Social Security and "What Americans Want"
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Paul Krugman lying yet again about Social Security:
Also spurious is the lie that any plan of voluntary* partial privatization would have to be invested in that most evil of contrivances, the stock market. One would think that such a supposedly brilliant economist as Paul Krugman might have heard of a money market fund — which would still outperform the returns Social Security offers its typical participant, and with zero risk to principal.
(*Sidebar: Isn't it interesting how the word "voluntary" is always conveniently omitted from every apologia for the status quo?)
But my main point is this: If it is indeed true that "the American people made it clear that they really want a program that guarantees a basic retirement income that doesn't depend on the Dow," then why not do exactly that? Why not abolish Social Security outright and simply replace it with a flat, egalitarian, public pension entitlement for all retirees equally — a program that guarantees a basic retirement income, paid not from a dedicated payroll tax but from general revenues?
If Krugman so correctly reads the American psyche, then he ought to advocate, indeed demand, the compete abolition of all FICA taxes. The federal government could replace those foregone FICA taxes by adjusting federal income tax rates and brackets, such that total federal receipts were not affected. It would be that much easier for employers (and the self-employed) to run their payrolls. Social Security's huge computation bureaucracy that must calculate credits earned, wage replacement formulas, etc., could be abolished and replaced with simple "Office of Retiree Check Printing."
And one more "benefit," at least to the Krugman types: Swapping FICA taxes for federal income taxes would be the single biggest "soak the rich" policy since the August Decrees. Far more redistributionist, incidentally, than that other radical liberal canard du jour, scrap-the-cap.
Remember: the working poor pay no federal income tax, but they do pay one-eighth of their income to Social Security (and Medicare). Surely the distribution of tax burdens would, if anything, become even more progressive if we swapped FICA for FIT, and surely any self-professed champion of the working poor would cheer such a proposal.
And yet they don't. Why?
Simple: Because, contra Krugman, the last thing in the world that apologists of Social Security want is "a program that guarantees a basic retirement income" (i.e., independent of any taxes paid to accrue such income).
There's another term for "a program that guarantees a basic income" — welfare. Americans love getting checks from the government, to be sure — but not when it's a welfare check. That's not a pension; it's a stigma.
The New Deal socialists who first devised Social Security recognized from the outset that the program must, at all costs, not be interpretable as "the dole." Yet the working poor would have seen a simple old-age pension entitlement as exactly that: They spend an entire career not paying any income tax, then suddenly they start getting checks from the government? That would be welfare, and that would be a dealbreaker. Thus was the FICA tax born.
What Americans really want is not a check from the government, but a check from the government that they can rationalize, that they need not feel embarrassed by. Which, one would think, would not be the prime criterion of "enlightened" central planner wannabes like Krugman.
One would think.
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UPDATE: Krugman has gone from blogpost to full-blown column. More thoughts from Greg Mankiw.
But a determined defense by progressives in the media, on the blogs, and in Congress beat back one spurious argument after another, while the American people made it clear that they really want a program that guarantees a basic retirement income that doesn't depend on the Dow. And Social Security survived.First of all, there is nothing more "spurious" than the fictitious and fraudulent Social Security "trust fund," which is nothing more than a solemn promise by the federal government — to raise taxes in the future, explode the deficit, or both.
Also spurious is the lie that any plan of voluntary* partial privatization would have to be invested in that most evil of contrivances, the stock market. One would think that such a supposedly brilliant economist as Paul Krugman might have heard of a money market fund — which would still outperform the returns Social Security offers its typical participant, and with zero risk to principal.
(*Sidebar: Isn't it interesting how the word "voluntary" is always conveniently omitted from every apologia for the status quo?)
But my main point is this: If it is indeed true that "the American people made it clear that they really want a program that guarantees a basic retirement income that doesn't depend on the Dow," then why not do exactly that? Why not abolish Social Security outright and simply replace it with a flat, egalitarian, public pension entitlement for all retirees equally — a program that guarantees a basic retirement income, paid not from a dedicated payroll tax but from general revenues?
If Krugman so correctly reads the American psyche, then he ought to advocate, indeed demand, the compete abolition of all FICA taxes. The federal government could replace those foregone FICA taxes by adjusting federal income tax rates and brackets, such that total federal receipts were not affected. It would be that much easier for employers (and the self-employed) to run their payrolls. Social Security's huge computation bureaucracy that must calculate credits earned, wage replacement formulas, etc., could be abolished and replaced with simple "Office of Retiree Check Printing."
And one more "benefit," at least to the Krugman types: Swapping FICA taxes for federal income taxes would be the single biggest "soak the rich" policy since the August Decrees. Far more redistributionist, incidentally, than that other radical liberal canard du jour, scrap-the-cap.
Remember: the working poor pay no federal income tax, but they do pay one-eighth of their income to Social Security (and Medicare). Surely the distribution of tax burdens would, if anything, become even more progressive if we swapped FICA for FIT, and surely any self-professed champion of the working poor would cheer such a proposal.
And yet they don't. Why?
Simple: Because, contra Krugman, the last thing in the world that apologists of Social Security want is "a program that guarantees a basic retirement income" (i.e., independent of any taxes paid to accrue such income).
There's another term for "a program that guarantees a basic income" — welfare. Americans love getting checks from the government, to be sure — but not when it's a welfare check. That's not a pension; it's a stigma.
The New Deal socialists who first devised Social Security recognized from the outset that the program must, at all costs, not be interpretable as "the dole." Yet the working poor would have seen a simple old-age pension entitlement as exactly that: They spend an entire career not paying any income tax, then suddenly they start getting checks from the government? That would be welfare, and that would be a dealbreaker. Thus was the FICA tax born.
What Americans really want is not a check from the government, but a check from the government that they can rationalize, that they need not feel embarrassed by. Which, one would think, would not be the prime criterion of "enlightened" central planner wannabes like Krugman.
One would think.
---
UPDATE: Krugman has gone from blogpost to full-blown column. More thoughts from Greg Mankiw.
Related Posts (on one page):
- Social Security and "What Americans Want"
- More on the Social Security Wage Cap
Posted by Kip on
15 November 2007
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