By Les Gehrett Albany Democrat-Herald
U.S. Rep. Peter DeFazio shared his plan to stabilize the nation’s Social Security system at a town hall meeting in Albany that drew more than 60 people Tuesday night. He started the meeting by reassuring seniors that the system is not broke and will continue honoring its current obligations. “We’ve been talking about the looming problem of Social Security for a number of years. Social Security’s current finances are sound,” DeFazio said. But he said the system will run into serious problems in about 37 years. Projections show that by that time the system will have used up all its reserves and will be on a “pay-as-you-go” basis.
Because of an aging population, the amount of benefits due then will outstrip the amount of money coming in by approximately 25 to 30 percent.
Problem #1: The system is already “pay-as-you-go” Money comes in and is immediately sent out to current recipients. The remainder is put into a”trust fund” where it is exchanged for Treasury notes that are used to pay down the national debt. There is nothing in the “trust fund” except I.O.U.’s from the Treasury backed by the government’s taxing power.
DeFazio said proposals to privatize part of Social Security — by allowing people to invest a portion of their Social Security dollars — will only make the situation worse because it will draw money away from paying current obligations and will hasten the day when all the reserves are gone.
So, the system is sound but could be driven into problems by people wanting to invest their own money.
He proposes to solve the problem by eliminating the cap on earnings subject to the payroll tax. Currently, income above $84,900 is not taxed for Social Security.
Oh, another “tax the guy behind the tree” plan. Will these higher tax payers also be entitled to higher pensions?
DeFazio would make the first $4,000 in income exempt from social security, but would make all remaining wages subject to the tax, no matter how high the income. This change would bring in a vast amount of new revenue to the Social Security system and make it solvent until at least 2076.
At which time he would be safely out of office and it would be someone else’s problem
DeFazio would use the new income to increase some Social Security benefits. He would also support allowing the Social Security system’s trustees to invest some of the money in order to increase returns and further extend the solvency of the system.
Oh, Good. Social Security Trustees get to invest our tax money in their friend’s businesses. This couldn’t possibly be used to steer money into some politicians’ pet projects could it?
Albany City Councilor Dick Olsen applauded DeFazio’s plan and asked how much support it had in Congress. “I wish I could tell you there was a groundswell of support,” DeFazio said, but he acknowledged that not many of his fellow representatives had signed off on the idea.
It only has support among DeFazio’s “progressive” caucus because it is the same plan they have been trying to sell for the past twenty years.
State Rep. Jeff Kropf, R-Halsey, said he appreciated DeFazio’s efforts to be creative and flexible in thinking about the problem. But he strongly disagreed with the idea of eliminating the income limit on payroll taxes. “My concern is that a person of upper income whose entire income was taxed, would never begin to receive this money back. That creates class warfare and inequity in taxing,” Kropf said.
That’s interesting, DeFazio is a U.S. Rep., Mr. Olsen is an Albany City Councilor, but Jeff Kropf is not only a State Rep. he is an R-Halsey. Nope, no Democrats here.
Kropf said he was interested in pursuing privatization ideas and noted that such a system was working fairly well in Chile and could be done better here. DeFazio questions the wisdom of private retirement accounts because they would increase the administrative costs of the system, and because individual investments could go wrong and leave the retiree in a bad financial position.
Actually DeFazio questions the wisdom of any private system. He believes that the important questions should be left to bureaucrats.