't worry about it (none / 0) (#109)
    by CST on Fri Jun 13, 2008 at 02:00:32 PM EST
    I am 23, but then again I don't worry because I just assume I will never see a penny so not much use in worrying.

    [ Parent ]
    Don't worry, (none / 0) (#118)
    by madamab on Fri Jun 13, 2008 at 02:13:52 PM EST
    you will get your share...unless the entire economy collapses, or global warming continues unchecked.

    [ Parent ]
    Well (none / 0) (#123)
    by CST on Fri Jun 13, 2008 at 02:19:17 PM EST
    I don't have that much confidence in our ability to deal with global warming.  Also, one of the ways to deal with it effectively is population control which means social security is screwed since it requires more young people.  Vicious cycle.

    [ Parent ]
    THIS (none / 0) (#122)
    by Capt Howdy on Fri Jun 13, 2008 at 02:18:39 PM EST
    IMO.  this feeling among people you age is the biggest threat to the system.


    [ Parent ]
    this ain't global warming... (5.00 / 2) (#106)
    by p lukasiak on Fri Jun 13, 2008 at 01:59:35 PM EST
    and there is no crisis today, there is no crisis in the foreseeable future (and no, 40 year projections are not the 'foreseeable future' they are merely guesses) and whatever problems there may be with SS in the future will be mere 'problems', not a "crisis."

    You want a crisis...MEDICARE is a crisis.  deal with that.  But stop acting like there is even a problem with Social Security, because they isn't.  PERIOD.

    [ Parent ]

    Indeed, the danger is for Medicare--and universal (none / 0) (#149)
    by jawbone on Fri Jun 13, 2008 at 03:03:46 PM EST
    healthcare and global warming are the two biggies. Medicare is fixed if there's universal healthcare, essentially. Then on to

    Why is Obama so enchanted by messing around on SocSec? His Univ of Chi advisers? Wall Street money raisers? I mean, Wall St is going to desperate to have mandatory private accounts.

    [ Parent ]

    Why is Obama even doing this?