March 31, 2013

Barney Frank: Social Security 'entitlement' deserves funding and respect

We should ensure its solvency by applying the payroll tax to earnings of $250,000 to $400,000.

Social Security, Medicare and Medicaid are three of America's greatest accomplishments in the 20th century. They are by far the most effective anti-poverty programs ever enacted. Without them, the problem of excessive and growing inequality in our society would be far worse.

People who want to cut them back so that we can reduce the federal deficit without cutting back our swollen military budget, or fairly taxing the very wealthy, understand the unpopularity of their position. So they refer to these pillars of social equity as "entitlements".

Cutting "entitlements" has an antiseptic, morally vigorous ring to it, implying that the recipients are enjoying some undeserved privilege -- that they are, to borrow a phrase, part of the "47 percent."

Reducing the annual cost-of-living increase of $50 dollars a month for an 80-year-old living on $18,000 a year in Portland sounds much harsher. As does telling 65-year-old women who have been carrying heavy trays of hot food since they were 18 that they have to wait two more years to receive Medicare, during which time they will have to pay more to receive less health care from the private market.

And withholding basic medical care to families earning 20,000 annually by rolling back or capping Medicaid is probably the cruelest step of all.

These are not hypothetical changes. They are three of the most prominent proposals advanced by eminent deficit hawks to bring down our national debt. For some, a willingness to accept pain inflicted on others is the price to be paid to be considered "responsible."

Proponents of such steps are, of course, entitled -- to use the word appropriately -- to advocate them. But they should not seek to mask their socially destructive impact with a euphemism.

Nor should they be able to assert without refutation that to cut our national debt we have to take back some part of what we've done to provide a secure retirement for the elderly and a reasonable minimum level of medical care for the poor and middle class.

Preserving Social Security is the easiest to defend for three reasons -- the structure of the payroll tax that finances it; President Obama's decisive re-election on a platform that included a small tax increase for those earning more than $250,000 per year; and the clear evidence such increases do not retard economic growth.

Taken together this means that to ensure Social Security's solvency we should subject incomes between $250,000 and $400,000 to the the payroll tax that finances the program.

The current cutoff point at which that tax is collected is $113,000. This is both regressive -- a married couple in which both spouses earn $60,000 -- pays more than an individual earning $1 million -- and inadequate to sustain benefits beyond 2035 or so. (The system is solvent until then).

No legal or economic principle argues against a change in the amount on which the tax is levied.

The $250,000 figure has two strong arguments in its favor. First, the compromise tax increase adopted in December affected the marginal rate for incomes above $400,000. That means a payroll tax on incomes in the $250,000 to $400,000 range won't subject incomes above $400,000 to a double increase. Nor would it be a violation of the Democratic campaign platform.

Second, the marginal rate increase adopted as a result of President Clinton's initiative in 1993 -- it was both larger, and applied at the $150,000 level -- did not prevent the following years from being among the best in our recent economic history, with unemployment dipping below 4 percent.

While there is some concern that raising the Social Security payroll tax to its previous level may cause some lag in spending by lower and middle income people, GDP growth estimates for this year are now generally higher than before the tax increase. And no economist -- including those employed by major financial institutions -- is asserting that a small tax increase on incomes above $400,000 is having any noticeable negative impact.

Finally, this proposal avoids a clash of philosophies on government spending because the money won't be available to those of us who wish to expand domestic programs such as improving infrastructure, increasing local government aid and cleaning up serious pollution.

All of the new revenue would be used exclusively to support Social Security benefits. And it may even produce enough money to allow a decrease in the payroll tax rate at some future date.

Barney Frank is a former Massachusetts congressman and author of landmark legislation. He was the first member of Congress to come out as a gay man. He lives with his husband in Ogunquit.

 

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors




Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)