Social Security Bait and Switch Shuffle

Fixed Straight Percentage Fair Contribution

Not so fast with the bait and switch Social Security Shuffle. Let’s look at Social Security again a little more carefully.

Employers withhold about 7 percent of wages on those employees that earn less than $90,000.00 a year. Employers then match that withholding with 7 percent and send it off to the Feds in Washington to pay for social security.

Now before we run off half cocked and trash Social Security, let’s look see what the problems with the current system might be.

One easily identifiable problem is that the system is not structured to help those Social Security is purported to help. The system was designed to help citizens beyond employable age. When politicians tell us that 10 workers used to pay for each person on Social Security the red light should have come on. Anytime you structure a system that takes advantage of others, it is exploitation and sooner or later it is doomed to fail. Think about it. Do we really want to design a retirement system that must encumber 10 other citizens to pay for each retiree?

In actuality the system is even more exploitive than that. Although the Social Security System is purported to be a graduated system, meaning that the wealthy pay more than the poor, it really is just the opposite. The 7 percent paid by you and your employer caps out at $90,000. What that means in real terms is that a citizen that earns $90,000 or less, pays 7 percent. A citizen earning$90,000 a year pays $6,300, into Social Security. It also means a citizen earning $1 million a year also pays $6,300.

In essence what that means is every year:
Each citizen earning $10,000.00 pays $700 into Social Security.
Each citizen earning $50,000.00 pays $3,500 into Social Security.
Each citizen earning $90,000.00 pays $6,300 into Social Security.
Each citizen earning $1,000,000.00 pays $6,300 into Social Security.
Each citizen earning $10,000,000.00 pays $6,300 into Social Security.

It becomes very clear that those in power structured a system that has the relatively poor burdened with paying the majority of the Social Security. While those most able to pay for Social Security and earning more than $90,000.00 have their contribution capped at $6,300. A citizen making $1 million a year pays less than 1 percent into Social Security. It makes me angry when our representatives, which incidentally most all make over a $1 million a year, want to toss the system into the dust bin because they might have to pay their full 7 percent share to keep the system going.

Supposedly, these representatives or at least their forefathers were purportedly looking out for our best interests. They designed a system that limited their liability and had the young poor fund the old poor. Well, we have a suggestion to fix the part of the Social Security system that is broken.

According to the 2003 U.S. Census data and some simple extrapolation, approximately 216 million citizens that earn less than $90,000 make some $3.2 trillion and contribute 7 percent of their income, $225 million, into Social Security. Correspondingly, each employer contributes a matching 7 percent for a total of $450 million. Now to that figure, imagine a straight 7 percent applied across the board, rich and poor alike, and add the amount not being paid by those earning over $90,000. That and the corresponding employer contribution would add $373 million a year to Social Security, almost doubling the existing Social Security bank roll.

See table above then check it out for yourself at:
Contribution and Benefit Base
Contribution and Benefit Base Calculation

President Bush is having a difficult time selling his new Social Security plan for a reason. James Madison really identified the problem when he said, "All men having power ought to be mistrusted."

The Social Security System that we have had is a sad example of the exemptions the powerful make for themselves. We figured out why the plan isn’t working. Those that earn between $90,000 and $4.5 billion are not paying 7 percent. They pay $6,300. Percent is a relative tax. 7 percent is relatively as painful to the poor as it is to the rich. The benefit of Social Security may be inconsequential to the rich. However, Social Security received by the poor can make a difference in obtaining food or shelter. Why don’t we just fix the part of the system that is broke? Here is the fix: Everyone pay their fair share, 7 percent, and let’s move on to something else.