Thursday, September 29, 2011

The Great Carnard

Did you know that 2/3 of all retirees derive more than 50%, and 1/3 more than 90%  of their income from Social Security?  It's true.  What is also true is that with the utter collapse of private pensions, both the defined benefit and defined contribution type, those ratios are on the rise.  Without this program, and without its strong and improving support, seniors would be headed for a sad end-of-life sentence of destitution and misery, just like more than half were saddled with in the 1930s, before the New Deal created the program.

That is why I wish that people would stop saying stupid things about Social Security.  Even some smart people, like James Kwak (Should Social Security Be Progressive?) fall victim to the mischaracterizations.  They actually confuse the relative outcome of the program, which is slightly progressive, with the nature of the tax assessed to fund it, which is decidedly regressive.  Unfortunately, they do this in the context of arguing that the income cap tax base for the assessment should not be raised, because this would increase its progressivity.  Nothing could be more untrue.  The tax rate itself would remain flat, and that is unquestionably a regressive form of taxation, no matter how the proceeds are put to use. 

Moreover, arguments, both economic as well as moral, abound that even the outcome of the program, now labeled progressive, is equitably beneficial to all income groups across the board.  Hence, the fact that some recipients receive a return of a higher proportion of earnings is not at all relevant to the issue of the nature of the tax itself, and in fact is a dubious standard for judging the overall performance of the program as well.  More on this in a later post when I have more time.   

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