Wednesday, February 11, 2015
Income inequality can accelerate coming deficit in Social Security
Michael A. Fletcher has an interesting perspective, “How growing income inequality is hurting Social Security”, on p. A14 of The Washington Post Wednesday morning, link here. Michelle Singletary tweeted the story this morning.
As more wealth is accrued by high earners while middle class workers don’t get good raises, the income subject to FICA tax doesn’t grow, so FICA tax receipts don’t increase sufficiently to match outlays for existing retirees.
Again, the old debate continues. In practice, people in my situation experience Social Security as an “annuity”, since it reasonably matches what I paid into it. But it doesn’t for everyone, and legally it’s still “welfare” according to Flemming v. Nestor. As we’ve seen in previous debates (in 2011 and then 2013) over the debt ceiling, probably the mechanics of the Social Security Trust Fund would protect it in case of a pseudo-default, but it’s not entirely clear.