September 18, 2004

John Kerry’s plan for Social Security reform

Fox News appears to have a scoop here, although they're really low-keying it. The lead issue on FNC's Cashin' In financial show this morning was whether John Kerry's SS reform plan was "good or bad news for the economy and the market." The first question that has to be asked is, "What is his plan? All that can be found in his speeches and position papers is what he is against: "As president, John Kerry will not raise Social Security taxes, raise the retirement age, cut benefits for people that rely on Social Security, or privatize Social Security."

I still haven't figured out where they got this information or how accurate it is, but Cashin' In's unattributed detail of the Kerry plan was as follows:

$120,000 Salary

You Now Pay* - $5,450/Yr
You Will Pay* - $7,440/Yr

*Self-employed's pay double

This means that many middle class families may be paying up to $4000 more in taxes every year, or double that if both wage earners are self-employed!

I've found no independent verification of this as the official plan of Team Kerry, but it is consistent with the analysis of the Cato Institute. (How is it even a possibility that a man could be elected President of the United States despite the fact that his policy positions must be derived from tea leaves? I can answer this but it will take a future blog post to do it.) Cato says:

Actually, it is all too clear where the money will come from. As former President Bill Clinton pointed out, there are really only three options for Social Security reform: raise taxes, cut benefits, or invest privately. Since Sen. Kerry rules out private investment or benefit cuts, he could legitimately be accused of implicitly endorsing tax increases.

And mighty big tax increases they would have to be: a 50 percent increase in the payroll tax or the equivalent. This would be a tax hike far higher than what Kerry would "save" by rolling back parts of President Bush's tax cuts -- even if he hadn't already promised to use those savings to fund other government spending."

It is painfully clear to all who care to see - A Kerry administration would seek to raise taxes at every turn, limited only by their own imagination and the extent to which Congress is willing to play along. Should our nation suffer the calamity of Kerry actually winning the election, our greatest hope seems to be that he will be as indecisive in office as he has been in seeking it.

Posted by JohnGalt at September 18, 2004 12:06 PM

He's only raising taxes on "the rich." I heard that he was lifting the maximum amount you pay Payroll taxes on. Right now, you pay only on the first 87,000 per year. Senator Kerry wants to charge payroll on all of it.

Surely, anybody that makes more than 87K deserves a tax increase.

Posted by: jk at September 18, 2004 12:52 PM

Careful there, JK. Not every reader will realize you are being facetious. (But thank you for the explanation of where the additional tax comes from. Can you refer us to any documentation that this is actually Kerry's plan?)

I'll repeat the assertion I've made before on these pages: A so-called 'flat tax' as a percentage of anything (income, wealth, spending) is, by definition, a progressive tax. Those with more are taxed more. Increasing marginal rates for ANY individuals using ANY criteria is, by definition, punitive.

Keep in mind that prior to the sixteenth amendment to the Constitution a flat tax was unconstitutional. Any tax had to be levied upon every individual EQUALLY. (Whoa, there's a concept for ya.)

Article I - Legislative Branch
Section 9 - Powers Forbidden to Congress
Paragraph 4: "No capitation or other direct tax shall be laid unless in proportion to the census or enumeration herein before directed to be taken."

Posted by: johngalt at September 19, 2004 09:58 AM

No, I cannot find docs and I don’t remember where I heard that. Googling "Kerry payroll tax" brings up quite a few articles on his Keynesian plan to offer a payroll tax holiday in lieu of the President's tax cuts. Ay-yi-yi, I am sure glad this guy is losing...

Posted by: jk at September 19, 2004 06:49 PM

I agree that many of these taxes on the "rich" are actually stinging the middle class, but your bold face type of $4000 increase assumes 2 wage earners each earning $120K? That would be "many" middle class families by using the definition of many being more than a few? Just curious as to what percentage of the middle class earns $240K annually. Not that your point doesn't hold, but just interesting the way it was phrased.

Posted by: Silence Dogood at September 20, 2004 11:45 AM

No, the $4000 figure would be for self-employed taxpayers, who pay double for Social Security because their contribution is not matched by their employer.

Posted by: jk at September 20, 2004 02:23 PM

Why do I feel like the majority of the public do not get this? Most on this blog are excepted. I am looking for some insight.

It makes no difference if it is $4,000 or $40. Why don't people understand that if the government is paying for things (any government, any things) for individuals, it is stealing the money to do it from other individuals who are not usually benefiting.

If the 18 year old unwed mother came into my house and stole money to pay for her food and health care, she would be sent to jail. If the government takes my money and gives it to her to pay for her food and health care, this is perfectly legal and even considered the right thing for governments to do. I have not agreed to this. Her NEED, strong as it may be does NOT entitle her to a claim on my earnings.

This applies to health care including medicare and medicaid, welfare, education, and so many other areas of our lives that it has become automatic for individuals to assume that the government should make sure we have, not only food and health care but, jobs, free from the possibility that the market might make our jobs obsolete and we might have to go find another.

Do I sound incensed? Even angry? You bet I am. The most frustrating thing, however, is that most people don't get it! This is morally wrong. Does ra_pe make you angry? murder? burgalary? car theft? Why doesn't this make you angry too? Why isn't everyone who works hard and believes in independence angry? Have we really come to believe that we are all dependent?

Silence, you are as close as we have to a liberal around here. Why do you think this is the way a government should behave? Why aren't people angry?

Posted by: dagny at September 20, 2004 09:28 PM

No fair! Silence always gets to be the liberal! Actually, this is where I part company with big-L Libertarians.

Dagny, we have freedom as our unalienable birthright as human beings, but we also have self-determination as Americans. American legislators ratified the 16th Amendment, elected FDR (four times), elected LBJ, and sent enough Deweyites into Congress over the years to give us these programs.

I seek reform, not abolishment. My niece and brother openly seek enlargement of the welfare state. I believe in Newt Gingrich's and Ronald Reagan's "safety net" for the "truly needy."

I am concerned that:
-- the trend is always toward enlargement of government
-- the progressive tax system leaves too few with skin in the game. If you pay little or no taxes, you have an incentive to vote for more services
-- the mainstream media is economically biased (the first example in Bernie Goldberg's book is CBS's bashing of the flat tax). Whether or not they are partisanly predilected, they are certainly economically predilected.

All this makes reduction and reform difficult. I do see eye-to-eye with you on many things, but exigencies dictate that we work through the system and not let the perfect be the enemy of the good.

I get a little mad at liberty lovers who will allow Senator Kerry to be elected because President Bush isn't "Conservative" enough, either socially or fiscally. As if either group would be happy with a Kerry Administration.

Posted by: jk at September 21, 2004 08:29 AM

How else will I get you, dagny, to pay for my children's education, my health care, and my retirement? Seriuosly it makes me angry and frustrated too, but how do you make the move from idealogy to reality? Can I tell my dad that since I don't believe in paying social security he can't have his check after paying in for 40 years? What does your Utopia look like, poor people don't have children, they die young, they suffer their health problems quietly away in a corner, or does removal of the safety net make them stronger and able to scrape by on their own?

I agree with John Galt on taxes, a straight percentage is a progressive tax, those who make more do pay more. We just need to get the myriad of tax breaks, shelters, incentives and the like out of the system so that it becomes more transparent. This is one reason I hold off judgement on medical savings accounts, it seems like just more tax complication. As JK says, the solution will have to be a gradual change, a reform, not abolition. The solution to avoid constant enlargement of the government should always be toward fewer tax breaks and incentives while at the same time a trend toward lower tax rates. This method of throwing a tax break at every problem from health care to education to retirement to environmental protection is never going to reverse the trend in government and work toward shrinking the government presence in our lives.

Posted by: Silence Dogood at September 21, 2004 09:30 AM

No, JK, Silence is right. I meant two wage earners earning a COMBINED $120K would each have to pay an extra $2K in FICA tax, double THAT if both were self-employed. Your clarification would mean that the extra $2K is on their combined incomes, so it's only "...$2000 more in taxes every year, or double that if both wage earners are self-employed!" Still enough to piss ME off, however.

Posted by: johngalt at September 21, 2004 11:02 AM

Gulity as charged. I am an idealist. The fact that we cannot reach the ideal in one step does not mean that we shouldn't work towards it or that we should accept steps that are backward in the meantime.

I have still not heard a moral argument that it is right to take my money away against my will and give it to those who have not earned it. JK argues that since we have voted for these programs that makes them right. That is called the tyranny of the majority and that is the argument that what Hitler did is right because he was freely elected.

JK, I believe in your, "safety net," but it must be voluntary. It would also be many times more efficient if I got to choose which individuals and organizations were deserving of my help.

Silence, your father is entitled to every penny he put in and whatever interest that money actually earned (it should not have been taken from him in the first place). However, social security is a guaranteed benefit and life spans are increasing so most seniors these days are collecting much more than they put in. That entitlement is wrong and it is what is bankrupting social security. Do you really believe that the cancellation of all government programs will result in, "poor people don't have children, they die young, they suffer their health problems quietly away in a corner,..."? Americans are incredibly generous people and if we don't have to pay taxes we will pick up the slack for those who are hard-working and deserving.

I am willing to make judgements about people and say this is a good person who deserves help and this is a lazy one who doesn't. Think about what such judgements will do for the general behavior of people. The child-care books call it, "tough love," these days.

Posted by: dagny at September 21, 2004 09:50 PM

Fair enough, Dagny. I dream of consumption-based taxation, I know about idealism.

I frequent a lot of libertarian blogs and discussions. These people frustrate me to no end. We both want essentially the same things -- yet they are way too cool to vote for Republicans because "they're no better than the Democrats."

The steps backward, if I may borrow your metaphor, in a Kerry administration seem huge to me. Giant steps away from liberty, away from personal responsibility and away from increased private ownership -- and most Libertarians I encounter are ready to take those backward steps because W isn't perfect to them.

Back to the philosophy of why you must pay, I think that a plurality of voters in this country clearly believe that birth as a human entitles a citizen of this country to a base level of sustenance and comfort. I'm closer to you than I am to Katrina Vanden Heuval, but I think we will vote to provide this safety-net to the undeserving every time. And if it does not wreck the economy or ruin personal incentives, I'll go along with very little fuss.

Posted by: jk at September 22, 2004 03:44 PM

This post about ONE of Kerry's tax hike plans seems to have degenerated into an intelligent discussion! I'm in agreement with Silence on his tax reform comments, particularly the trend toward lower overall tax rates. JK's prioritization of liberty, personal responsibility and private ownership of property are also truly moral ideals. And the exigencies, as you say, require the election of George W Bush as president lest we as individual Americans lose ground on every single one of these important issues.

Now that we've acknowledged so much agreement let's think about the remaining differences. They are small in number but have huge implications.

First of all I'll caution you to revise your preconceptions about "Libertarians." Historically, they value liberty only for the power it gives them to thumb their nose at the law, and prefer anarchy to personal responsibility and property ownership. They seek primarily to be liberated from consequences, and not from tyranny as you and I do. The people I make common cause with endorse 'pro-capitalism.'

Next is the idea that our government (which at its founding was given a detailed schedule of powers it is forbidden to wield - the Constitution) has the power to impose any restriction or penalty upon individuals so long as said penalty is "validated" by a simple majority vote. This is called 'democracy,' and it is most certainly NOT what this country was meant to be about. (The word 'democracy' appears in the US Constitution exactly ZERO times.) JK opines "...I think we will vote to provide this safety-net to the undeserving every time." Ignoring for the moment that the cause of this collectivist mentality is an unearned guilt incubated in mens' hearts by altruism, the "vote" you speak of is the civil equivalent of a lynch mob. Such a vote was prohibited by the Constitution and is a direct contradiction to the ideal of individual rights that this nation was founded upon. The act of ratification of the sixteenth amendment does not convey moral rectitude upon it, nor philosophical compatibility with the original Constitution it mutilated. Dagny's call for a moral argument to justify forcibly taking her property and giving it to others, therefore, remains wanting.

Finally, if it is true that a majority of people in this country believe (and I won't dispute they do) that mere existence entitles every citizen of this country to a certain standard of living, then the very same government entitlement programs that provide this "safety net" would still do exactly the same job and for less money if they were run privately and competitively.

I'll conclude with a relevant Heinlein quote:

"There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him."

Posted by: johngalt at September 23, 2004 01:49 AM

Perhaps you are right about the libs. I tell you, those folks are buggin me.

I think you may miss my point. It is not about a simple majority (unfettered democracy as it were). The fact is that people have taken the beautiful Constitution bequeathed us by Madison, Hamilton, Jay, Morris, et al -- and they have legally created the welfare state that we have. Supermajorities, state ratification, the whole nine yards. So do you have an unamendable Constitution or do you allow the inexorable dilution of the liberties it guarantees?

Posted by: jk at September 23, 2004 04:10 PM

I think the best answer to that question is that the Constitution should have been written to allow amendments only to ADD powers prohibited to government, not to remove or modify prohibitions already there.

I think this can reasonably be called a flaw in our Constitution. What case can be made that government will ever be entitled to any more power than it is entitled to today?

Posted by: johngalt at September 24, 2004 11:40 AM
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