Wednesday, January 02, 2013
Let GOP insist on carving out a property right to Social Security contributions; a debt ceiling breach could have dire consequences for some of today's beneficiaries
Well, the FICA tax on most wage earners goes back up by 2% (with a corresponding self-employment tax) and well it should. It’s my social security benefits that are getting paid. My next payment is due January 9 (sounds like a due date for a term paper in the old days).
But today’s wage earners are paying FICA, very “regressive” when viewed as a tax but sensible if viewed as an annuity premium, with no clear legal claim that politicians couldn’t take away their nest egg for some future crisis.
In view of the 1960 Supreme Court opinion (Flemming v. Nestor) I think Congress should carve out an explicit property right to everyone who has made social security contributions, both current beneficiaries, and people paying now for future retirement.
Some formula, commensurate with life insurance industry standards, should be used for the calculations. They should allow a sliding scale of starting retirement ages, and factor out a penalty (10%) to allow for the fact that the initial beneficiaries never paid in the 1930s (the Ponzi effect). That amount should be free from political meddling.
And, sorry, the calculated property numbers for current workers will be slightly less because of the two year tax discount. People not yet retiring would get statements of their “valuations” every year.
Would the GOP like this? After all, Bush wanted to privatize social security, and this would be a step toward privatization.
Yet, in the early summer of 2011, John Boehner made a comment that retirees with other assets and income should give up social security now, because “we don’t have the money”. It’s remarks like that, previously unthinkable, that are so scary.
Consider the legal consequences of defaulting on the debt, if the new Congress plays the “deconstruct the government” game (sorry, that term came from my first book, and others have jumped on it, even saying “I got what I wished for” from House Republicans). If current social security retirees (or “annuitants”) don’t have a legal property claim to their money, a court (if another party, like a stiffed government contractor brought suit) could order everyone else paid besides the retirees. This isn’t because of “Parlour Timocracy” (I’m referring now to the Treasury Secretary, not to the musician who coined the term in August 2011 for political satire); it could happen because of court opinion. (Geithner has already taken emergency steps to extend the debt limit for about six weeks.) Then, the only way social security beneficiaries could get back in the sheriff’s bankruptcy line is to demonstrate “need”. Means testing and asset tracking – we do it now for Medicaid – could be easier and scarier than you think. Some of us might never see checks again. (And the mathematical complications of early retirement even could raise the specter of trying to collect some of what was paid out.)
The president warned Tuesday night of catastrophe if the GOP plays with the stability of the country’s ability to pay its debts again. This could be part of what he is talking about.
But I do want some property right to what I put in. Don’t call me a “selfish baby boomer” or post-baby-boomer. I want what I thought was promised. That was the deal, the social contract.
There are some social conservatives who want to exclude all families with children from paying social security tax – which means that the childless carry the entire bill. Essentially, “he” (like Mero or Carlson) would create a world where only people who have raised children get benefits. How is that for a “modest proposal”? You could hear it some day.