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When our New World nation started a Social Security plan, we
looked to the Old World for guidance. Kaiser Wilhelm’s age
sixty five was adopted as our retirement age. Our plan in
now in operation for sixty nine years. With all that life
experience behind us, what is it about Social Security
Funding that makes it a problem that doesn’t go away?
Al Gore suggested in 2000 that we just solve the problem the
old way, and raise the taxes on both workers and employers.
Let’s look where that practice got us.
In 1935, a working person paid 1% of their first $3,000 wage
base into the fund, and their employer did likewise. The cap
was $30 per person per year. Only six of ten American
workers paid into the fund at the start. Those with
political clout wrangled an exemption. A few years later the
rate was increased to 1 ½% and the base to $3,600.
(Historical note: In 1954, working as a ‘hired inventor’ for
Union Carbide, I bought a brand new house while earning
$3,540 a year.)
From the beginning, Social Security was supposed to be a
retirement fund only, nothing more, and nothing less. In the
almost seventy years since, participation has grown from
sixty out of one hundred to ninety five out of a hundred wage
earners. The rate and the taxable base have been raised
thirty five times or more. Why is it still a problem?
We can look at our own lives. As youth we once felt a strong
need for a car. Then a spouse. Then a house. Then
furnishings. Then TV’s in three rooms. Then a larger house.
Then a cottage by the lake. Then a second car. Then college
for all of our children. Then…then…then…and then still more.
That style of thinking infected Social Security. Disability
benefits were added. Medicare was added. Benefits for new
immigrants were added. Politicians severed every connection
between ‘what you put in’ and ‘what you take out.’ Lower
wages were weighted to get disproportionately higher
payback. Over decades Social Security was degraded to adopt
a welfare payment bias instead of the original plan of an
earned income payment.
Another form of bias in the system is using only the last
ten years of working to compute benefits. A recent immigrant
American, who worked at highly inflated wages compared to
those with forty five years in the system, may reap much
higher benefits than their contributions truly deserve. We
should petition our Congress to base retirement benefits on
the taxes paid for the entire period between age twenty
and retirement, so that those with only ten years of
paying in are prohibited from taking out more than their
fair share. That could both improve fairness and plug a wide
open loophole.
Additionally, we may have to address our national sacred cow
whereby only payroll taxes on American workers flow
into the pot. Payroll taxes add to the cost to
manufacturing in America, a burden imports don’t share.
Maybe they should. America is no longer isolated from the
world as it was in 1935. That raises a new question.
Should Americans provide an almost planet-wide armed forces
safety umbrella to the world for free? While we pay the
bills for world defense, should we allow other nations to
earn their profits in America while avoiding direct payroll
tax contributions to our system? Is it possible that free
trade is only good for the nations not paying taxes here,
but bad for American workers who are losing their jobs to
imports?
Manufacturing jobs in American, for Americans, may be the
most overlooked element of our true social security as a
nation. If any nation could be rich and powerful by sweet
clean jobs like flipping burgers, brewing beer, hitting home
runs, shooting baskets and scoring touchdowns, there would
be no starvation in Africa or elsewhere. Manufacturing is
the wealth creating foundation of America. Politicians at
every level are overtaxing it into oblivion.
The Tax Foundation reports that our Tax Freedom Day in
2004 will arrive on May 30th, the 151st
day of the year. It will be three days later than last year.
Workers in other nations do not contribute to our tax
burden. Imports take away American jobs, wages, and Social
Security tax and federal tax revenue. That brings me to the
NEW THINK of this week. Maybe the true battle line in
defense of our Social Security system is JOBS FOR AMERICANS
IN AMERICA.
I still believe that with Patriotism and Imagination, we can
make tomorrow better than yesterday. We just have to keep
working at it. What do you think?
Poppa Kelly
SIDE BAR
One
official looking web site took pains to deny that there was
any link between the Social Security system of Germany and
that of the United States in so far as being age 65 to
retire. It went on as to say there was no possible link to
Bismark, because he was age 74 or 75 when Germany launched
their plan. Although it is purely academic, and does not
impact the liquidity of our system, this history will be
further researched. We will report our findings in a later
issue. PK
© Poppa Kelly 2004
Local editors may copy with credit to writer and source
To learn more about Poppa Kelly
please review his
initial article
- Thank you!
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