Here we go again.
Christie’s ideas include means-testing Social Security benefits for the very wealthy, and raising the retirement age for those in their 30s or 40s. Neither idea is totally crazy. Neither even need be draconian — at least in principle. But the devil, as usual, will be in the details. We were not able to reach his campaign for more details.
The real problem is that his Social Security notions are needless. Or should be.
There’s a recurring theme among members of the Republican Party. They don’t tell us that cutting Social Security and Medicare would be a desirable policy, because we all know it wouldn’t be. They tell us it’s inevitable. We “need” to do it. The programs, they say, are “unsustainable.”
In other words, resistance is useless. It’s one of the oldest tricks in the book.
It is also total claptrap. Or, to be more honest (and nonpartisan), it would be total claptrap if Democrats, as well as Republicans, were willing to turn on their buddies in the donor class.
There is absolutely no reason — none — to cut Social Security. Not now, not tomorrow, not ever. If politicians do it, it will be a choice.
First, there is more money around in America today than ever before.
The total net worth of everybody in the country is currently $149 trillion. That is twice as high as it was even at the peak in 2007 — before the global financial crisis.
Those numbers come from the Federal Reserve.
Compared with this, the deficit in Social Security’s accounts is bupkis. This year it’s equal to 0.08% of America’s net worth. That’s 8 cents out of every $100.
By early next decade that annual deficit is projected to soar to … 0.34% of net worth. Or 34 cents out of every $100.
And that’s if we use an absurdly pessimistic assumption that net worth won’t even rise over that period. If it just rises by, say, 3% a year the deficit will be 27 cents per $100.
These numbers are based on calculations by the Congressional Budget Office. I’ve deliberately used its estimates because they are more pessimistic than those offered by the Social Security Administration itself, and I don’t want anybody saying I’m soft soaping the issue.
“Unsustainable”? Really? This is a panic in search of a crisis.
When Willie Sutton was asked why he robbed banks, he supposedly replied, “Because that’s where the money is.” Anybody looking at America today knows that capital, not income, is where the money is. Wealth has skyrocketed in recent decades, increasing far, far faster than incomes. Total net worth is now nearly eight times disposable personal incomes (last year it hit a record). Under Ronald Reagan the multiple was just five.
Yet we barely tax it. And nobody is proposing to do so.
Instead Democratic proposals to boost Social Security consist of ideas to raise payroll taxes on income: mostly on earned income, though sometimes on investment income as well. Typically these are supposed to kick in on incomes over $200,000 or, if you’re married, $250,000.
Rich? These people are prosperous, but they are still working for a living. A doctor on $500,000 a year or even more is able to afford the good life, but does not own a private jet.
Meanwhile those with $100 million or $1 billion or $10 billion remain essentially untaxed. And that’s true even though those in the top 0.1% have the highest share of national wealth on record (and also way higher than it was under Reagan).
You don’t have to be a communist to think the richest people should pay at least some tax, as we peasants do. Exempting the superrich from tax isn’t capitalism. It’s feudalism.
I’m a independent and a capitalist. I’m not a socialist. But I’m not a feudalist, either.
Meanwhile, if you don’t even want to tax capital, there is another easy fix available for Social Security: Invest the damn money — like every other big pension fund in America and around the world.
Did you know that your Social Security payroll taxes are being blown on Treasury bonds earning a derisory rate of interest? Every nickel goes into Treasury bonds. It’s insane. A private-sector pension fund that operated like this would be sued into oblivion.
A normal pension fund is typically invested 60% in the stock market and only 40% in bonds. (Some have even more in stocks, but we’ll leave that aside.)
We have data on how much Social Security has earned in interest each year, going back to 1940. We also have solid data on how much U.S. stocks (as measured by the S&P 500 SPX, +0.37% ) and U.S. 10-year Treasury bonds have earned over the same period.
Bottom line? Social Security has missed out on gigantic gains thanks to its policy of investing only in Treasury bonds.
Huge. More than enough to have put the entire program on a healthy footing forever without one more nickel in taxes from anybody.
In the typical year, Social Security earned 5% interest on its bonds. A portfolio of 60% stocks and 40% bonds? More than 9%.
Over the average 35-year period Social Security could have earned more than 300% more in total gains if it had been invested normally.
Even the most liberal states in America invest their state pension funds in the stock market. But not Uncle Sam.
This is nuts.
Memo to politicians, including Chris Christie and … everyone … including all the Democrats: Go and tax capital. Tax your donors the way you tax us working stiffs. Then invest the Social Security in stocks as well as bonds, like any other pension fund in the world.
Then, and only then, am I open to hearing even a single word from you about what else we might need to do to shore up the plan’s finances.
