The next time John Boehner or Mike Pence or any of the rest of our politicians that want to join them with this talk of raising the retirement age for receiving Social Security benefits, I'd like for them to read this article first. Then maybe we can sit down and have an "adult conversation" a.k.a. one that's not full of their lies on the subject.
The annual report of the Social Security Trustees is the sort of rich compendium of facts and analysis that has something for everybody, like the Bible.
In recent years, during which conservatives have intensified their efforts to destroy one of the few U.S. government programs that actually works as intended, the report's publication has become an occasion for hand-wringing and crocodile tears over the (supposedly) parlous state of the system's finances.
This year's report, which came out Thursday, is no exception. Within minutes of its release, some analysts were claiming that it projected a "shortfall" for Social Security this year of $41 billion.
The truth is that there are two separate tax programs at work here — the payroll tax and the income tax — and they affect Americans in different ways. The first pays for Social Security and the second for the rest of the federal budget.
Most Americans pay more payroll tax than income tax. Not until you pull in $200,000 or more, which puts you among roughly the top 5% of income-earners, are you likely to pay more in income tax than payroll tax. One reason is that the income taxed for Social Security is capped — this year, at $106,800. (My payroll and income tax figures come from the Brookings Institution, and the income distribution statistics come from the U.S. Census Bureau.)
Since 1983, the money from all payroll taxpayers has been building up the Social Security surplus, swelling the trust fund. What's happened to the money? It's been borrowed by the federal government and spent on federal programs — housing, stimulus, war and a big income tax cut for the richest Americans, enacted under President George W. Bush in 2001.
In other words, money from the taxpayers at the lower end of the income scale has been spent to help out those at the higher end. That transfer — that loan, to characterize it accurately — is represented by the Treasury bonds held by the trust fund.
The interest on those bonds, and the eventual redemption of the principal, should have to be paid for by income taxpayers, who reaped the direct benefits from borrowing the money.
So all the whining you hear about how redeeming the trust fund will require a tax hike we can't afford is simply the sound of wealthy taxpayers trying to skip out on a bill about to come due. The next time someone tells you the trust fund is full of worthless IOUs, try to guess what tax bracket he's in.
Go read the whole thing. Lots more there with the numbers behind the surplus and the Peterson Foundation which is itching to hand the funds over to Wall Street. Boehner and Pence's hackery from Meet the Press below the fold.
MR. GREGORY: Let's talk about it. It's interesting, you talk about the importance of cutting the debt, the importance of cutting government spending, and you worry about the Democrats raising taxes. The Bush--the Obama administration wants to extend the Bush tax cuts only for those who make less than $250,000, and he wants to let them expire for those wealthy Americans making more than that. You're opposed to that. You want to extend the tax cuts, and the Republican leadership does. But Alan Greenspan, who was on this program last week, chairman of the Federal Reserve, said that's the wrong idea. Here's what he said.
(Videotape, last Sunday)
DR. ALAN GREENSPAN: Look, I'm very much in favor of tax cuts, but not with borrowed money. And the problem that we've gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day that proves disastrous. And my view is I don't think we can play subtle policy here.
MR. GREGORY: You don't agree with Republican leaders who say tax cuts pay for themselves.
DR. GREENSPAN: They do not.
MR. GREGORY: Leader Boehner, he puts it right to you.
REP. BOEHNER: The only way we're going to get our economy going again and solve our budget problems is to get the economy moving, get more people back to work where they can care for their own families and begin to expand the tax rolls to bring more revenue to the federal government. And what we have to do is we have to get our arms around the spending spree that's going on in Washington, D.C.
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MR. GREGORY: But Leader Boehner...
REP. BOEHNER: That's the only way we solve the budget problems.
MR. GREGORY: ...I'm sorry, you're--that--you're not, you're not being responsive to a specific point, which is how can you be for cutting the deficit and also cutting taxes, as well, when they're not paid for?
REP. BOEHNER: Listen, you can't raise taxes in the middle of a weak economy without risking the double-dip in this recession. President Obama's favorite Republican economist, Mark Zandi, came out several weeks ago and made it clear that raising taxes at this point in, in the economy is a very bad idea.
MR. GREGORY: But do you agree that tax cuts cannot be paid for...
REP. BOEHNER: You cannot balance the budget without a...
MR. GREGORY: But tax cuts are not paid for, is that correct?
REP. BOEHNER: I am not for raising taxes on the American people in a soft economy.
MR. GREGORY: That's not the question, Leader Boehner. The question...
REP. BOEHNER: And the people that the president wants to tax...
MR. GREGORY: ...is, are tax cuts paid for or not?
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REP. BOEHNER: Listen, what you're trying to do is get into this Washington game and their funny accounting over there. You cannot get the economy going again by raising taxes on those people who we expect to create jobs in America and to get the economy going again. If we want to solve the budget problem, we've got to have a healthy economy and we have to get our arms around the runaway spending that's going on in Washington, D.C.
MR. GREGORY: I just want to clarify this. I mean, if you--I'm relying on what Chairman Greenspan said. Maybe--if you're accusing him of funny Washington games. He says that tax cuts that aren't paid for are not--they are not cutting the deficit, that they are not actually paid for, it's borrowed money. And so do you believe tax cuts pay for themselves or not?
REP. BOEHNER: I do believe that we've got to get more money in the hands of small businesses and American families to get our economy going again, and the only way to get that economy going again is to do that and to get our arms around the spending.
MR. GREGORY: All right. One of the ways you talk about getting your arms around the spending was something you suggested back in June, and that is that Social Security, the retirement age, ought to be raised to the age of 70. Is that something that the GOP will campaign on in the fall?
REP. BOEHNER: David, I think it's time for the American people to have an adult conversation about the problems that we face. These entitlement programs serve tens of millions of Americans, and they're critically important. But we also know that these programs are, are unsustainable in their current form. And I really do think it's time that we sit down and we talk to the American people together about how we solve them. And I think we need to bring Democrats and Republicans together in order to solve this problem.
MR. GREGORY: And so you favor raising the retirement age?
REP. BOEHNER: David, there are a lot of options about how you solve this, but I don't want to get the cart before the horse. I think it's important to have this conversation. It's going to be a difficult conversation, but it's time to have it and it's time to come up with some solutions that are done in a bipartisan way to help address these problems.
MS. MITCHELL: And that they have paid the money back. Congressman Pence is strongly opposed to it, as he's just, as he's just described. Interesting that the majority--that the minority leader, Boehner, opened the door on the retirement age. That was a very big opening and one that, that--I don't know if Congressman Pence agrees with it because some Republicans may want--not want to follow the leader down that road.
MR. GREGORY: Do, do you agree with that? Should it be raised to 70?
REP. PENCE: Look, I, I think, I think it is absolutely imperative that we, that we address all of the federal budget and have--and, and I like Harold's comment. We, we miss Democrats like Harold on Capitol Hill these days. Have an adult conversation about domestic spending and about entitlements.
MR. GREGORY: But we keep talking about all these adults conversations.
REP. PENCE: This government, this government has--Todd's point...
MR. GREGORY: It's a narrow question which is you're either for raising the retirement age or you're not. You can have a childlike conversation about it and just say whether you're for it or not.
REP. PENCE: Yeah. Yeah. Look, look, I am for reforming our public entitlements for Americans who are far away from retirement. We need to keep promises to seniors that have been made...
MR. GREGORY: But put everything on the table.
REP. PENCE: ...make sure that people that--who are counting on Medicare or Social Security have the benefits they have. But for younger Americans, absolutely yes, we ought to bring...
MR. GREGORY: All right, but put it on...
REP. PENCE: ...we ought to bring real reform for, for the sake of, of future generations of Americans to get spending under control.