New THINKS!
(On our lives, times and fortunes.)

By Poppa Kelly
April 2, 2004
Issue # 3


SOCIAL INSECURITY NOW! (part2)

From the beginning of time our ancestors observed that as people aged, they were less vigorous. This human experience led to creation of various schemes to provide security in old age. In 1889 Kaiser Wilhelm ruled Germany, and was the first to offer a national plan. He decreed sixty five as retirement age because he was that age at the time. (See sidebar.)

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 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 30^th, the 151^st 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

© Poppa Kelly 2004 Local editors may copy with credit to writer and source