There are two utterly incompatible approaches to the maintenance of social safety nets–and beliefs about the obligation of a society to its most vulnerable members.
On one side are those who recognize the obligation, who see the payment of taxes to support social programs and government services as the “dues” we owe to the “club” we call America. On the other side are those who reject that obligation, who insist that individual citizens (including, presumably, children, the elderly and the disabled) must be personally responsible for their own needs, and to the extent they are unable to do so, that private charity should fill the gap (despite copious evidence that charity is grossly insufficient to the task).
Those in the first category have legitimate differences about how we discharge our obligations to each other, about the efficiency of programs put in place, about the evidence we can reasonably require in order to separate out the truly needy from the merely greedy. But they understand that no society that ignores its neediest citizens can be “great” or even good–let alone stable.
Those in the second category tend to be financially comfortable (or better). Their incentive to ignore reality and the plight of others is rooted in their desire to keep more of what they have and their insistence that they have “earned” their good fortune and other folks could too if they really wanted to.
They are the ones who have controlled Congress. And as Robert Reich has written,
Republicans would love to get rid of Social Security and Medicare. But they can’t, because Social Security and Medicare are among the most popular of all federal programs. Besides, most Americans have been paying into them their whole working lives, and depend on them.
Since any overt attack on these programs would be politically suicidal, the Republicans have decided to do nothing–aggressively– to refrain from the “fixes” and accommodations to economic changes that all such programs require from time to time.
The trustees for Medicare and Social Security – of which I used to be one – say Medicare will run out of money by 2026, three years sooner than last projected, and Social Security will run out in 2034.
But this doesn’t have to be the case.
Here are three easy fixes to Social Security and Medicare that Republicans don’t want you to know about.
First: Raise the cap on income subject to Social Security payroll taxes.
This year, that cap is $128,400, meaning that every dollar earned above $128,400 isn’t subject to Social Security taxes.
As Reich points out, the CEO of a big company making $15 million dollars a year pays Social Security taxes on just $128,400 of that, while the nurse practitioner taking home $100,000 pays Social Security taxes on every dollar of his or her income.
Reich’s second “fix” addresses a situation that most of us find outrageous:
To help rein in Medicare costs, allow the government to use its huge bargaining power to negotiate lower drug prices.
Every other country negotiates these prices; that we do not is an unconscionable gift to big Pharma, which already benefits from the immense amounts through which taxpayers subsidize research. (Pharma already spends more on advertising, marketing, and lobbying than it does on research, so protests that lower profit margins would curtail research are disingenuous at best.)
Reich’s third “fix” is the least intuitive–and the most intriguing.
Third: To deal with a basic reason why Social Security and Medicare are running out of money, allow more young immigrants into the U.S.
The basic reason why Social Security and Medicare are running out of money is the American population continues to age and live longer – leaving a relatively smaller working population to pay into Social Security and Medicare.
What to do? Allow in more young immigrants. Immigrants and their children are the fastest growing segment of the working population, already contributing billions in payroll taxes every year. Instead of shutting immigrants out, allowing more immigrants into the country will help secure the future of Social Security and Medicare.
I have previously reported on the multiple benefits conferred by immigration; this is another.
If you belonged to a club in which some members refused to pay the dues that maintained the facility and its amenities, you’d terminate their membership. We can’t terminate the citizenship of people who are unwilling to pay their fair share, but we can save Social Security and Medicare. As Reich says,
Raise the cap, negotiate drug prices, and allow in more immigrants. Do these three things and you won’t have to worry about Social Security and Medicare not being there when you need it.
I’m sure there were a few in Nazi Germany who still had nostalgic dreams like Robert Reich. They just didn’t have the luxury of the internet to carry out their fantasy world.
Allowing the caravan of immigrants and terrorists to join a US program meant for citizens?
“This is an outrage!”
Bernie has been talking about increasing the salary cap for years. Quite frankly, from the projected numbers I’ve seen, this alone would save social security.
Once again, this begs the question why it was kept at such a low amount when CEO wages grew exponentially over the past several decades?
It’s called theft.
And many of those years had Democrats running the show. Neoliberalism is the term for the period beginning with Reagan/Thatcher. Uncle Milton Friedman and his Chicago School of Economics. Arthur Laffer.
I’ve not read the book, but Thomas Piketty kind of nailed our fraudulent economy. Thomas began his research on the East Coast, but once he saw where the evidence was leading, he moved to France to finish his book because he knew it would be attacked by university officials who receive billions in hedge fund donations. 😉
Everyone protects the lie. It’s the Devil and Hell on the Earth, but men and women defend it with their dying breath.
The real question is, “WHY?”.
It’s the system we’ve built on the backs of our forefathers who stole land from the Native Americans and used slave labor for how long?
You can’t build anything upon sand…we must have a firm foundation. The checks and balances are gone within the government, and there is no free press. The free press looks more like Wikileaks than MSNBC.
If the American people cannot see what they’ve become and where it’s heading, our future species better find another planet to destroy because this one will be uninhabitable.
And what do Nazis have to do with this essay? People that don’t have a substantive contribution to the discussion resort to divisive, off-topic statements.
Focus on the essay – fixes for SS and Medicare.
Sheila,
“If you belonged to a club in which some members refused to pay the dues that maintained the facility and its amenities, you’d terminate their membership.”
I would suggest terminating the Koch Brothers Country Club that allowed such members to join.
“First things first”
Todd,
“If the American people cannot see what they’ve become and where it’s heading, our future species better find another planet to destroy because this one will be uninhabitable.”
Double Ditto.
Todd, why does everyone protect the lie?
IMO it is because they cannot face the truth. It isn’t that they do not KNOW the truth, but rather that they don’t WANT the truth as it interferes with their view of how things are. It is tied to ego.
Here’s a novel idea: Don’t just raise the cap. Eliminate it.
Theresia Shearer,
“And what do Nazis have to do with this essay? People that don’t have a substantive contribution to the discussion resort to divisive, off-topic statements.”
For one thing, how would you best describe Donald Trump?
Basically what the Republican ideal comes down to as it is to be interpreted in our day: If you can’t help yourself I WON’T HELP YOU. Like trump said to everyone’s face, “I am a greedy man! But now I am GREEDY FOR THE UNITED STATES OF AMERICA.
GREED is not humanitarian.
GREED is not compassionate.
GREED is ignorant of the facts around it. It only wants to feed itself.
If people would go back and see what he said: maybe they would understand he told us from the beginning – ‘This one is for REVENGE’… his sicko mental case world is now OURS.
But for the life of me I can’t see how he is still allowed to even be in that office!
Nor can I figure out HOW Robert Reich could be called a nazi?… wow.
I think we should tax greed. Raise the top marginal tax rates back to where they were in the 1950s. No CEO is worth 15 million a year. Accumulating great wealth is not a worthy goal for an individuals in a stable societies. Great wealth destabilizes societies and causes revolutions. If we don’t want a reprise of the French or Russian revolution in our country we must reverse the flow of wealth so the least among us can have better lives. The way we have organized our economic system is unsustainable.
Trump is angry at NATO because some members do not pay their full dues, which to me establishes an analytic benchmark from which a consistent thinker would judge all programs.
But to Trump and his deplorables (which includes Republican members of Congress), consistency is a very bad no-no.
Consistency would mean 1) you have to think about policy, and 2) it would mean that sooner or later you would have to choose policies that run against your emotions, your gut, your bias, your bigotry, your fears.
Reverend,
“Nor can I figure out HOW Robert Reich could be called a nazi?… wow.”
Who called Robert Reich a Nazi? I said he had NOSTALGIC DREAMS. All the Germans in Nazi Germany weren’t Nazis. I believe Robert Reich is one of the best, maybe the best, we have in America. However, that doesn’t mean he’d free of nostalgic dreams. He’s Jewish and has to be cognizant of the depth of anti-Semitism in present day America, which Donald Trump takes great pride in “fanning the flames.”
nos-stal-gi-a (na stal’ ja) n. [< Gr nostos, a return+ -ALGIA] a longing for something far away or long ago—nos-tal' gic (-jik) adj.
Peggy, your idea is a good one if hardly novel, and I think it could be done. After all, if you are Warren Buffet or one of the marketing and electronic zillionaires, having the social security contribution apply to all your income is a mere pinprick, hardly noticeable, and easily offset by more tax breaks on the order of the recent Trump/Ryan atrocity. No doubt superrich libertarians would also bribe those in power to legislatively redefine “income” as well, as they have done so successfully with the continuing “carried interest” fantasy, among others.
Given these likely responses, I still think an application of social security upwards to cover all income would solve the problem, and there could conceivably even be support for such a move from right wing anti-immigrant voters, who might favor having the rich pay more rather than being forced to open our borders to a flood of Trump-identified rapists, murderers and caravans loaded with drug lords.
The foregoing smacks of a very unlikely choice of alternatives and can probably be classified under the Pollyanna heading, of course, given the influence of libertarian, Ukrainian and Russian moneybags who have bought our Oval Office and prominent members of the Republican Party (notably Graham and McConnell), so that realistically, and for good reason other than balancing our social security funding for the future (e.g., plunging birth rate, aging workforce, and an economy not yet robotized in need of immigrants ), we will have to come up with policies that Reich has outlined.
Parenthetically, the sky isn’t falling on our ability to keep social security afloat. We have plenty of time within which to fix the numbers, and there is no emergency other than the one being manufactured by libertarian/Republican propaganda meisters in order to open up and tinker with the program and install their plan to rid us of this program altogether. Let’s not be fooled by the phony cries of doom for the program; let’s rather expand the program via reduction of the retirement age for qualification, additional benefits to offset Medicare costs etc., all of which are doable but lacking only the political will – and that problem can be fixed at the polling places.
places.
All I’ve been trying to say, during the past months or even years as a participant on this blog, is, why don’t we give POLITICAL REALITY a chance before it is TOO LATE?
Our major problem is SYSTEMIC. If we want DOMESTIC PEACE IN AMERICA, then we have to deal with the underlying political system. That means that we must first exam the “good ole boy’s club” aka THE EXCLUSIVE, ALL WHITE MEN’S ONLY COUNTRY CLUB. That ‘s the nexus, locale, or MAJOR NODE in the system.
There isn’t a cap in Switzerland for the “social security “ here. I think everyone pays 2 to 4% of their total income to the government. Why is there a cap anyway? Surely a rich man wouldn’t notice such a small amount deducted from them for the good of all…oh wait. We’re talking Americans that are greedy and can’t possibly do that. “i’ve Got mine, you get yours” thinkers.
I just hope that when I turn 65, I can get mine Back!
Marv; like everything in life, your POLITICAL REALITY is not the reality of everyone else. All in life is relative; Trump & Co.’s political damage to my life is mine own, not that of everyone or possibly, anyone else’s. The only issue that is all-encompassing is the fact that they are effecting all of us; we view the world from our own space, using our own knowledge and experience…and our life needs and hopes.
As Gerald said, “Parenthetically, the sky isn’t falling on our ability to keep social security afloat.” I don’t agree with his comment, “We have plenty of time within which to fix the numbers…” Via Medicare, my Social Security check has been eaten away the past two years with fewer Medicare benefits to account for the increases. Others may have lesser concerns; some may have reason to have more concerns; their political reality is their own but it is effecting all of us.
We don’t all have to agree to get along in the world or on this blog; neither do we have to “go along to get along” as the Republican party has done to create current conditions. I don’t know what any of us or the Democratic party has done to bring about the November 6th positive election results in the House; but we and they must have done something right because Trump is running scared which makes him more dangerous then he has been since his inauguration. Beyond here there be dragons. Be afraid, be very afraid; because the “Trumped Up” Social Welfare Crisis” is very real.
An economic system that results in a vastly uneven income distribution imposes a social cost (which call poverty) on society. A progressive income tax system is a way make those responsible f or that cost (or who at least benefit from it) provide the means to deal with that cost, by funding social service programs which address the consequences of the financial imbalance.
X
My solution would be to stop thinking of these as self supporting systems or lock boxes as Always Gore used to say. A tiny portion of the military spending from nuclear weapons modernazation would do it.
Can capitalism be managed to give everyone a decent life?
The stop tax limit of $128,400 is an interesting number. The upper income limit for the fourth fifth for all households is according to the 2017 Census Bureau $126,855, which means anyone with an income over $128,400 does not pay into Social Security for income above that level. Just so you know the lower limit for the top 5% in household income is $237,034.
Social Security is the only tax I know of that has a stop limit feature, or a cap. If the cap was eliminated who would be impacted, only those with incomes greater than $128,400. We do not need immigrants to fill the gap, which I find hard to believe they could in any case. Eliminate the Cap!!!
The Highest Fifth share of aggregate household income was 44.1% in 1980, it was 51.5% in 2017. The Top 5% share of aggregate household income was 16.6% in 1980, it was 22.3% in 2017.
All “income” is not subject to Social Security Taxes.
JoAnne,
“Marv; like everything in life, your POLITICAL REALITY is not the reality of everyone else. All in life is relative; Trump & Co.’s political damage to my life is mine own, not that of everyone or possibly, anyone else’s.”
That’s a very selfish viewpoint. That’s why you can’t lead. Speak for yourself, not everyone else.
im 63 and never looking to retire,truck driver,mechanic,and general all around fix it. why retire? im going to live forever,and never get sick. so,far so good..
reality, i cant retire. as working class,and yes,ive been able to get a great education,bla bla bla,but ya know,someones filing your supermarket up, getting the building supplies for your new mansion,or hauling the road oil to make pavement..someones making sure that military move is secure,on my truck.. ive watched a few recessions,and bank failures,like the savings and loan deal in calif,then the recession in the early 80s,and 2008. that wall street market sure
took good care to secure everyones pension and retirement investments,after all,no one lost a dime,right? who paid the taxes on withdrawl? who keeps those SOBs flush with profit from the work we do?and the many others who wear blue collars? if asking such a question, then ask for the most secure way to,retirement…social security is guarenteed,last time i checked,it didnt fail in 2008. wall street sure is making alot of feel good commercials about jake the parrot and the 5 kids who see investment as a cure for retirment. i see another scam brewing.. if wall street already controls the market,the currency,and credit,then what more could they need?,i call it economic slavery.a market course where we become dependant on a living made to order ,like farming,where they have few choices,and have to follow a plan,land,seed,fertilazer,tractors,diesel,help.is a tunnel,and you cant step out of it,or you fail. your directed,by, proceedure,and banks,and only certain corps supply all you need,to know…..like any buisness,you follow a certain path,or you fail..economic slavery bud….we have secured a noose around our necks,and we have giddely asked for it. when one becomes so pacified to ignore what going on around them,its done… enjoy movie,game,porn,food channel,or whatever you so make your leizure,but never stop reading a source of journalism that is covering your ass…..thanks Robert, your site is a must use,and should be discussed everyday..
I am probably known more for stirring the pot than pouring oil on troubled waters but for the nonce I am going against my “natural” instincts.
The subject of today’s blog, if I am not seriously mistaken, is how to prop up Social Security and Medicare.
But, in large part, we’re not discussing those issues. Instead we are acting like Democrats–you know–the party who has screwed up every opportunity to accomplish lasting fixes because we can’t EVER seen to agree on how to coalesce around an issue and work through our differences.
How about this: Let’s agree the cap on SS taxes should be eliminated. Let’s agree that drug prices should be negotiated. Let’s agree that we should have Medicare for all, and let’s agree that immigration is, at least in general good for our nation.
Let’s also agree we are all on the same side here, because if we are not we are going to screw ourselves once again.
Humbly submitted in a rare moment of bonhomie.
Wray,
“The subject of today’s blog, if I am not seriously mistaken, is how to prop up Social Security and Medicare.
But, in large part, we’re not discussing those issues.”
You’re right. But admit it, you also do not like dealing with the oligarchy that is ultimately in control. What good are unsuccessful ideas?
As Gerald, in an earlier post pointed out: “The foregoing smacks of a very unlikely choice of alternatives and can probably be classified under the Pollyanna heading, of course, given the influence of libertarian, Ukrainian and Russian moneybags who have bought our Oval Office and prominent members of the Republican Party.”
When the U.S. fertility rate began dropping thirty years ago, the received knowledge, reflected in numerous studies, was that we had a distinct economic advantage over most countries in Europe undergoing the same experience. By welcoming immigrants, most of whom have a positive income on the GDP, we could continue to grow and prosper while Europe was growth-limited by declining populations and anti-immigration policies.
Populist anti-immigration rhetoric amplified by fear-based reasons for hating the “others” have drowned out those arguments from public debate and purged sane minds of that reality so that it is seldom mentioned. But reality is real whether some political party likes it or not. The zero-sum reality preached by the far right is a cringing and cowardly and ultimately self- destructive worldview. More sober and effective perspectives can be expected to emerge as Democrats in Congress try to pull the nation out of the rabbit hole of unreality dug for us by Trumpian ignorance. Troops at the border may prove Trump’s nadir in attempting to persuade us to be afraid, very afraid. That is who he is, not who we are.
John Neal @10:31am
“Can capitalism be managed to give everyone a decent life?”
Of course it can, John, but the greedy would shout “Communism”, that moniker for a socio-political system that has been morphed into a dirty word. Less to be feared is “Socialism”, a system we actually employ with great success but hated by the rich and powerful.
We were hoodwinked by Trump’s rich bosses. Let’s start by trying to reverse the evil effects of “their” tax cuts. Our treasury has long supplied what “they” want; let’s work on supplying the needs of the people.
Flipping the House of Representatives was a first step, a very important one because that’s where money bills are introduced.
Put some pressure, John, on your members of Congress. Remind them that the Constitution requires our government to “Promote the General Welfare” (Preamble)
What Wray said at 11:32am.
The Dems in the House are already fighting among themselves, instead of coming together with concrete priorities and an unified plan for what they not only should, but must do starting on January 1, 2019 ( I know it’s a bit like trying to herd cats, but it can be done).
They absolutely must do everything they can to investigate and resist Trump and his Trumpite sycophants. But at the same time, they must also start introducing and passing progressive legislation in the House that we know the vast majority of U.S. Citizens are in favor of and support (those things others have mentioned here today including fixing Social Security and Medicare). That’s the case, even if the Republicans in the Senate will in all likelihood not even give those bills a hearing in the Senate, let alone pass any of them. If the Dems in the House can’t do that, what will they have to run on in 2020 to show the American public that voting for Democrats will make a difference? I think the American public wants something in addition to just running against Trump.
Can the Dems walk and chew gum at the same time? Guess we will see.
The financial problems of SS and Medicare are like climate change. Put simply, action today minimizes tomorrow’s costs. So, take a slug of anti vomit medicine with me and pretend that you are a member of the Republican Corporation and subscribe to make more money now regardless of the impact on any others ever. What do you do?
The obvious answer to do nothing and reward current tax payer/voters/consumers/workers. Of course that makes the eventual consequences more onerous and when responsible action eventually is unavoidable blame Democracts for both the cost of the solution and the consequences of late solutions.
Pretty straight forward as well as revealing another flaw in domocracy not considered by our founders. The competition in the system is between the two parties. They are perfectly happy to be in power only half of the time. The game is to blame.
Meanwhile the Democrats bumble around trying to act responsibly for we the people all of the time.
Democracy has to be smart enough to reward responsible governance but reality is that that can be easily prevented by entertainment media propaganda.
David F good comment @ 1:30 pm, “I think the American public wants something in addition to just running against Trump.”
Continued bashing of President Agent Orange and Pastor Pence maybe fun and games, but what Positive changes will the Democrats run on.
You are correct the Democrats have little chance of moving a Progressive Agenda forward with the Reactionary Republicans in control of the Senate and President Agent Orange and Pastor Pence.
However, the Democrats need to push forward with Universal Health Care – Single Payer, and adequate Social Security funding for several decades into the future and a commitment to the environment.
It certainly sounds like Nancy Pelosi is determined to hang on to her “leadership” role. Pelosi is a dead albatross around the Democratic Party’s neck.
Peggy Hannon
I agree raising the cap is a simple fix that would help a lot. But it shouldn’t be eliminated entirely. The reason that there needs to be some cap is that without it, the REALLY rich who are functionally in charge of public policy would be pissed off. Then they’d turn to their bought-and-paid-for congresscritters and tell them to kill the programs altogether. Take their ball and go home, “look what you made me do”, and so on.
My other comments
Allowing more immigrants (young, healthy, no demands on the system they’re paying into). Totally makes sense. But the vocal GOP base would rather see somebody else’s parents (not their own, though, what do you think they are, monsters?) die in poverty than allow “those” people into the country.
The most likely scenario is that the next time they get a chance (or even during the current lame duck session – it’s not outside the realm of possiblity) they GOP will stop contributions into the system. In order not to rile up their most reliable voters, they’ll allow people who are currently or within a few years of collecting benefits to do so. Then (sad trombone, who could have predicted) they’ll be “forced” start cutting benefits “to extend the life of the system so we don’t have to cut benefits”* because they’re so fiscally responsible.
* Cut benefits now so they don’t have to cut them later, but you know they’ll cut them later too. Destroy the village in order to save it.
This is a great topic. Professor kennedy is exactly right and making the point that some people want to get rid of their dues to society and have no moral code for taking care of the unfortunate part of our society. These programs were and are still recognized as the backbone of our welfare programs. Unfortunately we are dealing with individuals with different opinions .
Years ago I handed out government food as a young man to residents of our township and everyone received a few staples. They were grateful, now with the food stamp program we are able to take care of those who would go poor. Tax breaks allow us to give to private programs and receive tax deductions. But in regard to our Medicare and social security programs a new spproach needs to be taken to help subsidize the shortfall of funds
New contributor, long time browser. A different track to look at possibly, is the minimum wage. A properly set wage would allow a person to make enough from one job to live on. That opens up one or two jobs for the discouraged worker. More people working, paying taxes, off the “welfare” roll(!), less depression, …. Suddenly the government is collecting more money, stores are selling more “stuff”, stores have to stock more supplies. The extra dollar on the paycheck multiplies and pretty soon the corporations have to pay more taxes(HA! As if!). It could even be called “Trickle UP!” Rant off!
OMG,
I think you can get some marginal improvement by putting pressure on members of congress, but paradigm change requires radically different candidates and policies e.g. Beto.
What I was pointing out was do not get trapped into limiting our ourselves to thinking SS and Medicare have to be self sustaining programs. Health care as Ted Kennedy use to roar is a “right”. So is financial security in retirement!
Martin Norred; Welcome! And excellent thinking; would solve a number of problems for families and the economy. Keep commenting, we need your kind of input.
The one area in Social Security reform that I haven’t seen discussed is the monthly benefits after eliminating caps. Social Security was designed to be “earned” instead of being a “hand out”. As such your benefits are calculated using a convoluted formula based in contributions (Cost of Living adjustments, regressive brackets, 35 years of earnings, and a final payout reduction). Just removing the caps would keep the “earned” aspect, but might result in the unseemly view of the rich getting tens of thousands of dollars in benefits each month.
So if the cap is ever eliminated, we must be certain to fix the formula so that only a tiny fraction of that huge excess salary is considered when calculating benefits – and maybe an increased amount can go to those with less earnings.
For perspective – I believe that currently the bulk of everyone’s benefits is calculated at about 10-11% of average income as adjusted by the SSA. The Social Security Tax is 12.4% of adjusted income (different calculation). Top benefits at retirement age this year is a bit shy of $2,800.
Thank you for addressing these issues. They are SO important. These two programs that have rescued more people than any others from abject poverty. The whole economy has benefitted as a result.
Businesses would fight increases in the payroll cap since they pay the tax on each employee too. But if those making less than $128,400 must pay on all their salary or wages, so should millionaires and multi-millionaires. Wishful thinking I know, but could we at least raise the cap to $200,000?
I do not build roads and no longer arrange insurance programs but I do have two daughters and a half dozen teachers in the family. What can we do?
Charlie Belch; here in Indiana your family members who are teachers can keep a close eye on OUR public employee retirement funds. Regarding the state providing a balanced budget option on the ballot should be covered by the part of the Indiana State Constitution requiring no debts be incurred which cannot be paid for. Currently the state is using public employee retirement funds to pay the budget shortfall…which explains why I have not received a COLA on my PERF check for SIX YEARS.
The first two fixes are certainly logical and definitely should be done. However, I question fix number three. Isn’t this basically a “Ponzi” plan? These newcomers will also grow old and draw benefits, thereby negating the benefit of their contribution..