Elizabeth Warren: Following in the Footsteps of FDR
Sen. Elizabeth Warren has a plan to convert Social Security into a program that unambiguously redistributes wealth.
Former President Franklin Roosevelt, founding father of the program, would be proud.
In a position statement posted on her campaign website, Warren is promising to give all Social Security recipients a $2,400 annual increase in their benefits — and make “the rich” pay for it.
“Every single current Social Security beneficiary — about 64 million Americans — will immediately receive at least $200 more per month under my plan,” says Warren.
“My plan fully funds its new benefit increases and extends the full solvency of Social Security for nearly 20 more years by asking the richest top 2% of families to start contributing more,” she says.
Under the current Social Security program, all workers and employers pay Social Security taxes on up to $132,900 of the worker’s earnings. The worker pays 6.2%, and the employer pays 6.2%, for a combined 12.4% tax. Self-employed Americans pay the full 12.4% themselves.
Under Warren’s proposal, Americans who earn $250,000 or more would be required, along with their employer, to pay a 7.4% tax (for a combined tax of 14.8%) on their wages that exceed $250,000. Warren would also require Americans with annual personal incomes of over $250,000 (or “family” incomes of over $400,000) to pay an additional 14.8% Social Security tax on investment income in excess of $250,000.
So, Americans who save money for their own retirement — or in the hope of becoming economically self-sufficient — could end up paying a portion of the earnings they make for their savings to Warren’s government so it could pay the increased Social Security benefits she is promising potential voters.
Warren imposes a similar redistributionist scheme on working mothers.
“In part because of work and pay discrimination and time out of the workforce to provide care for children and elderly relatives, women receive an average monthly Social Security benefit that’s only 78% of the average monthly benefit for men,” says Warren. “That’s one reason women over the age of 65 are 80% more likely to live in poverty than men.”
“My plan,” she says, “includes several changes that primarily affect women and help reduce these disparities.”
“My plan creates a new credit for caregiving for people who qualify for Social Security benefits,” she says. “This credit raises Social Security benefits for people who take time out of the workforce to care for a family member — and recognizes caregiving for the valuable work it is.”
“My plan will give credit toward the Social Security average lifetime earnings calculation to people who provide 80 hours a month of unpaid care to a child under the age of 6, a dependent with a disability (including a veteran family member), or an elderly relative,” says Warren.
So, compare two hypothetical American women: One is married, has four children, and works full time to help pay for tuition to send her children to decent schools, cover the cost of the mortgage that puts a decent roof over their heads and save money so she and her husband might someday enjoy a decent retirement.
She and her working husband pay high state and federal taxes on the joint income they earn and have never taken a dime from any government program.
The other woman has two illegitimate children from two different men she never married. She has spent many years in the prime of her life — including when her children were under 6 — not working but instead collecting various welfare benefits.
Which one of these two mothers will have her Social Security enhanced by Elizabeth Warren’s plan? Which one might pay for it?
The first mother — and her husband — might, at some point in their lives, if they keep working hard and saving, end up being among what Warren calls “the rich.”
The second mother — without a husband — may, under Warren’s plan, get a bonus for the years she did not work and was theoretically taking care of her children.
Under Roosevelt’s original Social Security program, the scheme to redistribute wealth was a little more subtle.
The first Social Security beneficiary demonstrated how it worked politically.
The Historian’s Office of the Social Security Administration has posted a summary of the tax payments made and the benefits received by Ida May Fuller, who in 1940 became the first American to receive a Social Security check.
“Ida May Fuller worked for three years under the Social Security program,” the Historian’s Office says. “The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.”
In other words, Ida May Fuller, who started collecting Social Security the year Roosevelt was running for an unprecedented third term in office, ended up receiving approximately 925 times as much in Social Security benefits as she paid in Social Security taxes.
The benefits she received under FDR came from the taxes paid by younger Americans who were still working.
Every penny every American has ever paid in Social Security taxes has already been spent.
If you are still working today and have not qualified for Social Security, whether you ever get a Social Security check — let alone the additional $200 per month Elizabeth Warren is promising — depends on someone younger than you paying the taxes needed to fund it.
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