A Social Security Plan That Works for Everyone

Jan 5th, 2011 | By | Category: Social Security & Medicare

The new Congress will take up the issue of Social Security this term.  They will be discussing whether or not the program has an effect on the deficit (it does not), and how its solvency can be assured for future generations of beneficiaries.

In November, 2010, Jan Schakowsky (D-IL) released a plan she created in response to the Simpson-Bowles recommendations and plan.  Her plan“…offered a comprehensive proposal to reduce the federal deficit without making middle class Americans foot the bill. Schakowsky’s plan is an alternative to the Bowles-Simpson plan and would reduce the deficit by $441 billion in 2015, surpassing President Obama’s $250 billion target. Critically, the Schakowsky plan accomplishes deficit reduction without making cuts to essential federal expenditures that benefit the middle class.” 

There are five essential elements to the Schakowsky plan with details provided on the link; the plan is summarized here:

1) Increased economic stimulus to spur growth in the immediate term:  The plan provides $200 billion to invest over the next two years in measures to create jobs and spur economic growth; Adopt the President’s proposals to eliminate overseas tax havens and incentives for outsourcing;

2) Smart, targeted spending cuts: Non-Defense Discretionary – $7.55 billion in savings through increased efficiency and cuts to programs that benefit large corporations that don’t need assistance; Defense Discretionary – $110.7 billion in cuts from the 2015 defense budget, including efficiency savings, reducing our troop levels, cutting weapons systems we don’t need, and scaling back the wartime increases in the size of the military. 

3) Mandatory spending cuts: health care ($31.2 billion in savings); other (7.7 billion in savings) 

4) Reductions in tax expenditures: Raise $132.2 billion by closing tax subsidies for companies that ship American jobs overseas.  

5) Increases in revenues: raise billions in revenue with progressive reforms to current tax law.

The Simpson-Bowles proposal relies for the most part on benefit cuts, not revenue increases.  Schakowsky states, “Social Security has nothing to do with the deficit. Addressing the Social Security issue as part of the deficit question is like attacking Iraq to retaliate for the 9/11 attacks – there is simply no relationship between the two and attempting to conflate them does a grave disservice to America’s seniors.”

She goes on to say, “Taking money from Social Security retirees whose average total income is $18,000 per year and average benefit is $14,000 ($12,000 for women) is simply wrong. It places them at fiscal risk and hurts the economy because they will be unable to purchase the goods they need.  Americans in poll after poll have indicated their opposition to benefit cuts – particularly at a time when Wall Street bankers are making record bonuses.”

Schakowsky’s plan ensures long-term solvency to Social Security by eliminating the wage cap on the employer side and raising it to 90% on the employee side, applying FICA to all wage income below the cap, and establishing a modest legacy tax on wealthier Americans.  Any surplus funding can be used to improve the extremely-modest benefits that are now provided.

The plan makes sense because it works for everyone… senior citizens, middle class citizens and the wealthy.

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