THE SOLUTION TO THE SOCIAL SECURITY SHORTFALL. IT'S STIMULATING!

From time to time, GrandBoomers will make editorial comments on major concerns affecting GrandBoomer life.  The availability of Social Security in the future is one of these items. Here, we feel, is a solution. Your feedback is welcome.

Social Security (FICA) has now moved to the forefront of things GrandBoomers have to think about. Some in Washington want to cut benefits. Others claim the system will be bankrupt not too far down the road. No one seems to want to address the obvious way to fund Social Security.  Here’s a way to meet Social Security needs now and in the future and, as a bonus, provide a stimulus to the economy.

It seems that the current approach to make Social Security solvent is to decrease benefits.  In fact, there is a much more equitable way to not only make the system solvent but to provide an instant benefit to lower and middle class workers and the companies they work for.

In today’s economy, someone making $106,800 is middle class. At present, employees pay 4.20 percent and employers pay 6.20 percent of that first $106,800 into the Social Security pool.  

Many people make well in excess of this amount. According to reliable sources*, total American income in 2010 was $13.3 trillion. $552.8 billion was the amount collected for Social Security**. There was a shortfall of $49 billion in money needed to keep the program in the black**. In round figures $602 billion annually is needed to keep the program solvent in the short term.

If Washington will do away with the cap on income subject to social security taxes, we would bring in $602 billion at a total tax rate of 4.53 percent. 

Talk about a stimulus! If employees paid a tiny 2 percent of this figure on total wages, this would put 2.20 percent (the current figure less the new figure) of the cash currently withheld from those making $106,800 or less back into their pockets to stimulate the economy.  Employers would pay a lower percentage, too…2.53 percent… leaving funds to hire new employees and upgrade their companies. 

Since the new figure is so low, you could offset some future needs by rounding up the total percentage to 5.00 (3% for employers, 2% for employees), less than half the current amounts. 

In researching the figures for this, I came across a number of articles on the outrageous amount of waste in the Social Security Administration…$17.5 billion in improper payments last year alone***. Stopping those fraudulent payments would also help.

You can expect resistance from those making over $106,800, but the lower percentage won’t really affect their payments until much above that figure.  And to the truly wealthy 2.00 percent is chump change.

If the system is to be saved, we have to start somewhere. Maybe this is a good place.

*Yahoo ** AIPNews.com *** USA Today