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Froma Harrop
NationofChange / Op-Ed
Published: Tuesday 27 November 2012
Social Security's foes need Plan B.

How to Kill Social Security, With a Smile

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Conservatives never much liked Social Security. It's a wildly popular government program that's totally solvent until 2033. It will be easily fixable and by then may not need fixing at all. Doesn't quite fit with the government-can't-do-anything-right talking point.

Then there's the Social Security Trust Fund, a nice hunk of change invested in Treasury securities that some conservatives don't want to pay back. The trust fund represents payroll taxes collected from workers and employers — taxes raised a quarter century ago to provide a cushion against the predicted stresses of an aging population. The money in the trust fund was loaned, not given, to the federal government.

Many conservatives argue that the trust fund doesn't exist, thanks to cheesy accounting of the money. Whoops, it's been spent, they say. Tough luck.

The counterargument goes that the trust fund is real enough that the Treasury may not default on its debt to it without a vote by Congress. Name one rep of either party who would vote for stiffing the trust fund. Counterargument wins.

So Social Security's foes need Plan B.

They already tried Plan A during the George W. Bush years. Recall efforts to privatize the program — that is, let workers put their Social Security payroll tax money into private investment plans. Recall how the boosters tried to sell stocks as a no-lose investment.

The beauty of Plan A was that Wall Street would get its cut, and eventually, the federal government would no longer be obligated to cut Social Security checks. But the public was so protective of traditional Social Security that Plan A crashed even before the stock market did.

Plan B starts with means-testing. It is a clever approach because it expropriates liberal rhetoric about the rich helping the poor.

Means-testing would reduce the benefits of the well-to-do while keeping (or raising) them for others. This is an excellent way to destroy the loyalty to the program among our more powerful citizens. The deal could include making permanent the Social Security payroll tax holiday scheduled to expire on Jan. 1 — in the interests of progressive taxation, of course.

Another counter-idea: The payroll tax holiday was always a bad concept from a true liberal perspective. (President Obama backed it as a stimulus measure.) It's bad because Social Security is an earned benefit. You can't easily take away something people know they've paid for.

So here's the work-around: It makes no sense, writes conservative Ross Douthat, "to finance our retirement system with a tax that ... imposes particular burdens on small business and the working class."

How liberal sounding. How sneaky. Start paying for Social Security out of general revenues and reduce benefits for the wealthy, and what do you have? You have welfare. You know what happens to welfare.

Douthat breaks from liberal sweet-talk and gets down to basics. He urges Republicans to regard the payroll tax as "an obstacle — originally created by their political enemies! — to any restraint in what the program spends."

Actually, the law forbids Social Security to take a single penny from general revenues. I can't think of a better spending restraint than that. But the payroll tax is definitely a political restraint on plans to steal the trust fund.

By the way, we already have a system for means-testing. It's called the progressive income tax. If conservatives think rich people should pay more, they can simply let marginal tax rates (and the capital gains tax rate) rise. Complicating Social Security with more means-testing and ending the tax dedicated to keeping it afloat would kill the program — with a smile.

On to Plan C.


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ABOUT Froma Harrop
Froma Harrop’s nationally syndicated column appears in over 150 newspapers, including The Dallas Morning News, Houston Chronicle, Seattle Times, Denver Post and Newsday. The twice-a-week column is distributed by Creators Syndicate, in Los Angeles. Harrop has written for numerous other publications, ranging from The New York Times and Institutional Investor, to Harper’s Bazaar and Metropolitan Home. Previously, she covered business for Reuters Ltd., in New York, and was a financial editor for The New York Times News Service. A Loeb Award finalist for economic commentary, Harrop was also honored by the National Society of Newspaper Columnists. Over the years, the New England Associated Press News Executives Association has named her for five awards.

It's time to go after Wall

It's time to go after Wall Street that has never paid any taxes on their massive incomes over the history of the institution. Most Americans pay taxes on their incomes, personal property, homes, and everything they buy but Wall Street gets a free ride after causing the worst financial crisis in over seventy five years. New York City approved a tax on Wall Street that is still on the books but every mayor has cheerfully refunded the tax paid to Wall Street for fear they would relocate to another state and they would lose the prestige, and certain financial benefits, of being the home of Wall Street.
The Wall Street Transaction Tax (aka.Tobin Tax) was proposed back in the seventies and has never been enacted. Best estimates are that a 1% tax on just the millions of daily computerized Flash Trades would produce Billions of Dollars in revenue a year that would end the so-called fiscal crisis and a large portion could be distributed to the states to resolve their financial woes, many on the verge of bankruptcy. This tax would resolve the issue of gouging the rich to pay for this current fiscal crisis as they would see no higher income tax and little change in their investment income. This tax makes far more sense than putting the future of current and future seniors at risk just to satisfy a small group who have long fought to destroy government managed social programs that don't benefit the private profit objectives of Capitalists. As one progressive commentator said, “we are the wealthiest country on the planet and we should be ashamed of the stingy support that our government managed social programs provide when compared to the benefits provided by similar programs in Western Europe‘ !


Have you noticed, your Social Security check is now referred to as a "Federal Benefit Payment"? The government is now referring to our Social Security checks as a Federal Benefit Payment.

This isn’t a benefit its earned income! Not only did we all contribute to Social Security but our employers did too. It totaled 15% of our income before taxes.

If you averaged $30K per year over your working life, that’s close to $180,000 invested in Social Security. If you calculate the future value of your monthly investment in social security ($375/month, including both your and your employers contributions) at a meager 1% interest rate compounded monthly, after 40 years of working you'd have more than $1.3+ million dollars saved!

This is your personal investment.

Upon retirement, if you took out only 3% per year, you'd receive $39,318 per year, or $3,277 per month. That’s almost three times more than today’s average Social Security benefit of $1,230 per month, according to the Social Security Administration.

And your retirement fund would last more than 33 years (until you're 98 if you retire at age 65)! I can only imagine how much better most average-income people could live in retirement if our government had just invested our money in low-risk interest-earning accounts.

Instead, the folks in Washington pulled off a bigger Ponzi scheme than Bernie Madoff ever did.

They took our money and used it elsewhere. They forgot that it was OUR money they were taking. They didn’t have a referendum to ask us if we wanted to lend the money to them. And they didn’t pay interest on the debt they assumed. And recently, they’ve told us that the money wont support us for very much longer.

But is it our fault they misused our investments?

And now, to add insult to injury, they’re calling it a benefit, as if we never worked to earn every penny of it.

Just because they borrowed the money, doesn't mean that our investments were a charity!

Lets take a stand. We have earned our right to Social Security and Medicare. Demand that our legislators bring some sense into our government.

Find a way to keep Social Security and Medicare going, for the sake of that 92% of our population who earned it, and need it.

Then call it what it is: Our Earned Retirement Income.

Your understanding of how

Your understanding of how Social Security works is woeful at best. I won't even try to address all you're misconceptions, but let's take just one of you're assertions. Earning 1% interest compounded monthly. That works out to about 13 or 14 % annually. Very few investments pay that kind of return even for one year, let alone over their lifetime. Do you have a 401k or other IRA type investment? How did it do during the period 2008 to 2012? If it's like mine, it's wort less now than then, actually mime is worth less than the original investment despite some growth before 2008 and the fact that it was made with pre-tax dollars. But here is the kicker, Social Security is not an investment account. It's a pay as you go insurance plan. The money you paid in was used to pay "benefits" to those already retired, with any surplus invested by law only in U.S. government bonds (the so called Trust Fund). The government must redeem these bonds, including interest, as they come due. This is the reason SS will be able to pay "benefits" until 2033 or so, assuming the government doesn't default. There are more misunderstandings in your post that you could clear up if you spent some time reading how SS works. One commenter recommends a link, but I have not investigated it so cannot vouch for its contents.

I must agree that it's a

I must agree that it's a brainwash job on the public to refer to Social Security as an entitlement, indicating it is unearned welfare. Having had no option to opt out, having this deduction forcibly taken from earnings before receipt, then to see it as a liability for government is ludicrous. A means test has already been unfairly applied with Windfall Profit Elimination Act where certain government workers recieve less tahan their promised amounts of benefits because they recieve another pension source. I wonder where were the Windfall Profit limitations on Wall Street after bailouts when they paid themselves record bonuses with abandon? Enough people have been brainwashed by these entitlement tactics to work against their own best interests. Our government approves of borrowing billions for foreign aid,paying interest on those borrowed billions, forgiving foreign loans to countries with a better quality of life than us, yet Social Security and Medicare is what is seized on as culprits for the deficit. If this isn't throwing Seniors under the bus (a death panel tactic), I don't know what is.

TGS i agree about "federal


i agree about "federal benefit."

but your accounting of the costs/benefits of SS is almost certainly wrong.

I did my own careful calculations a few years ago. Your SS contribution returns anywhere from 10% real return on "investment" if you end up poorish after a working lifetime... to about 2% real return if you end up always having been at the high end (near or over the cap). This is not a bad return for the "rich" given the insurance value of SS, and it is a return the poor could never hope to get in any "market."

It is certainly not a Ponzi scheme. To say so is simply ignorant. The complain that the government used our money elesewhere is simply to say you don't know much about money or banking. What else would SS do with the surplus it collected to prepay the boomer retirement? It bought government bonds, the safest investment on the planet, and the government did what anyone does when they borrow money: they spent it. And now they are paying it back. All legal and proper and normal money management.

But yes... keep SS and Medicare going. SS looks as though it might need about an extra eighty cents per week each year for a while until the changing demographic picture stabilizes (that means you need to save more if you expect to live longer). Medicare needs to find a way to control costs, but it would be better if it was paid for entirely by a direct, transparent, and capped "tax" just like SS proper. As long as ALL medical expenses in retirement was covered, it would be the cheapest and fairest way to buy insurance for when you are no longer working.

They want to steal it just

They want to steal it just like they have stolen every other pension fund, public or private. The people against social security are the very ones that put the nation in debt.

As both parties are wholly

As both parties are wholly owned subsidiaries of Wall Street you can probably bet that they will formulate some complex measures around social security meant to baffle the general public in service to the elites. They already have with the raising of the age for full benefits to age 67. Most people will retire well before that age and will therefore receive less benefits. These type of measures are all calculated in advance so basically the politicos have already cut back on benefits.

Of course we need not fear as those who supported the Dems, and called for electing the lesser evil in the latest election charade have promised to hold this administration's feet to the fire....I can see the crowds amassing now with the "lesser's" organizing. The End.

One of the intended benefits

One of the intended benefits of Social Security is to allow older people to retire early with a defined level of financial security freeing up jobs for the younger generation who are no longer saddled with the responsibility of being caregivers for their elderly parents which was the case before Social Security. This program has always had broader implications for our society than the meager payments that are only intended to supplement additional private retirement savings and investments made during an individual's working years.

The move in congress is to

The move in congress is to raise the age requirement and sell it as not a cut.
Raising the age requirement from 65 to 66 is a cut - you lose one year of benefits and if you retire at that 65 year old age limit - sold to you through the decades it is a 6.2/3 % cut. They are selling it saying - you receive the lessor amount but get it back when you turn 66
....That is the fiscal crisis cliff approaches...the SOCIAL SECURITY ATTACK IS REAL . . . even after both parties - during the election said Social Security and Medicare/Medicade "were off the books"
. . Their diversion for today is the RICE appointment to the position of Secretary of State.......NO TALK OF RE-PAYING THE SOCIAL SECURITY TRUST FUND ......
do you read any press coverage of raising the age requirements ???

Social Security is a Pension

Social Security is a Pension Plan whose Income and Assets, like Those of Private Pensions, are Legally Required to be Segregated from Those of the Plan Sponsor. Its budget must be balanced, but Social Security cannot accrue the revenue needed to balance its budget through borrowing, because it has no borrowing authority. Social Security lacks the legal authority to deficit-spend, and so, cannot run a deficit. Because it cannot run a deficit, it cannot add to the federal deficit.

If you want the facts about social security, go to:

Froma tells us the trust fund

Froma tells us the trust fund is "real enough", and that's great news. Of course she also tells us that the funds have been loaned out to the Federal government. Here's my legitimate question: How much is in this Trust Fund that was loaned, not given, to the Federal Government? Being that the Federal government is over 16 trillion dollars in debt, when will they be paying this money back to the Social Security trust fund? Will they pay that back with interest? Froma also talked about Plan A which was centered around the privatization of Social Security under George Bush. As I remember, that was a volunteer program which allowed people to invest a very small percentage of their funds into private investment plans. Foma forgot to mention that. I also remember that before Bush brought out the privatization idea everyone, liberal Democrats included were saying that Social Security was broke. (Remember Al Gore and his "lock-box"?) When Bush brought up privatization the program suddenly became solvent and was overflowing with money until at least 2033. Now the question is this: Is privatization a bad idea because it allows people to invest in Wall Street; the place that liberals love to hate? Or is it a bad idea because it takes the money away from the government so greedy politicians can't get their hands on it? And those are the people that liberals love to love. Privatization has already taken place in Chile where people retire in dignity instead of gathering crumbs from the government floor as we do here. It's time to get over the silly animosities toward Wall Street. It's time to stop politicians from using the people's retirement fund to buy votes. It's time to privatize.

Boy! Am I glad I took

Boy! Am I glad I took Philosophy 101. Just about every argumentative tool is neatly laid out in your comments.

"How much is in this Trust Fund that was loaned... to the Federal Government?"

I think I know the answer here. All of it. Something in excess of $2.5 T. But some context is required. It is not strictly speaking a "loan". It is in the form of T bills.... T for Treasury bills. They are of course redeemed at maturity... with interest. If those are less than reliable as instruments of debt, please don't tell the Chinese. These are the same instruments that we use to have the Chinese underwrite our debt. And by the way, disparaging the worth of T bills is a violation of Federal law that prohibits casting dispersions on the good faith and credit of the United States government, a crime that w. bush was in fact flagrantly guilty of.

I don't recall any liberals suggesting that the SS trust fund was broke, (I can't say with 100% certainty anyway). They did suggest that Wall St. water boys were making an attempt to raid the system and that of course was correct. The lock box was to keep the raiders OUT.

And the idea that the system suddenly became solvent because w. bush made clear his desire to privatize, it was simply a matter of the truth overcoming the lies. The money has always been there..... Remember the T bills?

But I really loved this;

" Is privatization a bad idea because it allows people to invest in Wall Street; the place that liberals love to hate? Or is it a bad idea because it takes the money away from the government so greedy politicians can't get their hands on it? "

I think the events of the fall f 2008 to the present are evidence enough that Wall St. has earned all the critiques it's been subject to. Wall St. is a casino, and unless you own one, the odds are always against you and there is no guarantee that you won't be wiped out altogether. That's a great investment plan........ for the casino owner. Not so much for the rube who gets worthless paper. Sure pal. Great plan. And how about them greedy politcians? Would I rather have my money in the hands of greedy pols or greedy Wall St. huxsters? Let me think about that............ Well actually, It would seem that the return on my money being abused in Washington as opposed to New York, I'll actually go with with DC. Tortured though the process may be, I can vote out pols I think inadequate. I have no vote on the Dimons or the Blankfeins. Bad deal.

Pete Peterson, is that

Pete Peterson, is that you?

If so, you are completely full of shit.

You should go read some

You should go read some actual facts about socieal security because you obviously know very little about it.
From 2006 and you can bet we'd have the same problems with privitization:
Chile's Candidates Agree to Agree on Pension Woes, by Larry Rohter, NY Times: Michelle Bachelet is a pediatrician and a Socialist, while Sebastián Piñera is a billionaire businessman and a conservative. They may agree on little as the opposing candidates in Chile's election for president, but they concur on one important point: the country's much vaunted and much copied privatized pension system needs immediate repair. ... [D]issatisfaction with the system has emerged as one of the hot-button issues in the election...
"Many of those who started work when the system was first adopted are realizing that they have not been able to contribute enough to get a significant pension," ... they resent "overhead costs that are so high" and that have led to record profits for the pension funds that manage contributions automatically deducted from workers' paychecks. ...

"There are two big issues, coverage and costs," Andrés Velasco, Ms. Bachelet's economic adviser, said ... "Too many people are outside the system," he said, adding that too many of those in the system have found that "saving via the pension funds is quite expensive." ...

Mister B you are so

Mister B

you are so completely misinformed it is a testament to the power of the Big Lie.

The Trust Fund is currently being repaid, with interest. The interest first, of course. Your friends call that "being broke." Of course the money was lent to the government... safest investment in the world. That's what you do with a trust fund. Last I looked there was 2.7 Trillion dollars in the Trust Fund. It might be more now... interest, you know, in spite of the amount being paid out, as always intended, to make up for the current shortfall in payroll taxes caused by the recession caused by your friends on Wall Street,

The Bush plan sank because even the Right could see that it didn't add up.

The point of the "lock box" was to restrain government spending so the real debt (the one caused by tax cuts and undeclared wars and an insane level of military spending in time of peace) would not make it hard for congress to find the money to repay Social Security when the time came. Try to understand that you are not broke if you have money in government bonds... even if the congress doesn't want to have to find the money to pay you back.

Privatization is a bad idea because the stock market tends to go bad exactly when people need their money most. You can put 6% of your income into Social Security and still have plenty of money to invest in stocks if that's what you want to do with it. But even Big Investors like to keep a little in a low-return but very safe investment, "just in case." That is exactly what Social Security does for ordinary workers.
The thing in Chile hasn't been working out so well for ordinary workers. You need to keep up with that.

If it wasn't for Social Security, about half of "thepeople" would have no retirement fund at all. And none of the people would have "retirement insurance" they could count on. And the "return on investment" of SS is not at all bad, if you do an honest accounting.

Froma is exactly right. But

Froma is exactly right. But here is a plan B for the defenders of Social Security in case the Trustees projection of a shortfall in 2033 or so turn out to be correct.

At that point the best thing to have done would be to have raised the payroll tax one tenth of one percent (eighty cents per week in today's terms) in about 2018, and every year after that to avoid "short term actuarial insolvency."

That would not be a burden on the worker and it would guarantee he could retire "on time" with a benefit that was keeping up with his own standard of living... up to twice the real value of today's.

This should also take the wind out of the sails of the phony Social Security crisis.

Trying to raise the cap will, on the contrary, only inflame the enemies of SS and they currently have all the power. including the power to Lie to everyone and get away with it.

"Should any political party

"Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid." President Dwight D. Eisenhower (1953-1961). The original passage, from a letter Eisenhower wrote to his brother Edgar on Nov. 8, 1954.

Dwight Eisenhower continues

Dwight Eisenhower continues to be one of the smartest men in the room many years after his death. This is something average Americans have always had to live with, the tyranny of the wealthy. This country has never been a Democracy, or even a Democratic Republic as many claim was the founding father's intention. The population have always had to fight to gain the most basic of rights from the ever present Oligarchy and their prolific self-generating dynasties. No question as to why they have long fought against any form of Socialism that would end their iron grip on society. Funny how we have always railed against the idea of a monarchy but we think nothing of turning over everything to an unelected Oligarch !

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