Making the problem worse
Dear Editor:President Bush claims that the Social Security system will go broke around 2016. This is based on his assumption that government IOUs for money borrowed from the Social Security Trust Fund will not be repaid. To address this future shortfall, President Bush has proposed to take an additional 2 trillion dollars out of the Social Security system to set up private investment accounts for younger Americans.How does this fix the problem? Well, actually it doesn’t. It makes the problem worse. What is the logic behind the president’s proposal? Apparently the same type of logic that has cost 1,400 American lives and $300 billion for an unnecessary war in Iraq.President Bush could fix Social Security by raising taxes on wealthy Americans. Currently, the Social Security payroll tax stops after a person’s annual income exceeds $90,000. If this ceiling were removed, two-thirds of the shortfall would be covered. If the recent changes in the inheritance tax were replaced with an inheritance tax paid only by estates exceeding $7 million dollars, the remainder of the shortfall could be eliminated.Is it reasonable to rescind the tax breaks given recently to wealthy Americans? Yes. The business infrastructure built with taxes (e.g., airports, roads, harbors, bridges, public education) supports successful businesses. Our military power, also financed by tax dollars, makes the world safe for American business. Wealthy individuals benefit disproportionately when the economy is strong. Those who receive more from tax expenditures should pay more.The predilection of the president and Congress to engage in deficit financing also needs to end. The idea that deficits don’t matter was once labeled by President Bush Sr. as “voodoo economics.” The recent tax cuts combined with an expensive war in Iraq will produce huge deficits for at least the next five years. Peter Peterson, a lifelong Republican and former secretary of commerce under Nixon, reminds us that tax cuts unaccompanied by spending cuts are not tax cuts at all, but tax postponements. We are living it up today and leaving the bill for our children. If government spending and tax revenues were balanced, there would be no need to raid the Social Security Trust Fund.The president’s private account proposal hastens the day when the outflow from Social Security will exceed the inflow. His deficit spending encourages a profligate Congress to continue raiding the Social Security surplus. When outflow exceeds inflow in a few years, the only way to fund our retirement benefits will be to raise taxes on younger Americans. Bush’s plan for saving Social Security is similar to his plan for saving Fallujah. He “saved” the town by leveling it.Peter FreyBasalt
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