Opening Social Security to public scrutiny

[Reed Davis <rdavis2@ix.netcom.com>]

Carolyn Weaver wrote:
>
> That's the way a system financed on a pay-as-you-go basis works.
> While there always have been some who have questioned the "fairness"
> of this arrangement, it is only recently that the concern has become
> more widespread.  Part of the reason, I suspect, is that fairness
> seems like a less pressing issue when people are generally faring
> very well.  With the passing of time, successive cohorts have not
> fared so well and younger workers can expect to fare quite poorly.
> Fairness seems like a much more pressing issue.  Increasingly,
> there are concerns expressed about the fairness of social security
> across and within generations.
>
I agree.  In addition, I think that the structure of Social Security
almost guaranteed that we would have our current problems.  This
structure consists of complex benefit rules that few people understand.
I suspect that a major reason for these complex rules was to allow us to
hide the safety-net within the retirement portion.  This safety-net was
not paid for by a poor return to high-wage workers.  It was chiefly paid
for by a pyramiding FICA tax rate.  This can be seen in the tables at
http://people.delphi.com/rd100/ssfund.html .  From 1940 to present, the
OAS tax rate has risen from 1 percent to 5.3 percent.  The DI (disability
insurance) tax rate has risen from zero to 0.85 percent.  As can be seen
from the graphs, these increases in the tax rates closely paralleled the
increases in income from FICA taxes.

This strategy has hit a dead end, however.  Either because the FICA tax
rate has become more visible or because it is perceived to have reached
its maximum acceptable level, politicians no longer feel that they can
raise it.  Instead, many current proposals replace the pyramiding of the
FICA tax rate with various schemes to shift the cost to future taxpayers
by increasing the debt owed to Social Security, thereby committing future
general tax revenues.  I would not call Social Security a pure pyramid
scheme but it certainly contains an element of one.  And like all pyramid
schemes, that element is not sustainable.

I don't believe that we need any element of a pyramid scheme to care for
our elderly.  However, this likely requires that we fund the safety-net
portion of Social Security openly, not surreptitiously as we do currently.
Then the insurance and retirement portions of Social Security need to be
subjected to a strict accounting so as to insure their sustainability.
As long as we cloak Social Security behind a mass of obscure rules, I
doubt we will ever solve its long-term problems.  We need to simplify it
as much as possible and open it up to public scrutiny.

Reed Davis