Get Radical: Raise Social Security 

By THOMAS GEOGHEGAN

Chicago

The New York Times

June 19, 2011 

http://www.nytimes.com/2011/06/20/opinion/20geoghegan.html?hp

AS a labor lawyer I cringe when Democrats talk of
"saving" Social Security. We should not "save" it but
raise it. Right now Social Security pays out 39 percent
of the average worker's preretirement earnings. While
jaws may drop inside the Beltway, we could raise that
to 50 percent. We'd still be near the bottom of the
league of the world's richest countries -- but at least
it would be a basement with some food and air. We have
elderly people living on less than $10,000 a year. Is
that what Democrats want to "save"?

"But we can't afford it!" Oh, come on: We have a
federal tax rate equal to nearly 15 percent of our
G.D.P. -- far below the take in most wealthy countries.
Let's wake up: the biggest crisis we face is that most
of us have nothing meaningful saved for retirement. I
know. I started my career wanting to be a pension
lawyer. In the 1970s, lawyers like me expected there to
be big pots of private pensions for hourly workers. By
the 1980s, as factories closed, I was filing hopeless
lawsuits to claw back bits and pieces of benefits. Now
there are even fewer bits and pieces to get.

A recent Harris poll found that 34 percent of Americans
have nothing saved for retirement -- not even a hundred
bucks. In this lost decade, that percentage is sure to
go up. At retirement the lucky few with a 401(k)
typically have $98,000. As an annuity that's about $600
a month -- not exactly an upper-middle-class lifestyle.
It's too late for Congress to come up with some new
savings plan -- a new I.R.A. that grows hair, or
something. There's no time. We have to improve the one
public pension program in place. Should we means-test
it? No. I don't care if they go out and buy bottles of
Jim Beam: let our elderly have an occasional night out
at a restaurant.

The most paralyzing half-truth in this country is that
people hate taxes. People are willing to pay taxes that
they spend on themselves. Two-thirds of those surveyed
in a CBS/New York Times poll in January were willing to
pay more taxes to save Social Security at its modest
level. To "save" it, most of us don't need to pay. We
could lift the cap on high earners, the 6 percent of
workers who make over $106,800 a year. If earnings
above the cap were subject to the payroll tax with no
increase in benefits to high earners, there would be no
deficit in the Social Security trust fund in 2037, as
projected.

If people are willing to pay more just to "save" Social
Security, they should be glad to pay more to raise it.

What does it take to get Social Security up to half the
average worker's earnings? According to the National
Academy of Social Insurance, to close the deficit and
raise benefits to nearly half of average worker
earnings, we would need to find an additional 5 percent
of taxable payroll, or find the money elsewhere. If we
lift the cap on the payroll tax without paying more
benefits to those above it, that gets us 2.32 percent
(or a bit less if we slightly increase benefits to the
rich). Dedicating revenues from the estate tax at its
2009 levels to Social Security gets another half
percent. A few other tweaks, like covering new public
employees, add another 0.42 percent. The remainder can
be found by raising the payroll tax by roughly 1
percentage point for both employees and employers.

I can hear the argument: It will discourage jobs, blah,
blah. While I sympathize with the health costs
employers pay (I am an employer, at our tiny law firm),
they have had a windfall on pensions. In 1975, when I
left law school, around two-fifths of American workers
were in defined-benefit plans. Now it's just a fifth,
and dropping. For employers, that's not the real
bonanza.

Retirees today are shortchanged on Social Security
because they have been shortchanged on wages for their
entire working lives. The labor economist Richard B.
Freeman points out that the hourly earnings of workers
dropped by 8 percent from 1973 to 2005 while
productivity shot up 55 percent or more. The United
States is one of the few developed countries where
workers are routinely cheated of a share in higher
productivity.

And where has the money from the extra productivity
gone? It's gone right to the top, to the top few
percent. If wages had been paid fairly based on
productivity, there would have been enough money
subject to the payroll tax to avoid even a modest
shortfall.

As I write, the Democrats are proposing to cut payroll
taxes -- supposedly to create jobs. But the last cut in
the payroll tax, a few months back, led to little or no
hiring. And did I mention the Paul Ryan plan? Just wait
until the Democrats accept some "reasonable" version of
this Republican document.

A bigger pension -- a raise in Social Security benefits
-- is the stimulus this demoralized country needs. Come
on, Democrats: think of F.D.R., Robert Wagner, or heck,
even Lyndon B. Johnson. Let's ask ourselves: Who are we
for?

Thomas Geoghegan is the author of "Which Side Are You
On?: Trying to Be for Labor When It's Flat on Its
Back."

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