I listened to a good part of Mr. Kerry’s statement in Cincinnati on television yesterday. Why aren’t either of the candidates saying anything serious about the serious issues before us? Kim du Toit, in his inimitable manner, calls them “Great Big Elephants” in his post today.
In what had been touted as a major foreign policy speech, Mr. Kerry spoke primarily about the cost of waging war and how much nicer it would be if the money could be spent on health care. Well, I agree with this. I’m sure our parents and grandparents would have preferred spending their money on houses and cars rather than on sending troops to the Pacific, and North Africa, and Europe during World War II. And I’m even more sure that the parents of Beslan would rather have spent their money on new clothes and books for their children rather than on burying them.
But these are choices and a discussion for after the war has been won.
And, by the way, I think that the Administration’s decision to borrow a lot of money to spend on pharmaceuticals without adequate means testing for the recipients of the benefit is just as frivolous and fantastical.
Mr. Kerry on health care (from the speech cited above):
KERRY: Health care is a right for all Americans, and we’re going to make it available to all Americans.
This almost completely wrong. Health care is not a right. Speech, religion, freedom of assembly are rights. Health care is a benefit which must be purchased. Assertion of health care as a right means that either a) the right of health care providers to establish fees for their services must be denied; or b) health care providers have an unlimited call on public monies (which is ultimately a denial of my right to own property). I wouldn’t have a problem if Mr. Kerry said that health care is a benefit which, as a wealthy country, America should be extending to all of its citizens. But to assert it as a right is frivolous and fantastical.
Mr. Kerry on Social Security:
So as president, I will not privatize Social Security. I will not cut benefits. And I will not raise the retirement age, because when you’ve worked for a lifetime in America, America owes you what you’ve earned.
I agree with Mr. Kerry that the privatization of Social Security is a bad idea. But, since the non-existent “Social Security Trust Fund” doesn’t have the money to pay for the benefits to which we have already committed ourselves, if we neither raise the retirement age nor cut benefits (means testing would be a cut in benefits), the only remaining alternative to cover the existing commitment is to raise taxes.
There are essentially three strategies for raising revenue for Social Security: raise the marginal payroll tax rates, make more income subject to the payroll tax, and abandoning the payroll tax (at least in part) in favor of funds from general revenues. If marginal rates are raised, this is a regressive tax which would fall most harshly on the poorest workers. It would also stunt job creation and be a burden to some businesses. To make more income subject to the payroll tax you must remove FICA max or make wages currently exempt from the payroll tax subject to the payroll tax. I believe that the former is necessary. Most of the wages exempt from the payroll tax (other than the wages above FICA max) are the wages of state, local, and federal workers. I believe that removing these exemptions (while desireable) is politically impossible particularly for a Democratic president.
That leaves drawing increasingly on general revenues. How high will the income tax have to raised on all of us (not just the rich) to cover this? For running a political campaign based on increasing the income tax cf. Walter Mondale. Best of luck on this approach, Mr. Kerry.
For an excellent exposition on the problems of the Social Security system see the Concord Coalition’s statement. The first Baby Boomers begin to retire during the next presidential term. This is a problem that can be postponed no longer.
And there is a host of other issues that need to be talked about seriously. If not now, when?
UPDATE: Linked to Beltway Traffic Jam
I have an idea about how privatization of Social Security might work:
A worker could have an account (“ISSA”) like an IRA– choose his own brokerage (or other financial institution(s)) at which to hold it, choose whichever investment vehicle(s) (except certain high-risk ones) he wanted, and pay the brokerage fees for making the investment transactions in the account. However, the brokerage would merely be holding the funds for the Social Security Administration of the government. The worker would retire and start collecting Social Security, and take distributions, just like from his IRA. The government would still continue to calculate the amount to which the worker would be entitled every month, and the SSA (through the brokerage) would pay it out. There could be special rules for a worker who bankrupted his ISSA, like by buying all stocks that went bankrupt– there would be some formula whereby his Social Security check would be reduced proportional to his losses.