February 24, 2009
-- by Dave Johnson
Someone wrote to me the following. You have heard a thousand variations of the same thing:
"Starting in 2012, Social Security won’t take in enough to cover the benefits it is paying. So either we cut other federal programs to pay for Social Security, or we cut Social Security benefits."
Actually, the shortfall in 2012 has nothing to do with paying back Social Security in particular. Reagan and then Bush used the Social Security surplus to give huge tax cuts to the rich (further concentrating wealth at the top.) The government owes Social Security a lot of money, but -- and this is the thing -- it also owes all the other bond holders.
Social Security might need to start cashing in some of its bonds in 2012 or so.
Other bond holders need to cash in their bonds at other times. We never ask other bondholders to accept less when they ask for their money for their bonds. That would be called "defaulting."
So why does this bondholder, Social Security, get special treatment in our thinking? Why do we think that people who get Social Security should get less?
The answer to this and a lot of other problems is to raise taxes on the wealthiest. History shows that our economy does better when there is a VERY high tax rate on the very top incomes. It used to be 93% on money made after you hit a few hundred thousand. And that money was used to build infrastructure, educate kids, and all the things that made this a country that could compete. That is part of what got us out of the depression.
Let me add that a very high tax rate at the top removes the incentive to go for quick-buck schemes, and makes business owners plan for the long term.
Think of it this way -- if we had a 90% top tax rate hedge fund managers would only bring home a hundred million or so a year, but the rest of us would have health insurance and good roads and better schools.
Posted by Dave Johnson at February 24, 2009 8:10 AM
I LUV how you want to live in the Leave it Beaver era of 90% tax rates. Of course it did not increase tax intake
But if confiscatory rates return...when you try to steal my money... just like S Adams and J. Hancock, I will use every legal and extra-legal means to cut of funds to the Federal government. I will go to two friends, then to four. I will go door to door. Taxes on dividends, interest or cap gains will be cut off. I will disrupt Congressional town halls. We'll move capital offshore. I will buy Perth mint shares held in Australia. It will be a fad and a moral imperative.
As you advocate the unraveling of America, I listen to PBS nightly news finally covering the war being lost across the border, 10s of thousands killed. the Juarez police chief order to quit by the Cartel.
These are dire times and you are living in an imaginary past.
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