Whitehouse’s Social Security Blinders

Everybody should print out this snippet of a John Mulligan interview with U.S. Senator Sheldon Whitehouse (D, RI) as a cheat sheet on Democrat talking points about Social Security. It’s all there.

Whitehouse ignores the reality that the federal government spent the Social Security “surplus” and began having to compensates for deficits — that is, for crossing the threshold to paying out more in benefits than is coming in from the payroll tax — in 2010. Our Senator sees no problem with that, at least until 2033, when even general-fund Peter finishes paying off Social Security Paul.

However, the Social Security Administration is advising that lawmakers “take action sooner rather than later, more options and more time will be available to phase in changes.” So, there’s precious little room for the Democrats to ignore the problem. Whitehouse’s solution is to increase the payroll taxes by changing the cap:

… my idea is that we would increase the cap on the Social Security payments that people make from $110,000 in salary (per year) to kick in again at $250,000 … to honor the president’s promise that he wouldn’t raise taxes on people up to $250,000. So from $250,000 up, that should be subject to taxation, which gives you another couple of decades of security.

For explicitly political reasons, that is, Americans would pay the Social Security tax on their first $110,000 of income and then again on income above $250,000. (Speaking off the cuff, Whitehouse isn’t clear about whether that’s a threshold, meaning that people who move from $249,999 to $250,000 will suddenly have to pay taxes on dollars $110,001 through $249,999, as well.)

This amounts to a sort of gerrymandering-identity-politics of taxation. In electoral gerrymandering, politicians carve up the geography in bizarre ways in order to protect incumbents by giving them voters who are friendly to them. In identity politics, politicians divide Americans by ethnicity, region, religion, and other demographics to set them against each other and rack up groups of reliable votes. In this case, the Democrats want to carve up the tax base into factions that are willing to demand services and impose taxes on groups that are too narrow and divided to mount a challenge.

This is evident, too, in this telling exchange:

Q. Some people have more money than other people. What would be wrong with so called means-testing of some benefits?

A. The worry is that turns it into a low-income relief program rather than a social insurance program.

Q. If you’re going, on the benefits side, only at the wealthiest — maybe in the same way that you’re going after them on the tax side — why would that kind of means-testing turn it into a relief program for the poor?

A. It would take a lot of the people who have undue influence in Washington and make it look to them like a disposable program.

The worry, in other words, is that the popularity of the program will wane if people stop seeing Social Security as an actual insurance program (which it’s not) into which they pay with an expectation of a return on their investment and instead see it as a redistribution program (which it is) that takes money from young workers and gives it to older retirees. That stuff about “undue influence” is just a way of dividing Americans for political gain.

  • Monique

    "So from $250,000 up, that should be subject to taxation, which gives you another couple of decades of security."

    Setting aside for a moment the premise that it's revenue and not expenditures that is needed to address this problem, that's not a large segment of taxpayers. Does this revenue really buy us two decades? Has the Senator's office crunched any numbers? If so, can we see them, please?

    "It gives us another couple more decades, so you’re going from 2033 to, I don’t know, a rough number is 2053. That’s a long time from now and a lot can happen between now and then."

    Now, where have we heard that before? Oh, yes, that was the logic of decades of local and state elected officials right here in Rhode Island on the subject of the unaffordable pensions that they had promised to public employees. Look how that turned out (and is still deteriorating).