Barack’s Social Security A-Bama-Nation
The Democratic nominee wants to turn a pension program into another wealth redistribution scheme.
In a speech in Columbus, Ohio, on June 13, Barack Obama proposed a massive tax increase to fund the Social Security program.
A Democratic presidential candidate proposing a tax increase is not exactly news. But this is no ordinary tax increase.
For the first time in the history of Social Security, Obama would impose the payroll tax on a group of people — anyone earning over $250,000 from work or self-employment — who would receive no additional benefit in return. The Illinois senator would carve out a “doughnut hole,” sparing those who earn between the current maximum taxable earnings of $102,000 and $250,000 from having to pay any additional tax.
This is a tax increase that is stunning in both size and scope, as this chart shows:
Obama’s justification is particularly odious (statement comes at about 7:00 into the linked video):
Right now the Social Security payroll tax is capped. That means that most middle-class families pay the payroll tax on every dime that they earn. But once you get to $102,000 per individual, then you’re no longer paying the payroll tax. And what that means is that … you’ve got billionaires and millionaires who are paying … payroll tax on only a tiny fraction of their income.
Obama’s class-envy rhetoric obscures his proposal’s abandonment of what has been, until now, an immutable principle of Social Security: Every dollar a person pays into the system affects the amount of his or her Social Security retirement benefits, should he or she live to see that day — not by much, in the case of those whose earnings are in the top half of the taxable earnings range, but at least by a bit. Those who earn more than the taxable threshold aren’t taxed; but, in exchange, they don’t receive any additional benefits.
If Obama’s proposal were ever to become law, those days would be over.
There’s a supposedly open item in all of this that I believe has a pretty obvious answer. On June 4, as the outline of what Obama intended to propose began to become clear, the Wall Street Journal speculated on it:
A key question that the Obama campaign hasn’t yet answered is whether higher earners under his plan would collect more in Social Security benefits than under current law, to reflect the additional payroll taxes paid.
Many economists argue that if the earnings cap is lifted, it would be unseemly to pay benefits according to the current formula to wealthy CEOs who don’t need to rely on Social Security for financial support in retirement.
That’s exactly right. Although it might arguably be “fair” to extend benefits to high-income earners proportionate to the taxes they have paid in, it’s clear to me that any legislator or president attempting to defend doing this would be committing political suicide.
Thus, I believe that Barack Obama has no intention of increasing Social Security benefits paid to anyone he is targeting for the new tax beyond what the system currently provides — or if he claims he will, it will never happen. Instead, the Illinois senator simply wants to force the person earning $1 million, or $10 million, along with his or her employer (very often the same person), to kick in a combined additional $93,000 or $1.2 million, respectively, because … well, because he can.
Obama’s proposal thus officially severs the earnings/benefit linkage for the first time in the 70-year history of Social Security. As Jim Taranto wrote in the Wall Street Journal on Monday:
Obama’s proposal to use Social Security as a means for taxing “the rich” amounts to a repudiation of the program’s original New Deal conception. Social Security is supposed to be a pension for workers, not a redistribution scheme. That is why Democrats have, over the years, resisted efforts at means testing — i.e., preventing the wealthy from collecting benefits. Obama’s proposal would convert Social Security into nothing more than another welfare program.
Many don’t realize that Social Security is already means-tested in at least two ways:
- The more you make, the less you get as a percentage of what you earned while you were working. You’ll see that this is the case if you work through and understand the larger implications of the examples that begin on this page at Social Security’s website.
- If you make “too much” while you’re retired, you have to pay federal income tax on either 50% or 85% of your Social Security benefits.
Obama’s proposal effectively means-tests Social Security all the way up the income scale, piling additional insult on top of existing injury. Class warriors may take comfort in the money they will take from the rich, but I doubt that they have an answer to this question: How is the economy going to avoid a meltdown if its highest earners see their take-home pay and spending power cut by so much?
Tom Blumer owns a training and development company based in Mason, Ohio, outside of Cincinnati. He presents personal finance-related workshops and speeches at companies, and runs BizzyBlog.com.
 |
 |
 |
Podcasts |  PJM Home |
Pajamas Media appreciates your comments that abide by the following guidelines:
1. Avoid profanities or foul language unless it is contained in a necessary quote or is relevant to the comment.
2. Stay on topic.
3. Disagree, but avoid ad hominem attacks.
4. Threats are treated seriously and reported to law enforcement.
5. Spam and advertising are not permitted in the comments area.
The clause regarding "hate speech" has been deleted because readers criticized it as being too loosely defined. We agreed.
These guidelines are very general and cannot cover every possible situation. Please don't assume that Pajamas Media management agrees with or otherwise endorses any particular comment. We reserve the right to filter or delete comments or to deny posting privileges entirely at our discretion. If you feel your comment was filtered inappropriately, please email us at story@pajamasmedia.com.
33 Comments
1. BizzyBlog » New Pajamas Media Column (’Barack’s Social Security A-Bama-Nation‘) Is Up:[...] It’s here. [...]
Jun 21, 2008 - 5:29 am 2. BubbaJ:This just makes my blood boil. My husband’s parents didn’t have the money to send him to college, so he worked full time bussing and waiting tables for 4 years to pay his way through college, and he paid back every cent he borrowed for years after he graduated. He started out at the bottom of the totem pole at his firm, and when I met him he was working 60 – 80 hours a week most of the time. After busting his rear end for 27 years, he has worked his way to near the top. To this day he works 6 or 7 days a week and travels constantly. On this beautiful Saturday morning while I sit here on my lap top, he was up at 6:30am and in his home office working. Yes, he made a choice to do what he does, but damn it all, we already pay nearly half of his income in taxes each year. It’s just never enough. The harder he works, the more he gets taken away. Socialism kills the work ethic. Just look at France. He always tells me he doesn’t mind paying taxes and understands the need. He just gets angry when he hears politicians say the rich don’t pay enough. Grrrrr…
Jun 21, 2008 - 7:41 am 3. Eric:Bubba J – the reasons you cite above are exactly why I believe EVERYONE should pay income taxes if they are working. By removing more and more people from the tax rolls, as even Bush has done, we create a class of people that will vote for Obama and the Socialist, I mean Democrat, Party because of the freebies they promise. Of course they aren’t free to the dwindling number of taxpayers. Why would someone who doesn’t pay taxes object to tax increases?
Jun 21, 2008 - 11:07 am 4. George:At least we are starting to get a more comprehensive view of the man now as opposed to the Thomas the Tank Engine campaign that got him the nomination. Then again, at least the conservative populous is, the liberals were done at ‘Yes we can’ and ‘change’….They’re already done shopping for their vote for president. Now its time for the all-important WE WIN! Part of the presidential race, to hell with the(any) details and consequences.
Jun 21, 2008 - 11:25 am 5. George:Unfortunately there are no intelligent ideas on the table from any politician right now, such as a flat-tax eliminating all loopholes(and the majority of the IRS) with no federal income tax on those making less then $20,000/yr.
Jun 21, 2008 - 11:27 am 6. Texmom:Flat tax and slightly raise the age of Social Security recipients. These two measures would make a tremendous difference in the economy and national budget, I believe. It is so frustrating that these problems could be solved, just like energy, yet year after year it gets worse while nothing is done.
Jun 21, 2008 - 11:53 am 7. Marina W.:Point 1.
Just look at Canada. No competition. No need to fear. No personal responsibility. But it’s economy is still called a market one although in reality it is already the socialism. A paradise regained! The question is: why so many Canadians are dreaming to live in the US? And why is Canada so poor? Because the socialism is not about “let’s get rid of the poverty”, it’s about “let’s get rid of the rich”. No one stops to be poor in the socialism. The rich are turned into the poor. Cuba, China, Vietnam, Laos. All of them should be scary examples of the socialism, but the aren’t. I still wander why…
Point 2
Jun 21, 2008 - 12:17 pm 8. BubbaJ:If Obama is really going to “take from the rich and give to the poor”, why so many rich people are giving money to his campain?
In talking this over with my husband, his reply was, “That’s fine, I’ll just retire sooner. They can’t take social security out of my pension.”
Jun 21, 2008 - 12:36 pm 9. Jay:Many of the rich who are funding BHO expect to get paybacks from their consulting to government and for loopholes for hedge fund investments that will not look like loopholes to the ignorant reporters who tout class warfare.
Jun 21, 2008 - 1:01 pm 10. Barack’s Social Security A-Bama-Nation AND Obama’s Muslim Fans Need Some Straight Talk « Tizona’s Weblog:But who knows? Perhaps BHO is going to fool them and institute a type of Cuban economy on us.
[...] Posted by tizona on June 21, 2008 Pajamas Media Obama’s Social Security Link [...]
Jun 21, 2008 - 1:06 pm 11. Pope Linus:Hard work built this country, and taxing hard work will bring it crashing down. Socialism breeds laziness, and the false sense of security that it brings stifles initiative, ingenuity, risk-taking, and a strong work ethic.
Let’s call a spade a spade: Socialism, whether preached by Marx, Saint-Simon, or Obama, is morally evil.
Jun 21, 2008 - 7:33 pm 12. CFM:“Perhaps BHO is going to fool them and institute a type of Cuban economy on us.”
That is exactly what he intends. He’s been telling us this all along. The lefties understand it. Why doesn’t everyone else?
Jun 21, 2008 - 8:48 pm 13. Daedalus:Until the main stream media decides to look at BHO, and really tell the world that he is a socialist at best and worst, a radical marxist, we are doomed to the likelihood of a BHO win this fall. No one has vetted this guy, and the DNC along with the MSM have rolled over for him. Everyone is afraid of the race card and BHO is making the most of it as he daily plays the race card…….after all if you don’t vote for BHO, you are obviously racist. What is going to take to wake up the electorate to the danger this guy poses for the future of our country?
Jun 21, 2008 - 9:47 pm 14. NB:How strange. An excessively liberal candidate that wants to institute a vastly socialist reform that discourages success for the purpose of redistributing wealth.
Never saw that coming.
Jun 22, 2008 - 12:02 am 15. NB:“If you have been voting for politicians who promise to give you goodies at someone else’s expense, then you have no right to complain when they take your money and give it to someone else, including themselves”
-Thomas Sowell
Jun 22, 2008 - 12:34 am 16. bj:The real contradiction it is predicted BHO will outspend McCain by four times, so someone (the very very wealthy) must be funding him. We need names, who owns him? The democratic masses are paying for gasoline, and spent their wad beating Hill.
Jun 22, 2008 - 7:36 pm 17. Drama Queen:It’s difficult to understand how Bozobama hasn’t tanked already. I’m wondering if all BHO’s supporters have maxed out their credit cards donating to him yet. They don’t have to worry. BHO will bail them out. I know, off topic, but when BHO speaks, myriads of thoughts flood my mind.
Jun 23, 2008 - 5:19 am 18. asdfs:Drama Queen:
Jun 23, 2008 - 9:08 am 19. saleboter:Soros is funding BHO.
4 years of high taxes, terrorist attacks and an economy in depression, will put the dems out of office for along time
Jun 23, 2008 - 10:25 am 20. a what? « fierybones:[...] (borrowed from an article in pajama media by tom blumer) [...]
Jun 23, 2008 - 11:50 am 21. 6MT.net Infiniti G35/G37/GTR Community - do you trust obama?:[...] Pajamas Media » Barack’s Social Security A-Bama-Nation Yes, lets take more money from people and not give them anything in return. That will improve the economy and motivate people to work harder. __________________ Government is another way to say better, than, you! Do you serve a purpose or purposely serve? [...]
Jun 23, 2008 - 2:06 pm 22. masstexodus:This clearly has nothing to do with “saving” social security, since social security will be cash flow positive for the next 10 years. The trust fund will last for several decades. This is about saving the social security surplus – which is effectively a giant slush fund for big government types of both parties to waste of a wide range of publicly financed goodies.
Jun 23, 2008 - 2:29 pm 23. Kay:“How strange. An excessively liberal candidate that wants to institute a vastly socialist reform that discourages success for the purpose of redistributing wealth.”
As long as it’s not the elitist rich liberal base wealth, of course.
Jun 23, 2008 - 3:56 pm 24. Surf66:Sell out before it happens. Thats my plan. I’ve given enought to these theives. By the time these crackpots throw out their fishnet; Half my economy goes underground or into trade-of-services. What I claim will be well below the cap. God I hate Socialists.
Jun 24, 2008 - 2:29 pm 25. LisaP:Oblahma the socialist pig will not win in November. The polls are a big lie. Every typical white person that I know hates him and will ensure that his witchy wife never wears the title of first lady.
Jun 24, 2008 - 6:21 pm 26. Thoughts:Hey, You guys don’t get it. There is no Social Security on dividends. Only wages! The greatest portion of income to the wealthy is dividends, not wages. Warren Buffet only makes $100K in wages. The rest is dividends that are not taxable by SS!
Jun 24, 2008 - 9:12 pm 27. virgil xenophon:Following on THOUGHTS: To the extent possible everyone should become a Sub-S Independent Contractor and declare all income as dividends. The IRS simply HATES that, but can only nibble around the edges.
Jun 25, 2008 - 1:42 am 28. Will Becker:One thing is for sure,If Barak Hussein Obama is elected his Marxist government will cause many more criminals than we have ever seen.True Americans will rise up against the government that destroy’s our liberty.
Jun 25, 2008 - 5:11 pm 29. 6MT.net Infiniti G35/G37/GTR Community - do you trust obama?:[...] Pajamas Media » Barack’s Social Security A-Bama-Nation Yes, lets take more money from people and not give them anything in return. That will improve the economy and motivate people to work harder. __________________ 9-13-2008 [...]
Jun 27, 2008 - 11:11 am 30. BizzyBlog » Barack’s Social Security A-bama-nation:[...] This column was first posted at Pajamas Media on Saturday [...]
Jun 29, 2008 - 5:58 am 31. sni:here is the a lie detector test that works for both the dems and the reps if you see there lips move…….
and this is why it works so good: politicians are the best at crafting all the negative characteristics of the culture they rise out of
thats right they are us
and this will be the result:
the wealthy and more fortunate will end up being a little bit better then they were before.
The disabled deseased and disadvantaged will end up having life become just a little bit more difficult.
Nothing will ever change that.
I want to be the first to confess
I am guilty
Jul 3, 2008 - 11:16 am 32. BizzyBlog » Will Obama’s Next ‘Betrayal’ Be Environmentalism?:Its not an excuse, just an explanation
I am HUMAN (damn! Don’t ya just hate those)
[...] out is certainly not, as Team Obama has already acknowledged, to immediately and punitively raise Social Security and other taxes on the wealthiest 5% of Americans for the purpose of handing out money to millions [...]
Dec 5, 2008 - 5:54 am 33. BizzyBlog » The POR (Pelosi-Obama-Reid) Economy: Tanks a Lot:[...] inflation and tuneups would solve our energy problems, consisted of promises to radically raise Social Security and federal income taxes on the country’s highest earners, who also happen to largely be its [...]
Jan 17, 2009 - 6:05 am