The following are 8 of the current misunderstandings that I think are plaguing a large percentage of our country’s voters. Mostly this is because of constant misrepresentation in the media, whether purposeful or not. However none of us can make good decisions when our facts are flawed, so I thought I might point out these issues and help shed some clarity on the situation. Please be sure to check the facts presented and comment.
1. Social Security is broke, and cannot continue to pay out its benefits.
This is a very strange claim for a system that will be solvent, and able to pay any and all claims for the next 26 years. After that time it is estimated that it will only be able to pay about 78% of expected claims. However, right now Social security is running a 2.3 trillion dollars surplus in the form of it’s various savings funds. This information is readily available on their website. It’s still a future problem but we have a quarter of a century to solve it.
2. Social security is a Ponzi scheme.
Who runs a Ponzi scheme and keeps their books open to public scrutiny? It’s running the way it was designed, workers pay in now for those who are retired now, and collect later from those who will be working then. Social security sends anyone who pays in a statement each year of what they will be able to collect at retirement, as a legal guarantee. I don’t believe Ponzi schemes do any of those things.
3. Congress stole money from Social Security and that’s why it’s failing.
Congress did take money from the Social Security trust funds but then replaced it with government bonds. Does anyone really think that’s stealing? Those are the same bonds we sell to finance our debt. If investors around the world are lining up to buy our bonds, even after a credit downgrade, why would we doubt their value?
4. Only the private sector can, or should create jobs.
Ok, then where are they? We’ve all been waiting two years for the private sector to step in and create lots of jobs and they have only responded with a trickle. This is the same private sector that is showing record profits for the past two years and has some 2.3 trillion in ready assets. Are they ready to invest? Not so fast.
The “Private sector” we’re talking about here is made up of large businesses which could deliver lots of jobs but probably wont. The first reason is that they just cut their workforces in the recession and made up for it in productivity. They got leaner and more efficient and that’s a good thing for the companies and the investors. The second reason is that it’s not good business to expand without a verifiable market (profit). If no one is going to buy a whole lot more, why would you expand? They are meeting the current need with the staff they have, and they are concerned about the prudence of investment in the US at this time.
5. Costly regulations are stopping businesses from creating jobs and doing business in the US.
As I mentioned these same business are making money hand over fist, and under the current regulatory structure. Although it’s important to point out that the businesses with the 2.3 trillion of ready assets are not the so called “small” businesses that make up a little more than half of the businesses in the US. It’s also important to understand that those smaller businesses also do not have lobbyists in Washington, nor are they particularly concerned with overburdening regulations. Delis, garages, motels, lawyers, doctors and gardening services are not the ones calling for the scaling back of regulators like EPA. Small businesses are much more likely to care about the health, safety and the other government protections of the communities where they live and work.
6. Raising taxes on the rich (the Jobs Creators) will stop them from creating jobs.
As baby boomers, I think we have to realize that the tax structure that led to our America, the one of massive investments in schools, the building of a world class highways system and even reaching the Moon, is very different than the one we have today. Taxes on corporations and wealthy individuals were much higher from Eisenhower through Reagan than they are now. However in the late 70s and 80s we began to become enamored with “trickle down economics” and tried to incent rich individuals and large corporations with tax cuts and other inducements. The theory was that this would drive the whole economy to new heights and everyone would benefit. However, instead the gap between the lower income earners and the wealthy became much larger and large corporations began to move their facilities out of the US. In short, it did work, just not for everyone. The money has never come down, it stayed up.
7. Shrinking government will create jobs.
Massive layoffs of teachers, firefighters, and other government workers hasn’t created any jobs so far as I can tell. Has anyone heard of private plans to fill in for government services? Can a school district who can’t afford to pay the teachers they have, pay private contractors? Have these cutbacks and budgetary moves done anything but put more people on unemployment? Are school systems and other government agencies more efficient now? Will that change? I think it’s fair to ask where these new jobs will come from, and just what is the plan after we “shrink” government. Each one of us needs to seriously ask what that shrinking directly means to us and our children after us. For that, rhetoric and ideology wont do, we need details.
8. Taxing the rich is enabling “class warfare.”
When a wealthy person is paying an effective rate of 17% to 20%, and a middle class family is paying 35% to 37% aren’t we talking about “fair dealing?” If there is or was class warfare, most of us already lost. Everyone I’ve ever met wants to reform the tax code to make it fairer, isn’t that what we’re talking about?
I think one of the most important things to do as a voter is to check the facts, it’s much easier than it used to be. Politifact is a good place to look, as is Snopes, MediaMatters is another, although that may be a bit left wing for some. Still, none of us can afford to take any political statement of consequence at face value. We have unprecedented tools to check deeply into the records and garner the facts. Please check out the links above, these tools make it easy to do quick research and we all should make the most of them.
Copyright Prentiss Gray 2011
Prentiss Gray is a writer and columnist and currently writes the Domesti-Tech Blog for Gannett. He can be reached through his website at www.prentissgray.com
Prentiss Gray
Prentiss Gray is a writer/columnist/blogger from New Jersey. After 27 years as a Information Systems consultant and the death of his wife of 21 years, he returned to his roots as a writer, creating the national column Adventures of the Lone Dad/ Daddy chronicles. He now Blogs for Gannet on domestic technology, and writes feature pieces and stories for general publication. He is a member of the American Society of Journalists and Authors and contributes to Bloomberg News, Daily Record, Gannett and the Tribune Syndicate.
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As a non-citizen, I shall sit back and enjoy the debate.
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Our pleasure.
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So you carve out some room for argument …
But I just have to add facets to the Social Security debate. The Ponzi scheme is a valid argument. While what Ponzi did fell apart when it was revealed en masse, it certainly functioned well as a scheme. Social Security is the same scheme. The ways to shore up these funds are to raise the age of retirement and the tax bill! How fair is that to the younger generations.
Congress did steal the money…
The simple fact is that social security works on the two pocket principle. In your billfold you have the rent money which you don’t need for six days. You take out the cash and replace it with a “Bond”, insured by the full faith and credit of the “hip pocket” and then you spend it on beer and pu**y. Of course your billfold is made whole by the bond; the hip pocket promises to pay it back, with new money from the pilfered billfold, and yet another bond from the hip pocket…
I’ll leave the rest alone for now, but had to comment on third rail…
But I will say this about the tax rates, the top 5% pay 80% of the taxes one way or the other (and I’m not among them). I don’t favor the taxing of savings and investment; it has already been taxed. Not really income tax either, unless we establish a system of no deductions after the first 20,000. automatically adjusted for the rate of inflation and a small flat, everyone is the same, tax rate. Consumption is the way to tax. No forms, no BS, except for the businesses…
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I agree that consumption is a good way to tax, certainly the fairest kind of “flat” tax anyway. Even on the two pocket principle, it was already the “government’s pants”, can it steal from itself? And as I pointed out, paid in full. If by the “Tax bill” you mean get rid of the Social security tax cap, then i’m not sure that’s unfair to future generations. Removing that cap is projected to put the system back into balance for the foreseeable future, without raising the retirement age.
Simplify the tax system? Why not? That’s fine with me, but income on savings and investments is still income. And it’s new revenue, so while the original principle was taxed the new income it generates has not been.
Good comments you guys.
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As a citizen, I shall sit back like a non-citizen and enjoy the debate.
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Committee Searches for Economic ‘Tipping Point’; Prefer Not to Find It
By Jim Angle
The Joint Economic Committee, the bicameral group of legislators that reports on the nation’s economic picture, asked some troubling questions in a hearing Tuesday — what is the tipping point for the enormous debt the U.S. is carrying? And at what point do the nation’s debts start to weigh down the economy so much, it turns into a long-term slump?
Witnesses testifying on Tuesday said the nation shouldn’t even look for a tipping point, warning that the experiences of Greece or Italy and other heavily indebted nations show that the financial markets panic without warning.
“We know that the debt is now 100 percent — approximately 100 percent of (gross domestic product),” said Allan Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh. “That doesn’t include the unfunded liabilities. It doesn’t include (mortgage lenders)Fannie Mae and Freddie Mac. It doesn’t include a number of other things.”
By unfunded liabilities, Meltzer means entitlement programs. Social Security and Medicare alone have $46 trillion in unfunded liabilities, meaning that much more is promised in benefits than the government — and taxpayers — have as a plan to pay for them.
But some economists, and the Obama administration, argue that cutting too much spending too quickly could slow the economy even further. One witness told the committee that spending should be cut only a little now, but he also argued it must be cut a lot in the future to make up for that.
“The government would commit to lower deficits in the future, without sharply cutting the current deficit,” said Laurence Ball, a professor of economics at Johns Hopkins in Baltimore. “Just as one example of how this might be done, one could imagine cost-saving measures in entitlement programs, such as a higher retirement age, that could be phased in over time. With any luck, major spending cuts would occur only after the economy has recovered from its current slump.”
President Obama, in his latest plan to create jobs, dropped earlier proposals to do exactly that — to raise the eligibility age for Medicare and to change the inflation adjustment to Social Security payments.
The president has argued it is necessary to reform the programs in order to save them, but in deference to the Democratic base, he has only proposed cuts in payments to providers such as doctors and hospitals, at least until after 2017 when he would no longer be president even if he were to win a second term.
Chris Edwards, Director of Tax Policy Studies at the Cato Institute, a libertarian think tank in Washington, argues that U.S. debt is so far out of control that it must be contained soon.
“We’ve had five trillion (in) deficit spending since 2008, the most enormous sort of Keynesian stimulus you can imagine, and yet we’ve had slower growth than any time since World War II. So I don’t think spending helps.”
Meltzer pointed to three “fiscal changes that really did enormous good.” One was the tax cuts from the Kennedy and Johnson administrations, the most effective part of which were business tax cuts.
“They got the biggest bang for the buck,” he said.
The second were the Reagan-era tax cuts which came in two rounds and boosted a flagging economy. Meltzer said a completely different option worked well too.
“(The) third policy that gave people confidence were the Clinton tax increases, which assured people that their future tax rates were not going to go up, that they had seen what they were going to have to take, and there wouldn’t be anymore.”
Meltzer said the increases gave people certainty about what tax rates would be, which reassured businesses they wouldn’t go higher, allowing employers to plan and create jobs with confidence.
“It gives people confidence. That’s what the public desperately needs at the moment,” he said.
And he pointed to current conditions with this warning. “Fearing higher uncertainty about regulation and taxes, many investors hold cash and wait. Cash is their friend.”
But investment and job creation is what the economy needs and the government is not in a position to be the engine. Ball, who warned about cutting spending too abruptly, said debts must be cut.
“Oh, absolutely,” he said. “I think probably all three of us agree there is a tipping point and we don’t know where it is, and it would be prudent not to find out.”
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This article, while well written, is misleading I believe. Although it suggests that Allan Melzer is referring to Social Security and medicare as unfunded liabilities he is not. Social Security is a pay as you go system and will not generate or produce any liabilities for a quarter of a century, and then only if we do nothing to change it. Jim Angle then Claims that Social Security and Medicare have 46 trillion(?) in unfunded liabilities, a highly doubtful figure in that we have no idea where this number comes from, over what time period, under what conditions, ect. I suspect for the rest of the piece Mr. Angle is picking and choosing what Meltzer has said at different times in different contexts.
Still the piece argues for a “debt first” approach, and does point out that uncertainty is the reason that businesses are not investing. I’m not sure that I agree what Mr.Angle thinks is the particular “uncertainty.” My greatest fear is that we may be listening to voices advocating what the government did under Hoover, which was a huge mistake and lengthened the economic downturn of the Depression until the beginning of the second world war. It took Roosevelt and the next congress 10 years to dig the country out.
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1 and 3. – That’s good to hear and makes me relax a bit – I believe the news media is out to get ratings and one way to do it is to scare us sh**less.
4. Yes
5. I saw 60 Minutes a while back (I know, 60 Minutes can be bias by only presenting one side of it) but they said taxes on businesses are much higher in the US than other countries – and businesses are fleeing. Close loopholes, and find an incentive to get businesses back in the USA.
6 – 8. Totally agree
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You know how the Japanese car makers got by the injurious import tax levied against cars not made in America? They built factories here. Now they have direct access to our markets, skip the import tax and support American jobs. US (supposedly) companies who manufacture outside the country may need to face the same kind of import levies. It’s a complex line to draw, when does and American company like GE become a global company and loose some of it’s American market privileges.
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