Republicans' Deliberate Use of Leninist Strategy to Bust Social Security Support

[FayeforCure]

Let's go back to the original strategy brief by Stuart Butler and Peter Germanis. Their piece, "Achieving a 'Leninist' Strategy," appeared in the Cato Institute's Cato Journal for fall 1983. Anguished over President Reagan's failure to exploit Social Security's 1982 fiscal crisis to privatize the program, they concluded that the reason was the program's strong support among the powerful voting bloc of seniors.

The answer, they concluded, was to "neutralize" elderly voters while continuing to undermine confidence in Social Security among the young. Their model was the Leninist movement's "success in isolating and weakening its opponents."

Any plan to change Social Security, they wrote, "must therefore be neutral or (better still) clearly advantageous to senior citizens ... the most powerful element of the coalition that opposes structural reform."

The young, by contrast, were not organized to support privatization, and uninformed about its virtues. The task of filling the knowledge gap, they argued, could best be performed by "the business community and financial institutions in particular ... both through their commercial advertising and through public relations."

Ever since then, proposals for dramatic changes in Social Security and Medicare have reflected this divide-and-conquer strategy. Some have scarcely any other practical rationale. Consider, for example, the argument for means-testing Social Security. This often appears as the question of why the system should be burdened by paying a monthly benefit to Warren Buffett or Bill Gates (insert name of your favorite billionaire here).

Yet to reduce Social Security's costs significantly, any means test would have to reach far beyond billionaires. One reason is that there simply aren't enough taxpayers in the Buffett/Gates class to make a difference, especially when the maximum initial annual Social Security benefit, whatever your wealth, will be $30,156 this year. Only about 8,200 of the 140 million personal income tax returns filed with the IRS in 2009 reported adjusted gross income of $10 million or more.

Moreover, Social Security benefits are already sharply skewed toward the working class and middle class: 76% of all benefits paid in 2009 went to recipients with less than $20,000 in non-Social Security income, according to calculations by Dean Baker and Hye Jin Rho of the nonprofit Center for Economic and Policy Research. Those reporting $180,000 or more got 1% of the total. In other words, means testing makes no sense in terms of Social Security's fiscal condition; its only result would be to make the program less relevant to the lives of middle-class Americans â€" and that's a political strategy.

The same goes for increasing the full retirement age for Social Security (currently 67 for those born in 1960 or later) and the eligibility age for Medicare (65). An analysis of this commonly discussed nostrum for both programs was just released by the bipartisan Congressional Budget Office.

The CBO found that gradually raising the full retirement age to 70 for those born in 1973 and later would indeed cut Social Security outlays â€" by 2060 they would be 13% lower than if the law remained unchanged. But the burden would fall especially heavily on low-income seniors, who typically have few alternative income sources, and those for whom staying in the workforce isn't an option. The CBO says the change would "lower average income and increase poverty rates" among the elderly; does everyone understand the trade-off of a policy change so casually bruited about?

As for raising the Medicare age, that looks like a classic case of being penny wise and just plain foolish. Raising the age to 67 would reduce government expenditures on Medicare by 5%, the CBO says. But the agency acknowledges that it would do nothing to stem overall healthcare costs; indeed, its own analysis and those of other experts suggest those costs would rise overall. Those who lose Medicare access (those ages 65 and 66) "would pay higher premiums for health insurance, pay more out of pocket, or both." And some would have no insurance.

http://www.latimes.com/business/la-fi-hiltzik-20120113,0,442443.column

As always Republicans are penny wise and pound foolish, think short term rather than long term

Not the type of thing that makes for good leadership!

[Dog Walker]

Have there been any studies of what would happen if the cap on FICA liabilities on salaries was lifted?  Right now there are no FICA liabilities on salaries over $104K.  How would the solvency of Medicare and SS look then?

Of course there would have to be safequards against compensation being shifted to non-salary payments like cars, airplanes, tuition for kids, etc. as was done when marginal income tax rates were in the 90% bracket.

[finehoe]

Have there been any studies of what would happen if the cap on FICA liabilities on salaries was lifted? 

http://aging.senate.gov/crs/ss9.pdf

"If all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the
Social Security Trust Funds would remain solvent for the next 75 years."

[Dog Walker]

Suspicions confirmed!  Thanks.

[buckethead]

Stocks and stock options can also convert income to capital gains.

[Dog Walker]

Capital gains are still income.  Right now they are taxed at a lower income tax rate if you have held the stock or option for more than one year.

FICA should be paid on any salary substitute scheme.

[Traveller]

A couple of comments on this thread:

1. The social security wage cap is $110K this year, not $104K.

2. The healthcare bills created two new Medicare taxes on high income individuals: 0.9% on wages and 3.8% on investment income, to the extent AGI exceeds $200K for individuals and $250K for couples.  These are effective beginning in 2013.

3. All remuneration for services is subject to social security and Medicare taxes, whether in the form of stock, options, non-exempt fringe benefits, cars, planes, etc.  If you hold onto the stock after you receive it, only appreciation after receipt is eligible for reduced capital gains rates.

4. There are legislative proposals that would close the "John Edwards loophole" of reclassifying self-employment income as passive S-corporation investment income.  I would also like to see them close the "carried interest" loophole for hedge fund managers, but that won't happen until 2013.

[Dog Walker]

Thanks for the correction and the up to date information from an obvious expert.  Good stuff!

[civil42806]

Have there been any studies of what would happen if the cap on FICA liabilities on salaries was lifted? 

http://aging.senate.gov/crs/ss9.pdf

"If all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the
Social Security Trust Funds would remain solvent for the next 75 years."

So your advocating an increase in the tax rate for everyone over 110,000 a year by 6.2 percent and converting SS from a retirement fund (LOL) to just another welfare (income transfer) program

[civil42806]

Have there been any studies of what would happen if the cap on FICA liabilities on salaries was lifted? 

http://aging.senate.gov/crs/ss9.pdf

"If all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the
Social Security Trust Funds would remain solvent for the next 75 years."

So your advocating an increase in the tax rate for everyone over 110,000 a year by 6.2 percent and converting SS from a retirement fund (LOL) to just another welfare (income transfer) program

civil, i believe that finehoe was simply answering dogwalkers question as to whether or not anyone had studied the issue, rather than 'advocating just another welfare program'.

Aside from trying to conflate the answering of a question with advocacy of a point of view, there is a more important point.  As the grandchild and child of welfare recipients, I have to wonder if you think that a welfare program is a bad thing.

I know that many of the other people on this forum have benefited personally from this whole 'welfare' thing you speak so disparagingly about, whether or not directly, as my L'il Mama and mother did or indirectly----as in the benefit from not having to worry whether or not your elderly mother or disabled father will starve to death homeless in the streets because they are able to recieve social security payments.

It sounds like you are advocating a return to the wrenching poverty and disgusting history that preceded such programs.

Sorry but the question needs to be asked, if you want to remove the cap on social security tax and freeze benefits at the existing levels then you are advocating a 6.2 percent increase in the tax rate for all income over 110k.

The whole basis of the social security system is that you pay into it and you recieve benefits based on that.  If in fact the benefits are not based on contribution then its no longer a retirement system.  Please don't put words in my mouth or assume the worst of me.  Either social security is a retirement plan or its not.   The whole concept of social security changes if all income is taxed and the benefits are fixed.  If you want to change SS into a income transfer system thats fine, but the whole concept was that you pay in and reap the benefits.  That has insured a wide level of support across all income strats.  If that changes then expect the support to change.

[BridgeTroll]

While I am generally not in favor of tax increases...  I would be very open to the idea of either removing or moving the cap number upward.  In my view... this would not really be a tax increase since the rate would not change... but I would see it more of a loophole closing.

[FayeforCure]

While I am generally not in favor of tax increases...  I would be very open to the idea of either removing or moving the cap number upward.  In my view... this would not really be a tax increase since the rate would not change... but I would see it more of a loophole closing.

Wow BT, I love your very reasoned response. That is the second time I feel compelled to say something.........right before Christmas you even supported the idea of a universal healthcare system (provided it was put in the constitution)

Maybe the start of 2012 marks a renewed coming together on ideas that will make the US prosper once again while guarding the well-being of its people..........rather than the enabling of a return to barbaric conditions that conservatives so often advocate.

[BridgeTroll]

Neither of these positions are anything different from what I have always thought and said.  If you would stop lumping all republicans into some monolithic, stereotypical group and actually listen to what they say you would see that...

[FayeforCure]

Neither of these positions are anything different from what I have always thought and said.  If you would stop lumping all republicans into some monolithic, stereotypical group and actually listen to what they say you would see that...

Republicans in leadership are a very monolithic sterotypical group, that's why a reasoned person like Huntsman doesn't stand a chance.  It used to be the Republican's strength.......but it could very well be their undoing.

[BridgeTroll]

I am shocked you would see things the way you do...

Republicans Democrats in leadership are a very monolithic sterotypical group, that's why a reasoned person like Huntsman Leiberman doesn't didn't stand a chance.  It used to be the Republican's Democrats strength.......but it could very well be their undoing.

Ya think democrats who do not toe the party line are electable in a presidential election??  They have their sacred cows just as the republicans do... and the base gets pretty riled up when they deviate from the plan...